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TMI Blog2015 (11) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds of appeal taken by the Revenue are as under:- (1) The learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee is a co-operative society which fulfils all the three conditions of being held a Primary Co-operative Bank as given in section 5(ccv) of the Banking Regulation Act, 1949. (2) The learned CIT(Appeals) erred in law and on facts in not appreciating the definition of a co-operative bank which as per Explanation below section 80P(4) the co-operative bank shall have the meaning assigned to it in Part-V of the Banking Regulation Act, 1949. (3) The learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee society being a credit co-operative society engaged in banking business is a Primary Co-operative Bank within the definition of section 5(ccv) of the Banking Regulation Act, 1949 and as such, not eligible for deduction under section 80P(2)(a)(i) of the I.T. Act, 1961. (4) The learned CIT(Appeals) erred in not appreciating the facts of the case and also relying upon the decision of High Court of Karnataka in CIT vs. Sri Biluru Gurubasava Pattin Sahakari Sangh Niyamit, Bagalkot, IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 80P(2)(a)(i) can be denied by virtue of Sec.80P(4). 6.1 The relevant part of Section 80P of the I.T Act under which the appellant co-operative society has claimed deduction reads as under: Deduction in respect of Income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of co-operative society engaged in - (i) carrying on the business of banking or providing credit facilities to its members, or (ii) ------------------------------ the whole of the amount of profits and gains of business attributable to any one or more of such activities: 6.1.1 The clause (4) of sec.80P inserted by the Finance Act,2006 w.e.f. 01-04-2007, which has been invoked by the Assessing Officer to deny deduction to the appellant co-operative society reads as under: (4) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative society as a member. 3 Primary Credit Society Clause (ccvi) of section 5 Primary Co-operative Society means a co-operative society other than a primary agricultural credit society - (1) the primary object or principal business of which is the transaction of banking business; (2) the paid up share capital and reserves of which are not less than one lakhs of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member. The Assessing Officer has thus mentioned that the 'Co-operative Bank' includes 'Primary Co-operative Bank' and 'Primary Co-operative Bank' means Co-operative Society - (1) the primary object or principal business of which is the transaction of banking business; (2) the paid up share capital and reserves of which are not less than one lakhs of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member. 6.1.3 The Assessing Officer has concluded that the appellant co-operative society satisfies all the above mentioned three conditions and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the society should carry on the business of banking as per the definition of 'banking' in Banking Regulation Act, 1949. The appellants have also contended that the respective appellant assessee society registered under the Karnataka Cooperative Societies Act, 1959 is carrying on the business of providing credit facility to its members and is not allowed to issue cheques, drafts, pay orders, etc. As per the Banking Regulation Act, permission of Reserve Bank of India is required to issue cheques, drafts and pay orders, etc. and the respective appellant has not obtained any such license/permission from the Reserve Bank of India to carry on the business of banking. 6.2.2 The appellant cooperative societies have contended that the explanatory note to memorandum explaining the provisions in the Finance Bill, 2006 wherein the Hon'ble Finance Minister explains the reasons for withdrawal of tax benefits available to certain co-operative banks, the relevant portion of the said notes is reproduced hereinbelow: Section 80P, inter alia, provides for a deduction from the total income of the cooperative societies engaged in the business of banking or providing credit facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Society Vs ITO Ward 1(2), Belgaum ITA 229 230/PNJ/2013dt 28.2.2014 (vi) ITAT Bangalore B Bench decision vide ITA No 1069/Bang/2010 for the Asst Year 2007-08 of M/s Bangalore Commercial Transport Coop Society Ltd, Bangalore. (vii) ITO Vs Yeshwantpur Credit Coop Society Ltd ITA No 717/Bang/2011 Dt 11.4.2012 rendered by ITAT A Bench, Bangalore. (viii) M/s Jayalakshmi Mahila Vividodeshagala Souharada Sahakari Ltd Another in ITA No 01 to 03/PNJ/2012 and ITA 04 to 06/PNJ/2012. The appellants have claimed that in all these cases it was held that income earned by cooperative society from its act of lending money to members shall be eligible for exemption under section 80P(2)(a)(i) of the Act. 7. The important aspects relating to the issues in this case have been considered and decided by various ITATs across the country. The jurisdictional ITAT of Bangalore bench in a number of cases while deciding the issue in favour of the assessees has held that the cooperative societies are not doing banking business and therefore, the provisions of section 80P(4) are not applicable to them. The jurisdictional ITAT Panjim bench has also in a number of cases where the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Webester Dictionary gives the meaning of 'society' as; 'A voluntary association of individuals for common ends; especially: an organized group working together or periodically meeting because of common interests, beliefs, or profession' Going by the bye laws of the Souhardas and the provisions of The Karnataka Souharda Sahakari Act, 1997, it is clear that the Souhardas are societies which are cooperative in nature. They are registered under an Act which provides for recognition, encouragement and voluntary formation of co-operatives based on self help, mutual aid, wholly owned, managed and controlled by members as accountable, competitive, self reliant and economic enterprises guided by co-operative principles and matters connected therewith. It is also worth noting that the word Co-operative has been used on innumerable occasions in The Karnataka Souharda Sahakari Act, 1997. A few examples of which are: a. Section 4(1) - Co-operatives which may be registered:- No Co-operative shall be registered under this Act, Unless b. Section 6(1) - Certificate of Registration:- Where a co-operative is registered or deemed to be registered, the certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of section 80P of the Income Tax Act,1961. Moreover, it is not the case of the A.O that the appellant Souharda is not a co-operative Society within the meaning of section 80P of the I.T. Act. 8.2 The Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, supra which was followed in the cases of General Insurance Employees Cooperative Credit Society Ltd, and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014. Supra, has clearly held that a co-operative society registered as cooperative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(2)(a)(i) of the I.T. Act. The operative part of the judgment reads as follows: Therefore, the intention of the legislature is clear. If a Co-operative Bank is exclusively carrying on banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... savi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014 supra. Therefore, in view of the foregoing discussion and respectfully following the aforesaid decisions of the Jurisdictional High Court of Karnataka, it is held that the appellant's case is not covered by section 80P(4) as it is not a 'co-operative bank' and therefore, it is entitled to the exemption u/s 80P(2)(a)(i) of the IT. Act. 5. We find that the Commissioner of Income Tax (Appeals) has allowed the claim for deduction under sec. 80P(2)(a)(i) of the Act by following the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot in I.T.A.No. 5006/2013 dated 05/02/2014. No contrary decision could be cited by the Departmental Representative, therefore, we do not find any good and justifiable reason to interfere with the order of the Commissioner of Income Tax (Appeals) which is hereby confirmed and the grounds of appeal of the Revenue are dismissed. 6. In the result, appeal of the Revenue is dismissed. Order Pronounced in the Court at the close of the hearing on the 27.7.2015. - - TaxTMI - TMITa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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