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TMI Blog2016 (5) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Year 2010-11 on 06/09/2010 showing total income of Rs.36,81,108/- and after claiming deduction under sec. 80P(2)(a)(i) under Chapter-VIA, the total income declared was NIL both the assessment years. The claim of the assessee for deduction under section 80P(2)(a)(i) was rejected by the Assessing Officer vide his orders dated 23/11/2011 & 24/12/2012 passed under section 143(3) on the ground that the assessee is a cooperative bank and hence, not entitled to claim deduction by virtue of section 80P(4). 4. The assessee filed appeal against the above orders of the Assessing Officer before the Commissioner of Income Tax (Appeals), who allowed deduction under section 80P(2)(a)(i) to the assessee by observing as under:- "8. The Jurisdictional ITAT, following the decisions of Hon'ble Jurisdictional High Court of Karnataka has been consistently holding the view that Co-operative society registered as Co-operative society providing credit facility to its members and not registered with the RBI cannot be denied the deduction under section 80P(2)(a)(i) of the Income-tax Act. 9. The fact that the appellant is a cooperative society registered under the Karnataka Co operative Societies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deduction u/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 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-ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural and rural development bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a. primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a Co-operative bank which is exclusively carrying on banking business i.e. the purport of this amendment. Therefore, as the assessee is not 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 Co-operative bank. It is a Cooperative society which also carries on the business of lending money to its members which is covered under Section 80P{2)(a}(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society .........................................In the instant case, when the status of the assessee is a Co-operative society and is not a Co-operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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