2015 (12) TMI 1575 - HC - Income Tax

Entitlement for exemption in terms of Section 80P(2)(a)(i) - whether assessee are not a Co-operative Banks but a Co-operative Societies? - Held that - Taking note of the observations in the judgment in the case of M/s. The Quepem Urban Co-operative Credit Society Ltd., (2015 (6) TMI 573 - BOMBAY HIGH COURT ) to the effect that merely giving credit facilities to the members would not be a Co-operative Bank but continued to be a Co-operative Society and as there is no material on record that the respondents were giving any such credit facilities to the non members, we find that the observations in the said judgment in the case of M/s. The Quepem Urban Co-operative Credit Society Ltd., ( supra ) would be squarely applicable to the facts of the present case. As such, as no other contentions have been raised by the learned counsel appearing for the appellant, we find that the proposed substantial questions of law to that effect would not survive and does not require any further consideration

Summary

Issues:
Interpretation of Section 80P(2)(a)(i) of the Income Tax Act - Whether the respondents are Co-operative Banks or Co-operative Societies.

Analysis:
The judgment involves a dispute regarding the classification of the respondents as either Co-operative Banks or Co-operative Societies for the purpose of claiming exemption under Section 80P(2)(a)(i) of the Income Tax Act. The appellant argued that the respondents should be considered as Co-operative Banks based on the definition of 'income' in Section 2(24)(viia), which includes income from credit facilities to members. The appellant contended that since the respondents provide credit facilities to members, they should not be entitled to exemption under the said provision. The Assessment Officer also supported this view. However, the respondent's counsel argued that the fact-finding authorities had correctly classified the respondents as Co-operative Societies, making them eligible for the exemption. The respondent's counsel cited a previous judgment where it was established that providing credit facilities only to members does not qualify an entity as a Co-operative Bank.

Upon thorough consideration, the Court referred to a previous judgment involving a similar issue and highlighted the criteria for classifying an entity as a Co-operative Bank under the Banking Regulation Act. The Court emphasized that for an entity to be considered a Co-operative Bank, it must meet specific conditions cumulatively, including having its principal business as banking, a minimum share capital, and bye-laws that do not allow admission of other Co-operative Societies as members. In the present case, it was found that the respondents did not meet all the necessary conditions to be classified as a Co-operative Bank. The Court upheld the findings of the fact-finding authorities that the respondents were Co-operative Societies and thus entitled to the exemption under Section 80P(2)(a)(i) of the Income Tax Act.

In conclusion, the Court rejected the appellant's arguments and upheld the classification of the respondents as Co-operative Societies. The Court found no substantial question of law requiring further consideration, as the facts of the case aligned with the previous judgment's interpretation that providing credit facilities solely to members does not transform an entity into a Co-operative Bank. Therefore, the appeals were dismissed based on the established classification of the respondents as Co-operative Societies, making them eligible for the exemption under the relevant provision of the Income Tax Act.