TMI Blog2018 (3) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... e : Shri D.K.Pradhan, DR ORDER Per Pavan Kumar Gadale, JM This is an appeal filed by the assessee against the order of the CIT(A)- 1, Bhubaneswar dated 16.8.2016 for the assessment year 2012- 13. 2. The assessee has raised the following grounds of appeal: 1. That the order dated 16.08.2016 passed by the Learned Commissioner of Income Tax (Appeals) [in short CIT(Appeals) ], in dismissing the appeal is against the principle of natural justice, contrary to facts, arbitrary, erroneous and bad, both in the eye of law and on facts. 2. Denial/ Disallowance of claim of deduction u/s. 80P of the IT.Act a. That on the facts and in the circumstances the case, the sustaining of the disallowance of claim of deduction u/s.80P of the IT Act by the learned CIT(Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts and legally untenable. b. That the learned CIT(Appeals) holding that, the assessee is not eligible for deduction u/s.80P of the IT Act is arbitrary, erroneous and bad in law. c. That the lower authorities holding that the assessee is a cooperative bank and hence deduction u/s. 80P of the IT Act is not adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act on 5.3.2015. 4. On appeal, the CIT(A) confirmed the addition made by the Assessing Officer by observing as under: 4. I have considered the matter and gone through the provisions of law in this regard. The assessee is a Regional Rural Bank (RRB) which is deemed to be a cooperative society as per the provisions of the RRB Act for the purpose of Income Tax Act. It is involved in banking business and, therefore, has to be treated as a cooperative bank for the purpose of section 80P. Originally, the RRBs were not entitled to deduction u/s.80P. By virtue of a beneficial Circular of the CBDT No. 319, dated January 11, 1982, deduction was being allowed to RRBs up to the AY 2006-07. Section 80P was amended w.e.f. 1.4.2007 by insertion of a new sub-section (4) to deny deduction under that section to the cooperative banks other than Primary Agricultural Credit Society and Primary Cooperative Agricultural Development Bank. Accordingly, all cooperative banks including RRBs but excluding Primary Agricultural Credit Society and Primary Cooperative Agricultural Development Bank are not eligible for deduction u/s.80P. The assessee claims that it is only a cooperative society and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , deeming any regional rural bank to be co-operative society stands withdrawn for application with effect from the assessment year 2007-08. The field officers may take note of this position and take remedial action, if required. It is evident from the above Circular of the Board that the legal position is quite clear and the RRBs are not eligible for deduction u/s.80P from the AY 2007-08 onwards. I also find that in their order dt.18.6.2012 the Hon'ble ITAT, Indore Bench in the case of M/s. Vidisha Bhopal Kshetriya Gramin Bank vs. ACIT-3(1), Vidisha, Bhopal in ITA No.215 216/Ind/2011 for the AYs 2007-08 2008- 09 have held that RRBs are not entitled to deduction u/s.80P from AY 2007-08 onwards. The relevant portion of the order is reproduced below: 8. We have considered the rival submissions and have gone through the orders of the authorities below and found from record that the assessee is a Regional Rural Bank engaged in the activity of banking/financing in the District of Bhopal and Vidisha. Return was filed to claim all deduction u/s 80P in respect of its income. Section 80P, inter alia, provides for a deduction from the total income of the Co-operative so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. It is also not in dispute that the assessee is not claiming exemption as PACS for PCARDB. To clarify the amended provisions as brought by the Finance Act, 2006, the C.B.D.T. has also issued circular dated 28.12.2006, according to which after insertion of sub Section (4) in Section 80P, the benefit of provisions of Section 80P shall not apply in relation to any cooperative bank other than primary agricultural credit society or primary cooperative agricultural rural development Bank. Thus, income of business of banking has been brought u/s 80P for all the cooperative societies except PACS and PCARDB. The legislative intent for insertion of sub Section (4) as per the speech of Hon'ble Union Finance Minister on 28.2.2006 clearly shows that Coop. Banks were excluded from the benefit of Section 80P on the plea that like any other bank, the Coop. Banks are also lending institution and should pay tax on their profits. Accordingly, Coop. Banks were excluded from the scope of Section 80P. xxx xxx xxx 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary object or principal business of which is the transaction of banking business. ( 2) The paid up share capital and reserves of which are less than one lakh of rupees, and ( 3) The bye laws of which do not permit admission of any other co-operative society as a member: Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such cooperative bank subscribing to the share capital of such cooperative society out of funds provided by the State Government for the purpose: (ccvii) Central Co-operative bank (x x x ) primary rural credit society and State Co-operative bank, shall have the means respectively assigned to them in the National Bank for agricultural and rural development Act, 981 (61 of 1981). Relying on the above Banking Regulation Act, ld A.R. submitted that the assessee s case does not fall under the purview of section 80P(4) of the I.T.Act as co-operative bank, therefore, the denial of claim of deduction u/s.80P of the Act is not sustainable and relied on the judicial decisions as under: i) Pandiaya Gram Bank Vs ACIT (ita No.1941/Mds/2009. ii) Mohd ali Khan vs CWT, 92 Taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X
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