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TMI Blog2023 (9) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... e Circular No.6/2010 which provides that the Circular No.319 dated 11.01.1982 deeming any Regional Rural Bank to be co-operative society stands withdrawn for application with effect from assessment year 2007-08, thus, Baroda Rajasthan Bank Gramin Bank Ltd. cannot be treated as co-operative society in relation to the assessee and that fiction created u/s. 22 of RRB Act is limited to the assessment of RRB itself in relation to I.T. Act, 1961 [40 ITR 142 (SC)/72 ITR (SC)]: 3. Deleting the addition of Rs.2,23,46,187/- following the Hon'ble ITAT, Jodhpur's order dated 31.10.2018 in ITA No.437/Jodh/2017 for A.Y. 2014-15 in assessee's own case, without appreciating the fact that the order of the Hon'ble ITAT has not been accepted by the Revenue and further appeal has been preferred before the Hon'ble High Court, Jodhpur; 4. The appellant craves to add, amend, alter, delete or modify the above grounds of appeal before or at the time of hearing." 3. Brief facts of the case are that the assessee is engaged in the business of Processing & Manufacturing of Milk & Milk Products and trading cattle feed etc. It is observed that the assessee has claimed the deduction u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "5. We have considered the rival submission of the parties and have gone through the assessment proceedings the AO noted that assessee has claimed exemption of interest income on FDR with Central Cooperative Bank Ltd., for Rs.76,43.562/- and interest on FDR with Baroda Rajasthan Kshetriya Gramin Bank of Rs.2,09,91,701 The AO allowed the exemption on interest received from Central Co-operative Bank However, the AO disallowed the exemption on account of interest earned from Baroda Rajasthan Kshetriya Gramin Bank on his observation that Baroda Rajasthan Kshetriya Gramin Bank is not a Co-operative Society. The 40 also took the view that Baroda Rajasthan Kshetriya Gramin Bank is neither registered under Co-operative Society Act or under, other law for the time enforce any such state for registration of Co-operative Societies. Therefore, the interest of Rx 2,09,91,701/- received on FDR was not held eligible for deduction w/s 80P(2)(d). The Id. CIT(A) confirmed the action of AO holding that Baroda Rajasthan (supra) is not a Co-operative Society registered under the Co-operative Society Act or under any law for the time enforce in any state for the registration of Co-operative Society, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regional Rural Banks continue to claim deduction under section 80P on the ground that they are cooperative societies covered by section 80P(1) read with Boards Circular No. 319 dated 11-1-1982. 5. It is, therefore, reiterated that Regional Rural Banks are not eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards. Furthermore, the Circular No. 319 dated 11-1-1982 deeming any Regional Rural Bank to be cooperative society stands withdrawn for application with effect from assessment year 2007-08. The field officers may take note of this position and take remedial action, if required. 7. We have also perused the various provisions of Regional Rural Bank Act 1976. Baroda Rajasthan Kshetriya Gramina Bank was set up under the provisions of under the provisions of Regional Rural Bank Act. Section 22 of the Regional Rural Bank Act provides that Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961. In our considered view the Circular of CBDT cannot override the provisions of the Act of Parliament. Even the careful reading of the Circular No. 6 of CBDT make it clear that exemption is wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety be denied benefit of section 80P(2)(d) of the Act on interest received from another cooperative society engaged in banking activities. The similar issue has been decided by the Hon'ble Rajasthan High court, Jodhpur has decided in Revenue's appeal filed for the assessment year 2014-15 in the case of PCIT, Ajmer vs M/s Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd. in BD Income Tax Appeal No. 2/2019 vide its order dated 13.08.2019. The relevant observation made in the order by the Jurisdictional High Court has been reproduced as under:- "The revenue cites a CBDT Circular (No. 6/2010 dated 20.09.2010) and contends that the Board categorically stated that interest income derived from deposits, made with non-cooperative institutions and more specifically Regional Rural Banks do not qualify for the benefit under Section 80P(2) of the Act of 1961. Section 22 of the Regional Rural Banks Act, 1976 states as follows" "22. Regional Rural Bank to be deemed to be a co- operative society for purpose of the Income Tax Act, 1961- For the purpose of the Income Tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to any tax on income, profits, or gains, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... triya Gramin Bank on his observation that Baroda Rajasthan Kshetriya Gramin Bank is not a Co-operative Society. The 40 also took the view that Baroda Rajasthan Kshetriya Gramin Bank is neither registered under Co-operative Society Act or under, other law for the time enforce any such state for registration of Co-operative Societies. Therefore, the interest of Rx 2,09,91,701/- received on FDR was not held eligible for deduction w/s 80P(2)(d). The Id. CIT(A) confirmed the action of AO holding that Baroda Rajasthan (supra) is not a Co-operative Society registered under the Co-operative Society Act or under any law for the time enforce in any state for the registration of Co-operative Society, therefore, the interest received by assessee on FDR made with Baroda Rajasthan (supra) is not eligible for deduction w/s 80P(2)(d). 6. The ld. AR of the assessee relied upon the decision of Mumbai Tribunal in Presidency Co-operative Society (supra) and in Shree Keshorai Patan Sahakari Sugar Mill. In our considered view the facts narrative is not applicable on the facts of the present case. In both the cases the assessee, (in those cases were held entitled for exemption of interest received on d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for application with effect from assessment year 2007-08. The field officers may take note of this position and take remedial action, if required. 7. We have also perused the various provisions of Regional Rural Bank Act 1976. Baroda Rajasthan Kshetriya Gramina Bank was set up under the provisions of under the provisions of Regional Rural Bank Act. Section 22 of the Regional Rural Bank Act provides that Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961. In our considered view the Circular of CBDT cannot override the provisions of the Act of Parliament. Even the careful reading of the Circular No. 6 of CBDT make it clear that exemption is withdrawn with respect to Regional Rural Banks are not eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards, and not the co-operative societies. The assessee before us is the cooperative society and not the Regional Rural Bank. Therefore, considering the provisions of section 22 of Regional Rural Bank Act, wherein the status of the banks established are of the co-operative society the assessee is entitled for the exemption on the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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