9911796707
TMI Blog2014 (3) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... for deduction u/s 80P(2)(a)(i) on the income which it derives from carrying on the activities not relating to its members - where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilties to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co- operative societies in respect of business relating to its members. Nature of Assessee - Application of section 80P(4) of the Act on society - Whether the Assessee is a co-operative bank or not – Held that:- The Assessee did not file the copy of the bye-laws - neither are the provisions of Sec. 17 of The Karnataka State Co-operative Societies Act, 1959 - In the absence of the copy of the bye-laws we are unable to express any opinion whether the Assessee complies with the third condition or not – thus, the matter is remitted back to the AO for examination to look into the rules and bye-laws of the Assessee co-operative society – In case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2009-10 are that the Assessee is a co-operative society registered under the Karnataka State Co- operative Societies Act. The Assessee filed return declaring gross total income of Rs.37,07,382/- and claimed deduction u/s 80P(2)(a)(i) and therefore net taxable income was shown to be nil . The AO did not allow the deduction to the Assessee u/s 80P(2)(a)(i) and the income was assessed at Rs.41,03,978/-. The AO while denying the deduction to the Assessee u/s 80P(2)(a)(i) took the view that the Assessee is a primary co-operative bank and therefore provisions of Sec. 80P(4) are applicable in the case of the Assessee. The Assessee went in appeal before the CIT(A). CIT(A) partly allowed the appeal of the Assessee but did not allow deduction u/s 80P (2) (a) (i). 3.1 The ld. AR before us vehemently contended that the provisions of Sec. 80P(4) are not applicable in the case of the Assessee. The Assessee is not a co- operative bank. The Assessee is a co-operative society duly registered under the Karnataka State Co-operative Societies Act, 1959. The primary object of the Assessee is to develop self help. Economy and co-operative attitude among members and co member. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow as well as the decisions and the entire material and case laws referred to before us. The question before us is 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. The relevant provisions of both the sections are re-produced for our ready reference as under : 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :-- (a) in the case of a co-operative society engaged in-- (i) carrying on the business of banking or providing credit facilities to its members, or............... the whole of the amount of profits and gains of business attributable to any one or more of such activities. 80P(4) The provisions of this section shall not apply in relation to any co-operative bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(a)(i). This pre- supposes that every co-operative society engaged in carrying on business of banking cannot be regarded to be a co-operative bank. The embargo put u/s 80P(4) are applicable only to a co-operative bank. In our opinion, it cannot be said that a co-operative society cannot carry on business of banking facilities to its members even if it is not a co-operative bank. If we read the provisions in the manner that every co-operative society engaged in carrying on business of banking even for its members is regarded to be a co-operative bank, then, the provisions of Sec. 80P(2)(a)(i) will become redundant. Therefore, in our opinion, before deciding the issue whether the Assessee is entitled for deduction u/s 80P(2)(a)(i), it is essential to decide whether the Assessee is a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. In case it is found that the Assessee is a co-operative bank, the Assessee will not be entitled for deduction as stipulated u/s 80P(2)(a)(i) but in case the Assessee is not a co-operative bank other than a primary agricultural credit society or a primary co-operative ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Co-operative Bank and a Primary Co-operative bank. It is not the case of the revenue that the assessee is a state Co-operative bank or Central Co-operative bank. We have therefore to find whether the assessee is a primary Co-operative bank. 3.3.4 The Primary Co-operative bank is defined under section 5 clause (CCV) of Banking Regulation Act 1949 as under:- (CCV) primary co-operative bank means a co-operative society, other than a primary agricultural credit society- (1) the primary object or principal business of which is transaction of banking business: (2) the paid-up share capital and reserves of which are not less than one lakh of rupees: and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such Co-operative society out of funds provided by the State Government for the purpose 3.3.5 From the aforesaid definition, it is apparent that if the co-operative society complied with all the three conditions; firstly that the primary object or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of interest to support industrial development and self employment. 12. To provide financial and technical assistance for purchase of machineries to members for self employment. 13. Advancing loan to members for purchase of vehicles for good carriage. 14. Advancing mortgage loan on production by the members. 15. Advancing loans to dairy farms, poultry farm and other small scale industries. 16. Providing financial assistance to members to start small scale industries. 17. Advancing the loan according to their salary to the Government and Semi Government employees. 18. To undertake any other activity for the overall development of the members. On the basis of these objects whether it can be said that the primary object or principal business of the Assessee is transaction of banking business? Banking business has been defined u/s 5(b) of the Banking Regulation Act in the following manner : banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. From the said definition it is clear that banking means accepting dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment; (d) the Life Insurance Corporation of India, State Warehousing Corporation and such other institutions as may be approved by the State Government; (e) a firm, a company or any other body corporate constituted under any law for the time being in force including a society registered under the Karnataka Societies Registration Act, 1960 (Karnataka Act 17 of 1960); (f) a Market Committee established under the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (Karnataka Act 27 of 1966); (g) a local authority. Explanation.-For the purpose of this clause, local authority means, a Municipal Corporation, Municipal Council, Town Panchayat, Zilla Panchayat, Taluk Panchayat or Grama Panchayat constituted under any law for the time being in force] (2) No co-operative society shall, without sufficient cause, refuse admission to membership to any person duly qualified therefor under the provisions of this [Act, rules and bye-laws] The aforesaid provision of Sec. 16 mandates admission of any other co- operative society as a member of the co-operative society. The word used in Sec. 16(1) is shall . This fact is clarified further by sub-section (2) as re- pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operative Society Ltd. (supra) in ITA No. 72/Bang/2013. In this case, we noted that the Hon'ble Tribunal confirmed the order of CIT(A) following the decision of the Tribunal in the case of ACIT, Circle 3(1), Bangalore vs. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. in ITA No. 1069/Bang/2010 holding that Sec. 80P(2)(a)(i) is applicable only to a co-operative bank and not to credit co-operative society. With due regards to the Bench, we are unable to find any term credit co-operative society u/s 80P(2)(a)(i) or u/s 80P(4), therefore, this decision cannot assist us. We noted that the Hon'ble Gujarat High Court in the case of CIT vs. Jafari Momin Vikas Co-op. Credit Society Ltd. in Tax Appeals no. 442 of 2013, 443 of 2013 and 863 of 2013 (supra) vide order dt. 15.1.2014 took the view that Sec. 80P(4) will not apply to a society which is not a co-operative bank. In the case of Vyavasaya Seva Sahakara Sangha vs. State of Karnataka Ors. (supra) we noted that the issue before the Hon'ble High Court in the Writ Petition filed by the Petitioner related to the legislative competence of the State Legislature for issuing a circular. The issue does not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d down in the definition as given u/s. 5(ccv) of the Banking Regulation act, 1959 for becoming primary cooperative bank . The assessee, therefore, cannot be regarded to be primary cooperative bank and in consequence thereof, it cannot be a co-operative bank as defined under part V of the Banking Regulation Act 1949. Accordingly, in our opinion the provisions of section 80P (4) read with explanation there under will not be applicable in the case of the assessee. The assessee, therefore, in our opinion will be entitled for the deduction u/s 80P(2)(a)(i). We accordingly confirm the order of CIT(A) allowing deduction to the assessee. 3.3.9 We, therefore, in view of our aforesaid discussion hold that the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i). We, therefore, set aside the order of the CIT(A) and direct AO to allow deduction u/s 80P(2)(a)(i) to the assessee. 4. In the result, both the appeals filed by the Assessee are allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
