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TMI Blog2016 (1) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding granting of loan to its members, meaning thereby, such reserve funds has to be invested only for the highly restricted purposed as mentioned in the bye laws of the assessee society. - Decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 80P(4) of the Act, which was inserted by Finance Act 2006 w.e.f. April, 1, 2007. The A.O. was of the opinion that after the insertion of subsection (4) of Section 80P exemption shall not be available in relation to any Co-Operative Bank other than primary agricultural credit society or primary co-operative agricultural and rural development bank. According to the A.O. sub clause (viia) was also inserted in clause (iv) of Section 2 to provide that the profits and gains of any business of banking (including providing credit facilities) carried by cooperative society with its members shall be included in the definition of expression "income". On the basis of his combined reading of Sections of Section 2(24) (viia) and Section 80P of the Act after amendment by Finance Act, 2006, the A.O. concluded that even a cooperative society engaged in providing credit facilities to its members would be denied the exemption u/S 80P of the Act. Accordingly, the A.O. assessed the total income at ₹ 80,98,490/- and rejected assessee's claim for deduction under Section 80P of the Act. 4. The ld. CIT(A) has since disagreed with the A.O. primarily on the ground that the assesse-socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural 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 the Central Board of Direct Taxes Circular No. 133 of 2007, dated May 9, 2007. Circular provides as under : "Subject: Clarification regarding admissibility of deduction under section BOP of the Income-tax Act, 1961. 1. Please refer to your letter No. DCUS/30688/2007, dated March 28, 2007, addressed to the 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 co-operative 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, cooperative 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, 'co-operative bank means a State co-operative bank, a Central co-operative bank and a primary cooperative bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt bank. (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." 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 Cooperative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary cooperative agricultural and rural development bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a primary cooperative agricultural and rural development bank. They did not want to extend the said benefit to a Co-operative bank which is exclusively carrying on ban ..... X X X X Extracts X X X X X X X X Extracts X X X X
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