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TMI Blog2015 (10) TMI 2593X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was a cooperative bank, and hence, not entitled to claim deduction by virtue of sec. 80P(4). 4. On appeal, Commissioner of Income Tax (Appeals) allowed the claim of the assessee by observing as under:- "6. I have carefully perused and considered the aforesaid submission made by the appellant and the contents of the Assessment Order passed by the Assessing Officer. I have also perused the case laws relied upon by the appellant and the Assessing Officer. The main plank of argument of the Assessing Officer has been that after careful analysis of Section 80P(4) read with section 2(24)(viia) of the Income- tax Act, 1961 and Part V of the Banking Regulation Act and the facts of the case, the appellant assessee co-operative credit society is held to be a 'Primary Co-operative Bank' hence is not eligible for deduction under sec.80P(2)(a)(i) in view of the newly inserted provisions of section 80P(4). The assessing Officer has arrived at a conclusion that if a cooperative society satisfies all the three conditions as laid down in the definition as given u/s 5(ccv) in Part V of the Banking Regulation Act, 1949, then it becomes a "primary co-operative bank", and therefore dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation to sec.80P, the Assessing Officer, with a view to find out the definition of "co- operative bank" has taken recourse to the relevant provisions of The Banking Regulation Act, 1949. Sl. No. Category Clause/section of the Banking Regulation Act, 1949 Definition 1 2 3 4 1 Co- operative Bank Clause (cci) of section 5 Co-operative Bank means a State Co- operative Bank, a Central Co-operative Bank and a Primary co-operative Bank 2 Primary Co- operative Bank Clause (ccv) of Section 5 Primary Co-operative bank 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the AO is invoking the provisions of Sec. 80P(4) in their respective cases on the basis of various contentions discussed herein below. 6.2 The appellants on the other hand has challenged the interpretation of Sections 80P(2), 80P(4) and relevant provision of the Banking Regulation Act, 1949 as adopted by the A.O in his Assessment Order. The appellants have also contended that the intention of the legislature as revealed by the speech of the Finance Minister was not to deny deduction to all the cooperative societies by introduction of sec. 80P(4). 6.2.1 It has also been a contention of the appellants that to fulfil the first condition for becoming a 'Primary Co-operative Bank', 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, dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve bank of India to carry on business , it is not a Cooperative Bank. (ii) The Karnataka High Court decision in the case of The Commissioner of Income Tax (A), Mysore & Others Vs General Insurance Employees Cooperative Credit Society Ltd ITA No 273/2013 dt 27.6.2014. (iii) Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014. (iv) CIT Vs Jafari Mom in Vikas Coop Credit Society Ltd ITA 442,443 & 863 of 2013 of Gujarat High Court. (v) Taramani Manila Coop Credit 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative society (2) registered (a) under the Co-operative Societies Act, 1912 (2 of 1912), or (b) under any other law for the time being in force in any State for the registration of cooperative societies; 8.1.1 As far as first part of the definition given in section 2(19) is concerned, a Souharda is a society which is cooperative in nature and thus it is a co- operative society. The dictionary meaning of 'society' as per Oxford English Dictionary is: 'An association or body of people united by a common aim, interest, belief, profession etc.' 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 account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amitha, Bagalkot ITA 5006/2013 dt 5th Feb 2014. (ii) Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014. (iii) M/s Jayalakshmi Mahila Vividodeshagala Souharada Sahakari Ltd & Another in ITA No 01 to 03/PNJ/2012 and ITA 04 to 06/PNJ/2012. (iv) DCIT Vs. M/s Dwarka Souharda Credit Sahakari Ltd. ITA No.04-06/PNJ/2012 8.1.4 Thus, it is amply clear that 'Souhardas' are 'co-operative societies' within 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 l.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 canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers and it does not possess any banking licence from the RBI. It is therefore, clear that the appellant's case is squarely covered by the aforesaid decisions of the Jurisdictional High Court of Karnataka in the cases of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha. supra which was followed in the case 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. 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. The Departmental Representative relied on the order of the Assessing Officer. He could not point out any specific error in the above quoted order of the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act by following the decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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