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TMI Blog2014 (3) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... society as primary co- operative bank. 3. The learned Assessing Officer and honourable CIT(Appeals) have erred in not appreciating the difference between co-operative society and co-operative bank. 4. The learned Assessing Officer and honourable CIT(Appeals) have erred in not appreciating very intention behind introduction of sub-section 4 to 80P. 5. The learned officer and honourable CIT(Appeals) have been wrongly treated as our society is doing banking business." 2. Both the parties agreed that whatever view is taken for the A.Y 2009-10, the same view may be taken for the A.Y 2010-11, therefore these appeals are disposed off on the basis of the facts involved for the A.Y. 2009-10. Both the appeals are barred by limitation. The ITA No. 443/PNJ/2013 is delayed by 53 days while the ITA No. 444/PNJ/2013 is delayed by 57 days. Application for condonation of delay alongwith the Affidavit was filed. After hearing both the parties we find that it is a fit case for condonation of delay and accordingly we admit both the appeals. 3. The brief facts of the case for the assessment year 2009-10 are that the Assessee is a co-operative society registered under the Karnataka State Co- operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety Ltd. for the A.Y 2009-10 in which it was held that the provisions of Sec. 80P(4) are applicable only to credit co- operative banks and not to credit co-operative society. Reliance was also placed on the decision of the Panaji Bench in the case of DCIT vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. in ITA No. 1 to 3/PNJ/2012 dt. 30.3.2012. 3.2 The ld. DR, on the other hand vehemently contended that the Assessee is a co-operative bank. In view of the definition of the co-operative bank given under explanation to Sec. 80P(4) the Assessee is engaged in the business of banking. Sec. 80P(4) puts an embargo w.e.f. 1.4.2007 that if a co-operative society is carrying on banking business, the Assessee will not be entitled for the exemption. Reliance was placed on the decision of Hyderabad Bench of the Tribunal in the case of The Citizen Co-operative Society vs. Addl. CIT in ITA Nos. 1003/Hyd/2011 & 1004/Hyd/2011 dt. 2.7.2012. 3.3 We have heard the rival submissions and carefully considered the same alongwith the order of the tax authorities below as well as the decisions and the entire material and case laws referred to before us. The question before us is whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have the same meaning as assigned to them in Part- V of the Banking Regulation Act, 1949. It is not the case of either of the parties that the Assessee is a primary co-operative agricultural and rural development bank. It is also not the claim of the Assessee that Assessee is a primary agricultural credit society. If we read both the sections, Sec. 80P(2)(a)(i) and Sec. 80P(4) together, we find that the provisions of Sec. 80P(4) mandates that the provisions of Sec. 80P will not apply to any co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank but as per the provisions of Sec. 80P(2)(a)(i), a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is entitled for deduction. After the insertion of Sec. 80P(4), the provisions of Sec. 80P(2)(a)(i) were not amended, rather the co- operative society engaged in carrying on business of banking facilities to its members continued to be entitled for deduction u/s 80P(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-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for deduction u/s 80P(2)(a)(i) on the income which it derives from carrying on the activities not relating to its members. Therefore, 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. 3.3.2 Now, the question before us is whether the Assessee is a co-operative bank or not. "Co-operative Bank" is defined in Part V of the Banking Regulations Act, 1949 as under : "Co-operative bank" means a state co-operative bank, a central co-operative bank and a primary co-operative bank:" 3.3.3 From the definition of Co-operative bank it is apparent that Co-operative bank means state" co-operative bank, a Central 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my and co-operative attitude among members and co member. 2. To formulate plan to improve the financial position of economically backward families of the society and to provide them financial assistance. 3. Collection of deposits to fulfil financial requirement and provide the financial assistance to the members. 4. Advancing loans for purchase of machinery, vehicles and other vehicles. 5. Advancing gold loan and other loans by pledging the ornaments and certificates. 6. Investing excess amount of the society in any government recognized society as per section 58 of the Karnataka co-op societies Act 1959. 7. Creation of various funds as per the by-law for the benefit of the member and employees. 8. Providing assistance and supporting the economic activities of the members. 9. Purchase of building for society use and also taking on lease or to construct the building. 10. To open the branches for the benefit of the members and entrepreneurs. 11. Advancing the loan to its members at lower rate 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. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers. So far as the second condition is concerned, there is no dispute that the paid up share capital and reserves in the case of the Assessee is more than Rs. 1 lac. Therefore, the Assessee satisfies the second condition. So far as the third condition is concerned, we noted that Sec. 16 of The Karnataka State Co-operative Societies Act, 1959 permits admission of any other co-operative society as a member. The provisions of Sec. 16 are laid down as under : "16. Persons who may become members - [(1) Subject to the provisions of Section 17, no person shall be admitted as a member of a co-operative society except the following, namely:-- [(a) an individual who needs the services of such co-operative society [and is residing in the area of the operation of the society] and is competent to enter into contract under the Contract Act, 1872 (Central Act IX of 1872);] [(a-1) a depositor;] (b) any other co-operative society; (c) the State Government or the Central Government; (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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber. Thus the third condition for becoming primary co-operative bank is not complied with. 3.3.8 We have gone through the decision of the Hyderabad bench of this Tribunal in the case of The Citizen Cooperative Society vs. Addl. CIT (supra). We noted that this decision is not applicable to the facts of the case before us. In this decision, under para 23 the Tribunal has given a finding that the Assessee is carrying on banking business and for all practical purposes it acts like a co-operative bank. The Society is governed by the Banking Regulations Act. Therefore, the society being a co-operative bank providing banking facilities to members is not eligible to claim deduction u/s 80P(2)(a)(i) after the introduction of sub-section (4) to section 80P. In view of this finding, the Assessee was denied deduction u/s 80P(2)(a)(i). We have also gone through the decision of the Bangalore Bench of the Tribunal in the case of ITO vs. Divyajyothi Credit Co-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a co-operative society which is engaged in carrying on banking business facilities to its members if it is not a co-operative bank. We have also gone through the decision of this Bench in the case of DCIT vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. in ITA No. 1 to 3/PNJ/2012 dt. 30.3.2012 (supra), for which the undersigned is the author. While discussing this issue, after analysing the aims and objects of the co-operative society under para 12 of its order, this Tribunal has held as under : "12. From the aforesaid objects, it is apparent that none of the aims and objects allows the assessee cooperative society to accept deposits of money "from public for the purpose of lending or investment. In our opinion until and unless that condition is satisfied, it cannot be said that the prime object or principal business of the assessee is banking business. Therefore, the assessee will not comply with the first condition as laid 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-oper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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