2015 (4) TMI 759 - AT - Income Tax

Deduction available to Co-operative society - Deduction not available to Co-operative bank - Credit co-operative bank vs credit co-operative society - Held that - From the clarification issued by CBDT, it can be gathered that sub-section(4) of section 80P will not apply to an assessee which is not a co-operative bank. In the case clarified by CBDT, Delhi Coop Urban Thrift & Credit Society Ltd. was under consideration. Circular clarified that the said entity not being a cooperative bank, section 80P(4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenue s contention that section 80P(4) would exclude not only the co-operative banks other than those fulfilling the description contained therein but also credit societies, which are not cooperative banks. In the present case, respondent assessee is admittedly not a credit co-operative bank but a credit co-operative society. Exclusion clause of subsection( 4) of section 80P, therefore, would not apply. - Decided against the revenue.

Issues Involved:
1. Applicability of Section 80P(2)(a)(i) for deduction to a cooperative society.
2. Interpretation of Section 80P(4) and its applicability to cooperative banks versus cooperative societies.
3. Differentiation between a cooperative bank and a cooperative society.

Detailed Analysis:

1. Applicability of Section 80P(2)(a)(i) for deduction to a cooperative society:
The assessee, a cooperative society engaged in providing credit facilities to its members, claimed a deduction under Section 80P(2)(a)(i) of the Income Tax Act. The AO disallowed the deduction, interpreting that the assessee was functioning as a cooperative bank, thus falling under the exclusion provided by Section 80P(4). The Tribunal, however, referred to a precedent in the case of ACIT, Circle 3(1), Bangalore v. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd., where it was held that Section 80P(4) applies only to cooperative banks and not to credit cooperative societies. Thus, the assessee, being a cooperative society, was entitled to the deduction under Section 80P(2)(a)(i).

2. Interpretation of Section 80P(4) and its applicability to cooperative banks versus cooperative societies:
Section 80P(4) was introduced to exclude cooperative banks from the benefits of Section 80P, except for primary agricultural credit societies or primary cooperative agricultural and rural development banks. The Tribunal clarified that the term "cooperative bank" as used in Section 80P(4) refers to entities defined under Part V of the Banking Regulation Act, 1949, which includes State Cooperative Banks, Central Cooperative Banks, and Primary Cooperative Banks. The Tribunal emphasized that the exclusion under Section 80P(4) does not extend to cooperative societies that are not classified as cooperative banks. This interpretation was supported by CBDT Circular No.133/06/2007-TPL dated 9th May 2007, which explicitly states that Section 80P(4) does not apply to entities that are not cooperative banks.

3. Differentiation between a cooperative bank and a cooperative society:
The Tribunal provided a detailed comparison between cooperative banks and cooperative societies, highlighting differences in their registration, nature of business, regulatory compliance, and operational scope. Cooperative banks are registered under both the Banking Regulation Act, 1949, and the Cooperative Societies Act, 1959, and can perform a wide range of banking activities, including accepting deposits, issuing cheques, and acting as clearing agents. In contrast, cooperative societies are registered only under the Cooperative Societies Act, 1959, and have a limited scope of activities primarily focused on providing credit to their members. The Tribunal concluded that the legislative intent behind Section 80P(4) was to bring cooperative banks at par with commercial banks for taxation purposes, and not to deny benefits to cooperative societies.

Conclusion:
The Tribunal upheld the assessee's claim for deduction under Section 80P(2)(a)(i), concluding that the provisions of Section 80P(4) are not applicable to cooperative societies. This decision was consistent with judicial precedents and clarifications issued by the CBDT, thereby dismissing the Revenue's appeal. The Tribunal's order emphasized the clear legislative distinction between cooperative banks and cooperative societies, ensuring that the latter continue to benefit from the deductions provided under Section 80P(2)(a)(i).

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