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TMI Blog2014 (11) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ies - 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 – thus, the order of the CIT(A) is upheld – Decided against revenue. - ITA No. 1210/Bang/2013 - - - Dated:- 19-11-2014 - Shri Rajpal Yadav And Shri Jason P. Boaz,JJ. For the Petitioner : Shri Dhivahar, JCIT (DR) For the Respondent : Shri Zain Ahmed Khan, CA ORDER Per Rajpal Yadav, J. M. The Revenue is in appeal before us against the order of the learned CIT (A) dated 24.5.2013 passed for assessment year 2007-08. The solitary substantial grievance of the Revenue is that the learned CIT (A) has erred in upholding the claim of the assessee for grant of deduction u/s 80P(2)(a)(i) of the Act. 2. The brief facts of the case are that the assessee is a primary agricultural society. It has filed its return of income on 31.10.2007 declaring total income of ₹ 68,590/- after claiming de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cooperative bank which will disentitle from claiming deduction u/s 80P(2)(a)(i) or it is a cooperative credit society extending benefit to its members only?. According to the Assessing Officer, cooperative society even if extending benefit of credit facility to its members would fall within the ambit of cooperative bank and they are not entitled for deduction u/s 80P. Assessing Officer has nowhere brought any evidence on the record to indicate that the assessee is engaged in banking activity. He merely classified the interest income earned by the assessee but, whether this income was earned from non members, he has nowhere shown. Apart from the, nature of interest income, he has not brought any other material. On the other hand, the assessee has pointed out that it has not availed any bank license from the RBI and it is not issuing cheque book etc. to non members. The Tribunal has considered this aspect in the case of Jyoti Cooperative Society Ltd, Bagalkot in ITA No.1269/Bang/2013 dated 31.10.2014, as under: 6. We have duly considered the rival contentions and gone through the record carefully. The order of the Tribunal in assessment year 2009-10 read as under: This appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is available only to primary agricultural credit societies or primary co-operative agricultural and rural development banks; and that the benefit of such deduction is not available to institutions like the assessee society. The AO also referred to section 5(b) of the Banking Regulation Act to hold that, if one of the two conditions of the appellant is fulfilled; i.e. its primary object should be banking or its principal business must be transaction in banking business, it is sufficient to bring the assessee into the concept of a banking institution. The AO referred to the objects of the assessee society in its bye laws that the activities of the assessee fall within the provisions of sections 5(b), 6(1)(a), 6(1)(g), 6(1)(k) and 6(1)(n) of the Banking Regulations Act and held that, broadly, they are in the nature of banking activity. According to the AO, the following features make the assessee ineligible to exemption contemplated in section 80P of the Act: i) Since membership is open to anyone paying a sum of ₹ 10/- to ₹ 100/- for membership and no other condition is imposed. In other words, membership as is available in any banking institution is available in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation Act, 1949 (10 of 1949); (b) primary cooperative 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 . 9.1 The above sub-section 4 of section 80P provides that deduction under the said section shall not be available to any cooperative bank other than a primary agricultural credit society or rural development bank. For the purpose of the said sub section, cooperative bank shall have the meaning assigned to it in part V of the Banking Regulation Act, 1949. In Part V of the Banking Regulation Act, cooperative bank means a State Cooperative Bank, a Central Cooperative Bank and a Primate Cooperative Bank. 9.2 From the above section, it is clear that the provisions of section 80P(4) has got its application only to cooperative banks. Section 80P(4) does not define the word cooperative society . 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.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 in the assessee s case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act. Hence, we are of the view that the order of the CIT(A) is correct and in accordance with law and no interference is called for. 7. The Hon ble Gujarat High Court in the case of Tax appeal No.442 of 2013 with Tax appeal No.443 of 2013 with Tax appeal No.863 of 2013 in the case of CIT Vs. Jafari Momin Vikas Co-op Credit Society Ltd. by judgment dated 15.1.2014 had to deal with the following question of law: Whether the Hon ble Tribunal is correct in allowing deduction under section 80P(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 part V of the Banking Regulation Act, Cooperative Bank means a State Co-operative bank, a Central Co-operative Bank and a primary Co-operative bank. 4. Thus, if the Delhi Co op Urban T C Society Ltd. does not fall within the meaning of Co-operative Bank as defined in part V of the Banking Regulation Act, 1949, subsection(4) of section 80P will not apply in this case. 5. The issues with the approval of Chairman, Central Board of Direct Taxes. 7. From the above clarification, it can be gathered that sub-section(4) of section 80P will not apply to an assessee which is not a co-operative bank. In the case clarified by CBDT, Delhi Coop Urban Thrift Credit Society Ltd. was under consideration. Circular clarified that the said entity not being a cooperative bank, section 80P(4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenue s contention that section 80P(4) would exclude not only the co-operative banks other ..... 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