2015 (7) TMI 557 - AT - Income Tax

Ineligiblity for claiming deduction u/s.80P - In view of the nature of activities being carried out by the assessee as listed by the Assessing Officer in his detailed and well reasoned order, there is no doubt that the assessee is carrying on banking activities and is thus in-eligible for claiming deduction u/s.80P - CIT(A) allowed deduction - Held that - For the purpose of sub-section 4, co-operative bank and Primary Agricultural Credit Society shall have the meanings assigned to them under the Banking Regulation Act, 1949. We find that the issue whether credit co-operative societies are same as cooperative banks has been dealt in detail by the Bangalore Bench of the Tribunal in the case of ACIT Vs. M/s.Bangalore Commercial Transport Credit Co-operative Society Ltd., (2011 (4) TMI 1222 - ITAT BANGALORE). After comparative analysis of the co-operative banks and co-operative societies on various parameters, the Tribunal came to the conclusion that the activities of both the organizations and the compliances to be made under various Acts for both the organizations are varied. The sub-section 4 to section 80P is applicable only to co-operative banks and not to credit co-operative societies. Gujarat High Court in the case of CIT Vs. Jafari Momin Vikas Co-op. Credit Society Ltd.,(2014 (2) TMI 28 - GUJARAT HIGH COURT ) wherein the Hon ble High Court after taking into consideration the CBDT Circular No.133/07 has held that sub-section 4 section 80P will not apply to assessee which is not a co-operative bank The Revenue has tried to establish that the assessee although a credit co-operative society is carrying banking business and is thus not eligible. In our opinion, the assessee is not a co-operative bank. The activities in the nature of accepting deposits, advancing loans etc., carried on by the assessee are confined to its members only and that too in a particular geographical area. The activities of the assessee are not regulated by the RBI or the provisions of the Banking Regulation Act. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application and it is entitled to deduction u/s 80P(2)(a)(i) of the Act thus, the order of CIT(A) is correct and upheld - Decided in favour of assessee.

Summary

Issues involved:
1. Eligibility of a primary Agricultural Credit Co-operative Society for deduction under section 80P(2) of the Income Tax Act, 1961.
2. Interpretation of the amendment brought by the Finance Act, 2006 regarding the applicability of section 80P to co-operative banks.

Detailed Analysis:
1. The primary issue in this case revolved around the eligibility of a primary Agricultural Credit Co-operative Society for deduction under section 80P(2) of the Income Tax Act, 1961. The Revenue contended that the society was engaged in banking activities, making it ineligible for the deduction. The Assessing Officer disallowed the deduction claimed by the society under section 80P due to its significant activities in providing loans for non-agricultural purposes, resulting in a high percentage of interest income from non-agricultural activities. The society argued that it was registered under the Tamil Nadu Co-operative Societies Act, 1961, and its activities were limited to providing credit facilities to its agriculturist members in a specific geographical area. The society relied on previous tribunal decisions and a judgment of the Hon'ble Gujarat High Court to support its claim that it was not a co-operative bank and therefore entitled to the deduction.

2. The interpretation of the amendment brought by the Finance Act, 2006 regarding the applicability of section 80P to co-operative banks was a crucial aspect of the case. The sub-section 4 of section 80P excluded co-operative banks from the benefits of the section, while allowing Primary Agricultural Credit Societies to claim the deduction. The Explanation to section 80P defined 'co-operative bank' and 'Primary Agricultural Credit Society' based on the Banking Regulation Act, 1949. The Tribunal analyzed the distinction between co-operative banks and credit co-operative societies, emphasizing that the exclusion under sub-section 4 of section 80P applied only to co-operative banks. The Tribunal referenced previous decisions and a CBDT circular to support the conclusion that the society, being a credit co-operative society and not a co-operative bank, was eligible for the deduction under section 80P.

In conclusion, the Tribunal upheld the order of the CIT(Appeals) and dismissed the Revenue's appeal, stating that the society, being a credit co-operative society and not a co-operative bank, was entitled to claim the deduction under section 80P. The decision was based on the specific activities and nature of operations of the society, which were deemed distinct from those of a co-operative bank.