TMI Blog2017 (10) TMI 1383X X X X Extracts X X X X X X X X Extracts X X X X ..... T MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER Appellant by : Shri B.R. Ramesh, Jt. CIT(DR)(ITAT) Bengaluru Respondent by : Shri Madhukar G. Hegde, CA O R D E R Per Inturi Rama Rao, Accountant Member This appeal is filed by the revenue against the order of the ld. CIT(Appeals), Belagavi dated 30.01.2017 for the assessment year 2013-14. 2. The revenue has raised the following grounds:- (1) The learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee is a Co-operative Society which fulfills all the three conditions of being a Primary Co operative Bank as provided in section 5(ccv) of the Banking Regulation Act, 1949. (2) The learned CIT(Appeals) erred in law and on facts in not appreciating the definition of a Co-operative Bank which as per Explanation below section 80P(4) namely the cooperative bank shall have the meaning assigned to it in Part- V of the Banking Regulation Act, 1949. (3) The learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee society being a Credit Cooperative Society engaged in banking business is a Primary Cooperative Bank within the definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the decision of Hon'ble jurisdictional High Court and the ITAT in the cases of CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha in ITA No.5006/13, ITO v. Venugram Multipurpose Co-operative Credit Society Ltd. in ITA No.100042 of 2014 and CIT v. Zafari Momim Vikas Co-op. Credit Society Ltd. 7. We have heard the rival submissions and perused the material on record. The only issue in the present appeal is whether the respondentassessee co-operative society is entitled for deduction u/s. 80P of the Act. The respondent-assessee is registered under the Karnataka Co-operative Societies Act. According to the respondent-assessee, the primary activity of the assessee is only to provide credit facilities to its members and therefore it is not a co-operative bank. Hence the provisions of sub-section (4) of section 80P of the Act are not applicable. For the sake of better appreciation of facts, the provisions of section 80P are reproduced below:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,- (i) where such co-operative society is a consumers' co-operative society, one hundred thousand rupees; and (ii) in any other case, fifty thousand rupees. Explanation.-In this clause, consumers' co-operative society means a society for the benefit of the consumers; (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgment of the Hon ble Apex Court in the said decision is as under:- 18) We may mention at the outset that there cannot be any dispute to the proposition that Section 80P of the Act is a benevolent provision which is enacted by the Parliament in order to encourage and promote growth of co-operative sector in the economic life of the country. It was done pursuant to declared policy of the Government. Therefore, such a provision has to be read liberally, reasonably and in favour of the assessee (See Bajaj Tempo Limited, Bombay v. Commissioner of Income Tax, Bombay City-III, Bombay (1992) 3 SCC 78; 196 ITR 188 (SC) = 2002-TIOL-763-SC-IT. It is also trite that such a provision has to be construed as to effectuate the object of the Legislature and not to defeat it (See Commissioner of Income Tax, Bombay Ors. v. Mahindra and Mahindra Limited Ors. (1983) 4 SCC 392; [1983] 144 ITR 225 (SC) = 2002-TIOL-988- SC-IT. Therefore, it hardly needs to be emphasised that all those co-operative societies which fall within the purview of Section 80P of the Act are entitled to deduction in respect of any income referred to in sub-section (2) thereof. Clause (a) of sub-section (2) g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome fell within any of the several heads of exemption. If it fell within any one head of exemption,.... It means that a co-operative society engaged in carrying on the business of banking and a co-operative society providing credit facilities to its members will be entitled for exemption under this sub-clause. The carrying on the business of banking by a cooperative society or providing credit facilities to its members are two different types of activities which are covered under this sub-clause . So, in our view, if the income of a society is falling within any one head of exemption, it has to be exempted from tax notwithstanding that the condition of other heads of exemption are not satisfied. A reading of the provisions of section 80P of the Act would indicate the manner in which the exemption under the said provisions is sought to be extended. Whenever the Legislature wanted to restrict the exemption to a primary co-operative society, it was so made clear as is evident from clause (f) with reference to a milk co-operative society that a primary society engaged in supplying milk is entitled to such exemption while denying the same to a federal milk co-operative s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. A portion of these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found, as a matter of fact, that the depositors and borrowers are quiet distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative society. It is also found that the appellant is engaged in the activity of granting loans to general public as well. All this is done without any approval from the Registrar of the Societies. With indulgence in such kind of activity by the appellant, it is remarked by the Assessing Officer that the activity of the appellant is in violation of the Cooperative Societies Act. Moreover, it is a co-operative credit society which is not entitled to deduction under Section 80P(2)(a)(i) of the Act. 26) It is in this background, a specific finding is also rendered that the principle of mutuality is missing in the instant case. Though there is a detailed discussion in this behalf in the order of the Assessing Officer, our purpose would be served by taking note of the following portion of the discussion: As various courts have observed that the following three conditions must exis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
