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TMI Blog2015 (7) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 3-7-2015 - Shri N.V. Vasudevan and Shri Jason P. Boaz , JJ. For the Petitioner : Shri P. Dhivahar, Jt. CIT(DR) For the Respondent : None ORDER Per N.V. Vasudevan, Judicial Member This appeal by the Revenue is against the order dated 20.5.2014 of the CIT(Appeals), Hubli relating to assessment year 2010-11. 2. In this appeal, the Revenue has challenged the order of CIT(Appeals), whereby the CIT(Appeals) allowed exemption to the assessee u/s. 80P(2)(a)(i) of the Act, holding that the assessee is a co operative society and not a co-operative bank and therefore the provisions of section 80P(4) of the Act are not applicable. 3. The assessee is a co-operative society. It is engaged in the business of providing credit facilities to its members. The assessee had claimed deduction u/s. 80P(2)(a)(i) of the Act of a sum of ₹ 22.60,375. Under Sec.80P(2)(i) of the Act where the gross total income of a cooperative society 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to its members are in the nature of transaction of banking activity and also that the paid-up capital reserves as per its Balance Sheet as on 31.3.2009 is in excess of ₹ 1,00,000. 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 case of the appellant society. ii) The purpose of accepting deposits from the public is for making investments and for lending to members. Confining the lending only to members makes no difference. iii) Deposits collected from the depositors are repayable on demand and do not go into the corpus of the appellant. iv) The assessee society came within the Explanation to subsection (4) of section 80P of the Act as a banking institution. 5. In the light of the above-mentioned observations, the AO held that the assessee was not entitled to exemption in respect of the amount u/s 80P(2)(a)(i) of the Act and brought the same to tax. 6. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall have the meanings respectively assigned to them in Part V of the Banking Regulation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 10. 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 q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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 sub-section, 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 subsection( 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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