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TMI Blog2014 (11) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislature of bringing in cooperative 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 existing sub-section 80P(2)(a)(i) shall be applicable to a cooperative society carrying on credit facility to its members - This view is clarified by Central Board of Direct Tax vide its clarification No.133/06/2007-TPL dated 9th May, 2007 - The new proviso to section 80P(4) which is brought into statute 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 and it is entitled to deduction u/s 80P(2)(a)(i) of the Act - the assessee society is entitled to deduction u/s. 80P(2)(a)(i) of the Act – Decided in favour of assessee. - ITA No. 98/Bang/2014 - - - Dated:- 14-11-2014 - Shri N. V. Vasudevan And Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety includes income from carrying on the business of banking or providing credit facilities to its members, the same is allowed deduction. By the Finance Act, 2006 w.e.f. 1-4-2006, Sub-section (4) was inserted in Sec.80-P which provides as follows: (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation : For the purposes of this sub-section, (a) co-operative bank and primary agricultural credit society shall have the meanings 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 long-term credit for agricultural and rural development activities. 7. In the course of scrutiny assessment proceedings u/s. 143(3), the AO was of the view that after amendment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 this sub-section, (a) co-operative bank and primary agricultural credit soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society cannot open savings bank account, current account, issue letter of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary agricultural credit society . 6. Had this been the plain statutory provisions under consideration in isolation, in our opinion, the question of law could be stated to have arisen. When, as contended by the assessee, by virtue of subsection(4) only co-operative banks other than those mentioned therein 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 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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