TMI Blog2015 (9) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... ve bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society There is a seriously disputed question of fact which the Authorities under the IT Act have taken upon themselves to interpret in the face of the BR Act prescribing that in the event of a dispute as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi) of Section 56 of the BR Act, a determination thereof by the Reserve Bank shall be final, would require the dispute to be resolved by the Reserve Bank of India, before the authorities could term the assessee as a co-operative bank, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt a Co-operative Society. Therefore, the Assessing Officer held that the appellant society being a primary co- operative bank, was not eligible for deduction under Section 80 P of the IT Act. 3. The appellant - Society had then preferred an appeal before the Commissioner of Income Tax (Appeals) challenging the above order of the Assessing Officer. The same was said to have been partly allowed. The appellant had then approached the Income Tax Appellate Tribunal. The Tribunal having affirmed the concurrent findings of the above authorities, the appellant is before this court. 4. The questions of law that arise for our consideration in this appeal are : i. Whether the benefit of deduction, under Section 80 P (2) (a) (i) of the IT Act, could be denied to the assessee on the footing that, though the appellant was said to be a Co-operative Society, it was in fact a co-operative bank, within the meaning as assigned to such bank under Part V of the BR Act. ii. Whether the Authorities under the IT Act were competent and possessed the jurisdiction to resolve the controversy as to whether the assessee was a co-operative society or co-operative ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 5,- [(i) after clause (cc), the following clauses shall be inserted, namely:- (cci) Co-operative bank means a state co- operative bank, a central co-operative bank and a primary co-operative bank; (ccii) co-operative credit society means a co- operative society, the primary object of which is to provide financial accommodation to its members and includes a co- operative land mortgage bank; (cciia) co-operative society means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co-operative societies, or any other Central or State law relating to co-operative societies for the time being in force;] (cciii) director in relation to a co-operative society, includes a member of any committee or body for the time being vested with the management of the affairs of that society; [(cciiia) multi-State co-operative bank means a multi-State co-operative society which is a primary co- operative bank;] [(cciiib) multi-State co-operative society means a multi-State co-operative society registered as such under any Central Act for the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination thereof by the Reserve Bank shall be final; x x x x x x 6. In so far as the first question of law is concerned, there are a series of decisions of this court wherein it has been repeatedly answered in favour of the assessee. Two of the said decisions are as follows : 1. CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha in ITA No.5006/2013 2. CIT vs. Bangalore Commercial Transporter Credit Society in ITA No.351/2011 ITA No.599/2013 In interpreting Section 80 P (4) in CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha of the I T Act, it was held as follows : If a Co-operative Bank is exclusively carrying on banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural and rural development bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a primary co-operative agricultural and rural dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eques, DDs, pay orders and other forms. 4. Society are bound by rules and regulations as specified by in the co- operative societies act. Filing of returns Co-operative banks have to submit annual return to RBI every year. Society has to submit the annual return to Registrar of Societies. Inspection RBI has the power to inspect accounts and overall functioning of the Bank. Registrar has the power to inspect accounts and overall functioning of the bank. Part V Part V of the Banking Regulation Act is applicable to co- operative banks. Part V of the Banking Regulation Act is not Applicable to co- operative banks. Use of words The word bank , banker , banking can be used by a co-operative bank. The word bank , banker , banking cannot be used by a co-operative society. And this court had dismissed the appeal of the revenue following the decision in CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a disputed question as to whether the assessee was indeed a co- operative bank. The authorities under the IT Act were not competent and did not have the jurisdiction to arrive at a finding in that regard and attention is drawn to the Explanation appended to clause (ccvi ) to Section 56 of the BR Act, which reads as follows : Explanation- If any dispute arises as to the primary object or principal business of any co- operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final; It is hence contended that the appeal be allowed and the judgment of the Tribunal be set aside. 8. On the other hand, the learned counsel Shri Y.V. Raviraj, appearing on behalf of the Revenue contends as follows : Section 80P(2)(a)(i) provides deduction of income of co- operative societies carrying on the business of banking or providing credit facilities to its members . However, an exception to this is provided under Section 80P(4) which provides that this deduction will not be available to any co-operative bank other than a primary agricultural credit society or a primary co-operative ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80P by inserting a new sub-section (4) so as to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than primary credit society or a primary co-operative agricultural and rural development bank. It is also proposed to define the expressions co-operative bank , primary agricultural credit society and primary co-operative agricultural and rural development bank . It is also proposed to insert a new sub-clause (viia) in clause (24) of the Section 2 so as to provide that ttheprofits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition of income . Section 2(24(viia) of the Income Tax Act inserted by the Finance Act, 2006, with effect from 1.4.2007 includes the following in its definition of income as under: profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members. The relevant portion of Section 80P is as under: 80P(1): Where, in the case of an assessee being a co-operative society, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not 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 co-operative bank subscribing to the share capital of such Co-operative society out of funds provided by the State Government for the purpose . Section 5(cciia) of Banking Regulation Act, 1949 defines a Co-operative Society as under: Co-operative Society means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co-operative societies or any other Central or State law relating to co-operative societies for the time being in force; Section 5(b) of the Banking Regulation Act, will also have to be looked into to examine whether the primary object or principal business of the co-operative society is transaction of banking business. The section is as under: banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Sri. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot in ITA No.5006/2013 dated 5th February 2014: The substantial question of law pleaded on behalf of the Revenue in the said case was as follows: In the facts and circumstances of this case, whether the Revisional Authority was justified in invoking his power under Section 263 of the Act without the foundational fact of assessee being co-operative bank was not there? It is pointed out that this Court, in the above case, had not examined the applicability of the provisions of the definition of a co-operative bank as per Part V of the Banking Regulation Act, 1949 by reading Explanation to section 80P(4). The facts of the above case are clearly distinguishable and are not applicable. However, a Review Petition was filed in the said case and subsequently, a memo had been filed to withdraw the said Review Petition, which is pending. It is submitted that the matter is being taken up by the Revenue in appeal before the Hon ble Apex Court. It is also stated that in some matters, the Tribunal has granted relief by holding that Section 80P(4) is not applicable, by referring to one ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eans a co-operative society other than in clause (ccv) of BR Act, the Legislature has created a legal fiction for the purpose of taxing under certain circumstances, a Society which is to be treated as a bank for the purposes of the Income Tax Act, 1961 while dealing with the issue of its claim of deduction under Section 80P. Further, when a Statute enacts that something shall be deemed to be treated as something else, which in fact is not true, the Court shall appreciate and ascertain for what purposes the statutory fiction is resorted and then give full effect to the statutory fiction to carry it to the logical conclusion. Therefore, in the case of an assessee Co-operative Society claiming deductions under Section 80P, an examination of the factual aspects will have to be conducted by the Revenue authorities on the basis of the facts and materials on record to conclude whether the assessee Society is to be treated as a primary co-operative bank which fulfills the above three conditions. 9. In the light of the above contentions and on an examination of the relevant legal provisions, it is to be noticed at the outset that this court in the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
