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TMI Blog2014 (3) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... d attracted under the facts and in the circumstances of the appellant's case. 3. The learned CIT (A) failed to appreciate that the appellant is not a primary co-operative bank within the meaning of Part V of the Banking Regulation Act, 1949, to which the Explanation to section 80P(4) of the Act draws reference and consequently, the provisions of section 80P(4) of the Act are not applicable to the case of the appellant. 4. The learned CIT (A) failed to appreciate that the binding decisions of the Hon'ble ITAT were not "per incurrium" as held by him and that the provisions of section 2(24)(viia) of the Act does not change or alter the applicability of the provisions of section 80P(4) of the Act, which applies only to co-operative banks and not the co-operative societies providing credit facility to its members". 3. Brief facts of the case are as follows. The assessee is a co-operative society. It is engaged in the business of providing credit facility to its members. For the relevant assessment year, return of income was filed on 28.09.2010 declaring a 'nil' income after claiming deduction u/s 80P(2) of the Act amounting to Rs. 1,01,47,751/-. The assessment was take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013, with Tax Appeal No. 863 of 2013 and various orders of the Bangalore Bench of the Tribunal. 6. The learned DR was present was duly heard. 7. We have heard the rival submissions and perused the material on record. The Hon'ble Karnataka High Court after reproducing sub section 4 of section 80P of the Act held that the said provisions is not applicable to co-operative societies and is restricted only to cooperative bank, which has got license to do banking business from the RBI. The relevant findings of the Hon'ble jurisdictional High Court in the case of CIT vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot (Supra) reads as follows: "Therefore, the insertion of the legislature is clear. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the question of law could be stated to have arisen. When, as contended by the assessee, by virtue of sub-section (4) only cooperative banks other than those mentioned therein were meant to be excluded for the purpose of deduction u/s 80P, a question would arise why then Legislature specified primary agricultural credit societies along with primary cooperative agricultural and rural development banks for exclusion from such exclusion and in other words, continued to hold such entity as eligible for deduction. However, 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 admissibility of deduction u/s 80P of the Income Tax Act, 1961. 1. Please refer to your letter No. DCIS/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 co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 4 of 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 Regulation Act, 1949. In Part V of the Banking Regulation Act, "cooperative bank" means a State Cooperativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature was not to grant deduction u/5 80P (2)(a)(i) to co-operative 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 co-operative societies. The intention of the legislature of brining in co-operative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-operative 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) of the Act. Hence, we are of the view that the order of the CIT (A) is correct and in accordance with law and no interference is called for." 7.3. In view of the aforesaid judgments of the Hon'ble High Court's and the order of the Tribunal, we hold that the authorities below is not justified in denying the benefit of deduction u/s 80P(2) of the Act to the assessee society. Therefore, Assessing Officer is directed to grant the relief sought by the assessee society. It is ordered accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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