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TMI Blog2014 (11) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... erative 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 – Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee’s case and it is entitled to deduction u/s 80P(2)(a)(i) of the Act – thus, the AO is directed to grant deduction u/s 80P(2)(a)(i) – Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... s respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "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 provide for longterm credit for agricultural and rural development activities." 3. The AO was of the view that after amended by the Finance Act, 2006 w.e.f. 1.4.2007 by which sub-section (4) was inserted, the Assessee which was a co-operative society carrying on banking business was not entitled to deduction u/s.80P(2)(i) of the Act. According to the AO, the assessee was a co-operative bank and therefore the deduction u/s. 80P(2)(a)(i) cannot be allowed. In coming to the above conclusion, the AO noticed that the nature of the activity of the assessee, though registered as a credit cooperative society, is that of a banking institution notwithstanding the fact that receipt of and lending money is limited to its members. The AO further noticed that clause (viia) in section 2(24) of the Act was inserted by the Finance Act 2006 effective from 1/4/2007, which provides that profits and gains of any business (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this Tribunal in the case of ACIT, Circle 3(1), Bangalore v. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. in ITA No.1069/Bang/2010, wherein this Tribunal held that section 80P(4) is applicable only to cooperative banks and not to credit cooperative societies. The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee's case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act. The following were the relevant observations of the Tribunal:- "9. We have heard the rival submissions and perused the material on record. The assessee was denied the deduction u/s 80-P(2)(a)(i) of the Act for the reason of introduction of sub section 4 to section 80P. Section 80P(4) reads as follows:- "(4) The provisions of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. Explanation: For the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit, discounting bills of exchange, issue cheques, demand drafts, pay orders, gift cheques, lockers, bank guarantees etc. 3. Society cannot act as clearing agent, for cheques, DDs, pay orders and other forms. 4. Society are bound by rules and regulations as specified by in the cooperative societies act. Filing of returns Cooperative banks have to submit annual return to RBI every year. Society has to submit the annual return to Registrar of Societies. Inspection RBI has the power to inspect accounts and overall functioning of the bank. Registrar has the power to inspect accounts and overall functioning of the bank Part V Part V of the Banking Regulation Act is applicable to cooperative banks. Part V of the Banking Regulation Act is not applicable to cooperative banks. Use of words The word 'bank', banker', 'banking' can be used by a cooperative bank. The word 'bank', banker', 'banking' cannot be used by a cooperative society. 9.3 If the intention of the legislature was not to grant deduction u/s 80P(2)(a)(i) to cooperative societies carrying on the business of providing credit facilities to its members, then this section would have been deleted. The new proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein were meant to be excluded for the purpose of deduction under section 80P, a question would arise why then Legislature specified primary agricultural credit societies along with primary cooperative agricultural and rural development banks for exclusion from such exclusion and in other words, continued to hold such entity as eligible for deduction. However, the issue has been considerably simplified by virtue of CBDT circular No.133 of 2007 dated 9.5.2007. Circular provides as under:- "Subject: Clarification regarding admissibly of deduction under section 80P of the Income-Tax Act, 1961. 1. Please refer to your letter no.DCUS/30688/2007, dated 28.03.2007 addressed to Chairman, Central Board of Direct Taxes, on the above given subject. 2. In this regard, I have been directed to state that sub-section(4) of section 80P provides that deduction under the said section shall not be allowable to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. For the purpose of the said subsection, co-operative bank shall have the meaning assigned to it in part V of the Banking Regulation Act, 1949. 3. In par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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