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TMI Blog2014 (2) TMI 1412X X X X Extracts X X X X X X X X Extracts X X X X ..... fines income inclusively to include profits and gains of any business of banking (including providing credit facilities) carried on by cooperative societies. Hence, as per this section, providing credit facilities to the constituents is to be construed broadly as the business of banking. 2.2 The Id CIT(A) ought to have noted that with effect from 01.04.2007 Sec.80P was amended by the Finance Act and sub-section (4) was introduced whereby all cooperative banks other than primary agricultural credit society or primary cooperative agricultural & rural development bank are not eligible for deduction u/s 80P of the Act. The assessee states itself to be a cooperative society engaged in the business of providing credit facilities to its members and hence falls within the definition of a cooperative bank. 2.3 Reliance is placed on the decision of the ITAT Cochin Bench in the case of Kerala State Cooperative Agricultural Rural Development Bank Limited 10 Taxman 145, wherein it was held that a federation doing banking activities with cooperative credit societies or Pat Pedhis who are its members and which is located in an urban area is also not entitled for deduction u/s 80P. In the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer formed reasons to believe that deduction available u/s 80P does not apply in assessee's case by virtue of sub-section(4) inserted by the legislature in the Act with effect from 1.4.2007 relevant to the impugned assessment year. Per Assessing Officer, this deduction could be availed only by a co-operative society which is a primary agricultural society or a primary co-operative agricultural and rural development bank whereas the assessee was a co-operative society accepting deposits and granting loans to its members. Thereafter, on 26.3.2013, he framed re-assessment and disallowed the aforesaid amount by denying deduction. He held in the re-assessment order that the assessee is not in banking business but provided credit facility to its members. In his view, a co-operative federation doing banking activities with co-operative credit societies or pat pedhis who are members located in urban areas is not entitled for relief under the provisions of section 80P r.w.s 2(24)(viia) of the Act from assessment year 2007-08. 7. Aggrieved, the assessee preferred appeal. In the lower appellate proceedings, the CIT(A) has first examined at length the relevant statutory provision i.e 80P of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, the assessee is an apex body operating at the state level and its members are primary cooperative housing societies and hence the assessee can not considered as a "primary co-operative society". The Assessing Officer has not made out any case as to how the assessee becomes a 'state Co-operative bank' or a 'Central Co-operative bank'. Further, neither the assessee's name includes the words "bank"/"banker"/"banking", nor its activities are coming under the purview of RBI. Therefore, it can not be held that the assessee is engaged in the business of banking. The next issue to be seen is whether the primary object or principle business of the assessee is transactions of the banking business. In case the primary objects or principle business is transaction of banking business, the assessee will be co-operative bank (subject to the name of the assessee and the RBI's regulations, as mentioned above). The banking business has been defmed ujs.5(b) of the Banking Regulation Act as under: - Sec.5(b)"banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "co-operative bank" means, - * a co-operative society having the words "bank" or "banker" or "banking" in its name, and engaged in the business of banking and coming under the purview of RBI (in the case of apex or district level co-operative banks), or * a co-operative society having its paid up share capital and reserves of not less than one lakh of rupees and engaged in the business of banking (in the case of primary co-operative societies). Where as in the instant case, the assessee i.e. M/s. Tamil Nadu Co-operative Housing Federation Ltd, is the apex body at the state level. All its members are primary co-operative housing societies in the state of Tamil Nadu. There are no district level housing societies, as the system is the 2-tier system. The assessee i.e. M/s. Tamil Nadu Co-operative Housing Federation Ltd, can not be considered as a "Co-operative bank", because - * neither the words "bank" or "banker" or "banking" are incorporated in the name, nor the assessee is not coming under the purview of RBI (the two mandatory requirements of a co-operative society to be called a "co-operative bank", at the apex/district level). * In view of the above two facts, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shmi Mahila Vividodeshagala Souharda Sahakari Ltd.[2012]137 ITD 163(Panaji)/ [2012]149 TTJ 356 (Panji) / [2012] 23 taxmann.com 313(Panaji): Section 80P of the Income-tax Act, 1961, read with sections 5(b), 5(cci) and 5(ccv) of the Banking Regulation Act, 1949 - Deductions - Income of cooperative societies - Assessment years 2007-08 to 2009-10 - Assessee was a society engaged in business of providing credit facilities to its members by granting loans for purposes like business, housing, vehicles, etc. - Section 80P deduction was denied by Assessing Officer in view of amendment brought into section 80P whereby co-operative banks were excluded from purview of section 80P with effect from 1-4-2007 - Whether since on facts none of assessee's aims and objects allowed assessee to accept deposits of money from public for purpose of lending or investment, it could not be said that principle business of assessee was banking business - Held, yes - Whether, therefore, assessee could not be regarded as a primary co-operative bank and, hence, was entitled to deduction under section 80P(2)(a)(i) - Held, yes. 3. ITO v. Jankalyan Nagri Sahakari Pat Sanstha Ltd. [2012] 54 SOT 60 (Pune)(URO)/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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