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2014 (11) TMI 260 - AT - Income TaxClaim of deduction u/s 80P(2)(a)(i) disallowed - Nature of assessee Cooperative bank or not Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 Held that - Banking means accepting deposit of money from the public which is repayable on demand or otherwise and withdrawal of these deposits by cheque, draft, order or otherwise and these deposits are accepted for the purpose of lending or investment - These deposits must be accepted from the public, not only from the members - These deposits must be repayable on demand or otherwise and could be withdrawn by the depositor by cheque, draft or otherwise - the assesse has accepted deposits from non-members - No evidence were filed before us by Ld. AR to contradict the finding given by CIT(A) - Even though he contended that none of the objects permits the assesse to accept deposits from the public it cannot be held that the assesse did not accept the deposit from public during the year - The assesse since not discharged the onus. The deposits accepted are used by the Assessee co-operative society for lending or investment - Even out of the deposits so received, the loans have been given to the members of the society in accordance with the objects - the Assessee society was carrying on banking business as it was accepting deposits from the persons who were not members during the year - the paid up share capital and reserves in the case of the Assessee is more than ₹ 1 lac - Sec. 16 of The Karnataka State Co-operative Societies Act, 1959 permits admission of any other co-operative society as a member - section 80P(2)(a)(i) nowhere talks of co-operative credit society and therefore the distinction made under the Banking Regulation Act cannot be imported u/s 80P(2)(a)(i) - the Assessee has to be regarded to be a primary co-operative bank as all the three basic conditions are complied with, therefore, it is a co-operative bank and the provisions of Sec. 80P(4) are applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) the order of the CIT(A) is upheld Decided against assessee.
Issues Involved:
1. Disallowance of deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. Determination of whether the assessee is a Primary Co-operative Bank under Part V of the Banking Regulation Act, 1949. 3. Applicability of section 80P(4) to the assessee. Issue-Wise Detailed Analysis: 1. Disallowance of Deduction Claimed under Section 80P(2)(a)(i): The assessee, a co-operative society registered under the Karnataka State Co-operative Societies Act, claimed a deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961, which was disallowed by the Assessing Officer (AO). The AO assessed the income at Rs. 11,62,750/-, concluding that the assessee is a primary co-operative bank and thus, the provisions of section 80P(4) applied. The assessee's appeal to the CIT(A) was dismissed, prompting the current appeal. 2. Determination of Whether the Assessee is a Primary Co-operative Bank: The tribunal examined whether the assessee meets the criteria of a primary co-operative bank as defined under section 5(ccv) of the Banking Regulation Act, 1949. The conditions include: - Primary Object or Principal Business: The tribunal reviewed the bye-laws and found that the primary object or principal business of the assessee is the transaction of banking business, as it accepts deposits from non-members and uses these for lending or investment. - Paid-up Share Capital and Reserves: It was undisputed that the assessee's paid-up share capital and reserves exceed Rs. 1 lakh. - Membership Restrictions: The bye-laws do not permit the admission of any other co-operative society as a member, fulfilling the third condition. Based on these criteria, the tribunal concluded that the assessee qualifies as a primary co-operative bank. 3. Applicability of Section 80P(4): Section 80P(4) denies deductions to co-operative banks other than primary agricultural credit societies or primary co-operative agricultural and rural development banks. The tribunal emphasized that the provisions of section 80P(4) apply to co-operative banks, and since the assessee qualifies as a primary co-operative bank, it falls within the ambit of section 80P(4). Consequently, the assessee is not entitled to the deduction under section 80P(2)(a)(i). Conclusion: The tribunal upheld the order of the CIT(A), confirming that the assessee is a primary co-operative bank and thus, the provisions of section 80P(4) apply. Therefore, the assessee is not entitled to the deduction under section 80P(2)(a)(i). The appeal filed by the assessee was dismissed. Order Pronouncement: The order was pronounced in the open court on 08.08.2014.
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