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TMI Blog2014 (10) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Banking Regulation Act 1949 - the provisions of section 80P (4) read with explanation there under will not be applicable in the case of the assessee -The assessee will be entitled for the deduction u/s 80P(2)(a)(i) - the assessee is a primary cooperative bank and therefore hit by the provisions of section 80P(4) - Clause (c) of section 80P(2) is intended to cover receipts from sources other than the actual conduct of the business but attributable to an activity which results in profits and gains - Letting out of surplus space in the building owned and used by the assessee is not such an activity falling under clause (c) - the assessee is not entitled for deduction u/s. 80P of the Act – Decided against assessee. - I.T.A. No. 260/Coch/2014 - - - Dated:- 10-10-2014 - Shri N. R. S. Ganesan, JM And Chandra Poojari, AM,JJ. For the Petitioner : Shri T. M. Sreedharan, Sr. Adv. For the Respondent : Shri K.K.John, Sr. DR ORDER Per Chandra Poojari, Accountant Member: This appeal filed by the assessee is directed against the order dated 05-02-2014 passed by the CIT(A), Kozhikode for the assessment year 2008-09. 2. There was a delay of 21 days in filing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1969 in the classification as Primary Agricultural Credit Society by the Joint Registrar of Co-operative Societies, Kannur. The Ld. AR submitted that the assessee has not obtained any banking licence and as per the letter dated 15-01- 2014, the Reserve Bank of India informed the assessee that in terms of sec. 3 of Banking Regulation Act, 1949, Primary Agricultural Credit Society (PACS) are not entitled for obtaining a banking licence. According to the Ld. AR, sec. 80P(4) was introduced by Finance Act, 2006 with effect from 01-04-2007, excluding the benefits as per sec. 80P(2) to a co-operative Bank which reads as under: (4) The provisions of sec. 80P shall not apply in relation to any cooperative Bank, other than a Primary Agricultural Credit Society or Primary Co-operative Agricultural and Rural Development Bank . (a) Co-operative Bank and Primary Agricultural Credit Society shall have the meanings respectively assign to them in Part V of the Banking Regulation Act, 1949 (10 of 1949). (b) The Primary Co-operative Agricultural and Rural Development Bank means a Society having its area of operation confined to a Taluk and the principal object of which is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. ITAT Bangalore A Bench in I.T.A. No. 737/Bang/2011. 12. The Ld. AR submitted that the assessee has given a tabulation before the CIT(A) which showed that the direct agricultural loan given to its members amounted to 45.58% against security of gold and against security of mortgage of property and loans covered by surety aggregating to 50.38%. Thus, according to the Ld. AR, the direct agricultural loans and agricultural and allied loans worked out to 95.96% of the total loan. According to the Ld. AR, the Assessing officer has erroneously stated that the agricultural loans provided by the assessee to agriculturists are less than 2% and moreover, the Assessing officer did not provide assessee an opportunity to substantiate its claim. 13. The Ld. AR further relied on the judgment of the Jurisdictional High Court in the case of Moolamattom Electricity Board Employee s Co-operative Bank Ltd. and Others vs. ITO which referred to sec. 2(19). According to the above judgment, for the purpose of understanding Co-operative Society , the meaning that can be given is only as per the definition u/s. 2(19) of the Act and not otherwise. It was also held that the Primary Credit Societies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative Society Ltd. (supra) in ITA No. 72/Bang/2013. In this case, we notice 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 cooperative 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 CITvs. 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 notice 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 relate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king 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. The other decisions also relied on are not applicable to the facts of the case of the assessee. 8.11. In view of our aforesaid discussion, we hold that the assessee is a primary cooperative bank and therefore hit by the provisions of section 80P(4). 9. On the other hand, the assessee made an alternative plea that the assessee is lending money only to its members. Being so, applying the concept of mutuality, the total income of the assessee has to be exempt from tax. However, we find that this argument of the assessee is also devoid of merits. The Hon ble Supreme Court had an occasion to consider this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as a business activity under clause (a) of sub-section (2) of section 80P of the Act. The appeals were accordingly allowed. The question of law arises out of the order of the Tribunal. Section 80P of the Incometax Act, 1961, allows a straight deduction, in the computation of the total income of a co-operative society, to the extent mentioned. Clause(c) of section 80P(2) provides that in the case of a cooperative society engaged in activities other than those specified in clause (a) or clause (b) either independently of, or in addition to, all or any of the activities so specified, so much of its profits and gains attributable to such activities as does not exceed ₹ 20,000 shall be deducted in computing the total income. The co-operative society engaged in carrying on the business of banking or providing credit facilities to its members falls under clause (a) of section 80P(2). The claim for exemption under clause (c) is in addition to the exemption provided under clause (a). The provisions are cumulative and mutually supplementing. The limits specified in clause(c) are in relation to the profits and gains attributable to the activity other than that specified in clau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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