9911796707
TMI Blog2018 (4) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... records. The effective grounds, thus raised reads as follows:- 1. The Learned Commissioner of Income Tax (A) has erred in confirming denial of deduction of Rs. 26,74,591/- u/s 80P(2)(d) of Income Tax Act, 1961. Without prejudice, the denial of deduction be restricted to the amount of alleged eligible income as reduced by the amount of interest paid / payable on the monies borrowed which have been deployed in the deposits on which the alleged ineligible income has been earned. 2 The Learned Commissioner of Income Tax (A) has erred in holding that the eligibility of deduction claimed from the gross total income need not be examined under Section 80P(2)(a)(i) of the Income Tax Act. It is prayed that the claim for deduction under Section 80P(2)(a)(i) of the act be adjudicated as an alternative to claim under Section 80P(2)(d) of the Act. 2.1 Facts leading to the same are that the assessee being registered cooperative Society under The Maharashtra State Cooperative Societies Act, 1960 as credit resource society to carry out the business of providing credit facilities to its members. The Society was not registered under Banking Regulation Act 1949 i.e. with Reserve Bank of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 4. At the outset, so far as the exclusion provided by Section 80P(4) is concerned, Ld. Authorized Counsel for Assessee [AR] has rightly placed the reliance on recent decision of Hon'ble Apex Court rendered in The Citizen Cooperative Society Limited Vs. ACIT [397 ITR 1 dated 08/08/2017] where the Hon'ble Court has observed as under:- 23. With the insertion of sub-section (4) by the Finance Act, 2006, which is in the nature of a proviso to the aforesaid provision, it is made clear that such a deduction shall not be admissible to a co-operative bank. However, if it is a primary agriculture credit society or a primary co-operative agriculture and rural development bank, the deduction would still be provided. Thus, co-operative banks are now specifically excluded from the ambit of Section 80P of the Act. 24. Undoubtedly, if one has to go by the aforesaid definition of 'co-operative bank', the appellant does not get covered thereby. It is also a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a licence from the Reserve Bank of India, which the appellant does not possess. Not only this, as noticed above, the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5 (CCV) : "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 transaction of banking business : (2) the paid-up share capital and reserves of which are not less than one lakh of rupees : and (3) the bye-laws of which do not permit admission of any other co-operative society as a member : Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such Co-operative society out of finds provided by the State Government "for the purpose." 6. Mr. Chythanya K. K., the learned Counsel for the appellant in support of the appeals submits as under : (a) The appellant is admittedly a co-operative society registered under the Cooperative Societies Act and is engaged in providing credit facilities to its members. Consequently, the income earned by the appellant from its activity of providing credit facilities to its members, is entitled to deduction under Section 80P(2)(a)(i) of the Act. The appellant is not a co-operative Bank and thus, the exclusion p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under subsection (1) is available. In this case we are concerned with clause (a)(i) of subsection (2), which refers to a cooperative society engaged in carrying on banking business or providing credit facilities to its members. Thus the deduction is available on either of the two activities i.e. banking business or providing credit facilities to its members. We are not concerned with the other subclauses of Subsection (2) or Subsection (3) of Section 80P(4) of the Act for the purposes of this case. Subsection (4) provides that Section 80P of the Act will not apply in relation to a cooperative bank other than a primary agricultural credit society or primary agricultural and rural development bank. Before us, the appellant is not claiming to be a primary agricultural credit society or primary agricultural and rural development bank but it claims to be engaged in providing credit facilities and not a banking society. Thus not hit by subsection (4) of Section 80P of the Act. 9. There is no dispute between the parties that the appellant is a co- operative society as the same is registered under the Co-operative Societies Act. The appellant is claiming deduction of income earned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts from people who are not members has been so recorded by the CIT(A) in his order dated 15 July, 2014. Before the Tribunal also the appellant did not dispute the fact that in a few cases they have dealt with non members. However so far as accepting deposits from non members is concerned it is submitted that the Byelaw 43 only permits the society to accept deposits from its members. It is submitted that Bye laws 43 does not permit receipt of deposits from persons other then members, the word "any person" is a gloss added in the impugned order as it is not found in Bye law 43. It is undisputed that the transactions with non members are insignificant/miniscule. On the above basis it cannot be concluded that the appellant's principal business is of accepting deposits from public and therefore it is in banking business. In fact, the impugned order erroneously relies upon bye-law 43 of the society which enables the society to receive deposits to conclude that it can receive deposits from public. However, the impugned order relies upon bye-law 43 to conclude that it enables the appellant to receive deposits from any person is not correct. Thus in the present facts the finding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualifying condition 3 for being considered as a primary Cooperative bank is that the bye laws must not permit admission of any other cooperative society. This is a mandatory condition i.e. the bye laws must specifically prohibit admission of any other cooperative society to its membership. The Revenue has not been able to show any such prohibition in the bye laws of the appellant. Thus even the aforesaid qualifying condition (3) for being considered as a primary cooperative bank is not satisfied. Thus, the three conditions as provided under Section 5 (CVV) of the Banking Regulation Act, 1949, are to be satisfied cumulatively and except condition (2) the other two qualifying conditions are not satisfied. Ergo, appellant cannot be considered to be a co-operative bank for the purposes of Section 80P(4) of the Act. Thus, the appellant is entitled to the benefit of deduction available under Section 80P(2)(a)(i) of the Act. 13. The contention of Ms. Dessai, learned Counsel for the revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cannot be upheld. This for the reason that Section 80P(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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