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2012 (9) TMI 288 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - Co-operative Credit Society engaged in providing credit facilities to its Member - dis-allowance on ground that in view of insertion of the of sub-sec(4) to Sec. 80P w.e.f. 1.4.2007, the said section will not apply to any Co-operative Bank - reference to Banking Regulation Act 1949 - Held that - On plain reading of the Banking Regulation Act, 1949, nowhere it is suggested that the term Co-operative Bank also includes Co-Operative Credit Society also. Meaning of any term or expression is to be ascertained in the context of provisions of referred Act. Interpretaion of AO that assessee Co-Operative Credit Society partakes the character of the Primary Co-operative Bank is not the correct interpretation. It is well settled principle in the interpretation of the taxing provisions that the same are to be strictly construed and there is no room for any intendment. One has to fairly look into language used by the Parliament. The Parliament has adopted the definition of the Co-operative Bank by referring the same as given in the Banking Regulation Act, 1949. It is called Legislation by reference and we have to give the strict interpretation while interpreting the effect of Sub-sec. (4) to Sec. 80 P. In our opinion, Co-operative Credit Society is distinct and separate from the Co-operative Bank nor it can be said as a Primary Co-operative Bank within the meaning of Banking Regulation Act, 1949. Hence, the assessee being a Co-operative Credit Society is entitled for deduction u/s. 80 P(2)(a)(i) - Decided in favor of assessee.
Issues Involved:
1. Entitlement of the assessee Credit Society to the benefit of Section 80P(2)(a)(i) of the Income Tax Act. 2. Interpretation of the term "co-operative bank" and its applicability to co-operative credit societies under Section 80P(4). Issue-Wise Detailed Analysis: 1. Entitlement of the Assessee Credit Society to the Benefit of Section 80P(2)(a)(i): The primary issue in this appeal is whether the assessee, a Co-operative Credit Society, is entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act for the Assessment Year 2007-08. The assessee claimed a deduction of Rs. 32,15,717/- under this section, which was initially disallowed by the Assessing Officer (A.O.). The A.O. argued that the assessee's activities were akin to those of a banking business, making it ineligible for the deduction under the amended Section 80P(4) effective from 1.4.2007. The A.O. concluded that the assessee was a "primary co-operative bank" as defined under the Banking Regulation Act, 1949, and thus not entitled to the deduction. However, the Commissioner of Income Tax (Appeals) [CIT(A)] reversed the A.O.'s decision, stating that the assessee was not a co-operative bank but a co-operative credit society. The CIT(A) emphasized that the amendment to Section 80P(4) specifically excluded co-operative banks from the deduction but did not apply to co-operative credit societies. The CIT(A) cited the Central Board of Direct Taxes (CBDT) circular No. 3/2008 and a clarification letter dated 09/05/2008, which supported the view that credit co-operative societies are distinct from co-operative banks and are eligible for the deduction under Section 80P(2)(a)(i). 2. Interpretation of the Term "Co-operative Bank" and Its Applicability to Co-operative Credit Societies Under Section 80P(4): The appeal required a detailed examination of the legal definitions and interpretations of "co-operative bank" and "co-operative credit society." The Banking Regulation Act, 1949, defines a "co-operative bank" to include State Co-operative Banks, Central Co-operative Banks, and Primary Co-operative Banks. A "primary co-operative bank" is defined as a co-operative society whose primary business is banking, with a paid-up share capital and reserves of not less than one lakh rupees, and bylaws that do not permit the admission of other co-operative societies as members, except in specific circumstances. The Tribunal noted that for a co-operative society to be classified as a "primary co-operative bank," it must meet all three conditions specified in the Banking Regulation Act. In this case, there was no evidence to suggest that the assessee fulfilled these conditions. The Tribunal also highlighted that the definition of a "co-operative credit society" is distinct and separate from that of a "co-operative bank" under the Banking Regulation Act. The Act defines a "co-operative credit society" as a society whose primary object is to provide financial accommodation to its members, which does not include co-operative banks. The Tribunal emphasized the principle of strict interpretation of taxing provisions, stating that the language used by the Parliament must be fairly looked into without any presumption or intendment. The Tribunal concluded that the assessee, being a co-operative credit society, is distinct from a co-operative bank and is entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act. Conclusion: The Tribunal upheld the order of the CIT(A), affirming that the assessee, a co-operative credit society, is entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act. The revenue's appeal was dismissed, and the Tribunal clarified that the provisions of Section 80P(4) do not apply to co-operative credit societies, which are distinct from co-operative banks.
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