TMI Blog2018 (4) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain financial aspects and Ld. first appellate authority has not examined the claim of the assessee u/s 80P(2)(a)(i). Therefore, without delving much deeper, we deem it fit to restore the matter back to the file of Ld. CIT(A) for adjudication thereof. This ground of assessee’s appeal stands allowed for statistical purposes. - I.T.A. No.3225/Mum/2017 - - - Dated:- 4-4-2018 - SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Revenue : N.Hemalatha, Ld. DR For The Assessee : Dilip P.Bapat,Ld. AR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2012-13 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-33 [CIT(A)], Mumbai, Appeal No.CIT(A)-33/Rg.21/194/2015-16 dated 27/02/2017. The Assessment for the impugned AY was framed by Ld. Income Tax Officer-21(3)(4), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 30/03/2015 determining total income of the assessee at ₹ 26,74,590/- as against Nil return e-filed by the assessee on 28/09/2012. In the quantum assessment, the assessee has been denied deduction u/s 80P which is the sole subject matter of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee was a registered cooperative society, whose principal business was banking business and its share capital and reserves exceeded the prescribed limit and therefore, it was a cooperative bank within the meaning of Part-V of the Banking Regulation Act, 1949 and therefore, not eligible to claim any deduction. The said opinion was further substantiated with explanatory notes to the Finance Act, 2006 and amended definition of income u/s 2(24)(viia) to hold that the cooperative society providing credit facilities to its members was ineligible to claim any deduction. Finally, after placing reliance on several judicial pronouncements, deduction u/s 80P amounting to ₹ 31,90,812/- (wrongly referred to as ₹ 39,90,812/- by Ld. AO) was denied to the assessee. 3. Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 27/02/2017 where Ld. CIT(A) concluded that deduction u/s 80P(2)(d) was not available to the assessee being co-operative bank carrying on banking and finance business. While arriving at the said conclusion, reliance was placed on the decision of Mumbai Tribunal in Shri Saidatta Cooperative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80P : ( 1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. ( 2) The sums referred to in sub-section (1) shall be the following, namely :- (a) in the case of a co-operative society engaged in - (i) carrying on the business of banking or providing credit facilities to its members, or... the whole of the amount of profits and gains of business attributable to any one or more of such activities. ( ii)to (vii)....; ( b) to (f).....; ( 3) ........ ( 4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank. Explanation For the purposes of this sub-section, - ( a) co-operative bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held to have as its principal business as banking business in the absence of a banking licence issued to the appellant by the Reserve Bank of India under Banking Regulation Act. This licence is a sine quo non for recognizing to the appellant by a co-operative bank. The issue of the appellant not being a cooperative bank in the absence of a licnece to do banking business is concluded by the decision of the Karnakata High Court in Commissioner of Income Tax and another vs. Sri Biluru Gurubasva Pattina Sahakari Sangha Niyamitha Bagalkot (2014) 369 ITR 86. 7. As against the above, Ms. Asha Dessai, learned counsel tor the revenue in support of the impugned order submits as under : ( a) The impugned order is correct in law and thus calls for no interference ; and ( b) In any view of the matter, as there is finding of fact that the appellant is doing business along with non-members. Howsoever, miniscule, it would by itself disqualify the appellant from enjoying the exemption under Section 80P(2)(a)(i) of the Act. This on the ground that Section 80P(2)(a)(i) of the Act specifically provided that the deduction thereunder will be available only in case of cooperative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be examined is whether the appellant is a primary Cooperative Bank as defined in Para V of the Banking Regulation Act. Section 5(ccv) of the Banking Regulation Act defines a primary cooperative bank to mean a cooperative society which cumulatively satisfies the following three conditions : ( 1) Its principal business or primary object should be banking business of Banking; ( 2) Its paid up share capital and reserves should not be less that rupees one lakh. ( 3) Its bye-laws do not permit admission of any other cooperative society as its member. It is accepted position that condition No.(2) is satisfied as the share capital in an excess of rupees one lakh. It has been the appellant's contention that the conditions No. (1) and (3) provided above are not satisfied. 10. Therefore the issue that arises for consideration is whether the appellant satisfies condition No.(1) and (3) above. The impugned order after referring to the definition of 'Banking Business' as defined in Section 5b of the Banking Regulation Act, held that the principal business of the Appellant is Banking. Section 5b of the Banking Regulation Act defines banking to mean accepting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be issued by the Reserve Bank of India, which it admittedly does not have, is not being considered. 12. So far as condition No.3 of the definition/meaning of Primary Cooperative Bank as provided in Section 5(ccv) of the Banking Regulation Act is concerned, the same requires the Bye laws of society to contain a prohibition from admitting any other cooperative society as its member. In fact the bye-laws of the appellant society originally in bye-law 9(d) clearly provided that no co-operative society shall be admitted to the membership of the society. Thus there was a bar but the same was amended w.e.f. 12 January, 2001 as to permit a society to be admitted to the membership of the society. Therefore for the subject assessment years there is no prohibition to admitting a society to its membership and one of three cumulative conditions precedent to be a primary cooperative bank is not satisfied. However the impugned order construed the amended clause 9(d) of the appellant's bye laws to mean that it only permits a society to be admitted to the membership of the appellant and not a co-operative society. According to the impugned order, a society and a co-operative society are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the respondent-Revenue. Upon perusal of the same, we find that the terms cooperative societies and cooperative bank carry different meaning under law for the purpose of Section 80P(4) and exclusion clause only debars the cooperative bank and not cooperative societies to claim deduction u/s 80P. The revenue has not controverted the fact that the assessee was not in possession of license from RBI and nothing is available on record to suggest that the assessee has dealings with non-members also and was accepting deposit from public at large. Therefore, the assessee, in our opinion, was not carrying out the business of banking and therefore, not hit by the provisions of Section 80P(4) of the Act and therefore, eligible to claim deduction within the provisions of Section 80P. 5. Proceeding further, we find that the assessee has claimed deduction u/s 80P(2)(d) which provides for deduction in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society. We find that this deduction is available only if the income or dividends are derived by the assessee from cooperative soci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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