TMI Blog2015 (8) TMI 1571X X X X Extracts X X X X X X X X Extracts X X X X ..... that section 80P(4) is applicable only to cooperative banks and not to credit cooperative societies. The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee s case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) We are of the view that the assessee society is entitled to deduction u/s. 80P(2)(a)(i) of the Act. We uphold the order of the ld CIT(Appeals). Decided in favour of assessee. - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE , ACCOUNTANT MEMBER For the Appellant : Shri Sunil Kumar Agarwala, Jt. CIT(DR) For the Respondent : Shri Prasad R. Siramath, Advocate ORDER Per N.V. Vasudevan, Judicial Member This appeal by the Revenue is against the order dated 11.02.2015 of the CIT(Appeals), Hubballi relating to assessment year 2010-11. 2. In this appeal, the Revenue has challenged the order of CIT(Appeals) allowing exemption to the assessee u/s. 80P(2)(a)(i) of the Act, holding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity was also Income . That the deduction from gross total income of certain receipts is available only to primary agricultural credit societies or primary co-operative agricultural and rural development banks; and that the benefit of such deduction is not available to institutions like the assessee society. The AO also referred to section 5(b) of the Banking Regulation Act to hold that, if one of the two conditions of the appellant i.e. its primary object should be banking or its principal business must be transaction in banking business, is sufficient to bring the appellant into the concept of a banking institution. The AO referred to the objects of the assessee society and held that accepting deposits and lending to its members are in the nature of transaction of banking activity and also that the paid-up capital reserves as per its Balance Sheet as on 31.3.2010 is in excess of Rs.1,00,000. According to the AO, the following features make the assessee ineligible to exemption contemplated in section 80P of the Act: i) Since membership is open to anyone paying a sum of Rs.10/- to Rs.100/- for membership and no other condition is imposed. In other words, membership as is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee was denied the deduction u/s 80-P(2)(a)(i) of the Act for the reason of introduction of sub section 4 to section 80P. Section 80P(4) reads as follows:- (4) The provisions of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative 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 of 1949); (b) primary cooperative agricultural and rural development bank means a society having its area of operation confined to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities . 9.1 The above sub-section 4 of section 80P provides that deduction under the said section shall not be available to any cooperative bank other than a primary agricultural credit society or rural development bank. For the purpose of the said sub section, cooperative bank shall have the meaning assigned to it in part V of the Banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts 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 cooperative banks. Part V of the Banking Regulation Act is not applicable to cooperative banks. Use of words The word bank , banker , banking can be used by a cooperative bank. The word bank , banker , banking cannot be used by a cooperative society. 9.3 If the intention of the legislature was not to grant deduction u/s 80P(2)(a)(i) to cooperative societies carrying on the business of providing credit facilities to its members, then this section would have been deleted. The new proviso to section 80P(4) which is brought into statute is applicable only to cooperative banks and not to credit cooperative societies. The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, the issue has been considerably simplified by virtue of CBDT circular No. 133 of 2007 dated 9.5.2007. Circular provides as under:- Subject: Clarification regarding admissibly of deduction under section 80P of the Income-Tax Act, 1961. 1. Please refer to your letter no. DCUS/30688/2007, dated 28.03.2007 addressed to Chairman, Central Board of Direct Taxes, on the above given subject. 2. In this regard, I have been directed to state that sub-section(4) of section 80P provides that deduction under the said section shall not be allowable to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. For the purpose of the said sub-section, co-operative bank shall have the meaning assigned to it in part V of the Banking Regulation Act, 1949. 3. In part V of the Banking Regulation Act, Cooperative Bank means a State Co-operative bank, a Central Co-operative Bank and a primary Co-operative bank. 4. Thus, if the Delhi Co op Urban T C Society Ltd. does not fall within the meaning of Co-operative Bank as defined in part V of the Banking Regulation Act, 1949, subsection(4) of section 80P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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