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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 ..... sh Kumar D. Lathe - CA. For the Respondent : Shri K. Mehboob Khan - DR ORDER PER N S. SAINI, ACCOUNTANT MEMBER These are the appeals filed by the Revenue and the Cross Objections filed by the assessee against the separate orders of the Commissioner of Income Tax (Appeals), Belagavi, both dated 30/12/2015. 2. The sole issue involved in these appeals is that the Commissioner of Income Tax (Appeals) erred in allowing deduction to the assessee under sec. 80P(2)(a)(i) of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee is a cooperative society registered under the Karnataka Cooperative Societies Act, 1959. The assessee filed its return of income for the Assessment Year 2009-10 on 25/09/2009 showing total income at ₹ 37,19,476/- and for the Assessment Year 2010-11 on 06/09/2010 showing total income of ₹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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income after claiming deduction under sec. 80P(2)(a)(i) of the Act. The total income was declared at Rs. NIL. It was claimed that the society is entitled to deduction under sec. 80P(2)(a)(i) as it was a Cooperative Society, carrying on the business of banking or providing credit facilities to its members. However, the claim of the assessee for deduction under sec. 80P(2)(a)(i) was rejected by the Assessing Officer in the order passed under sec. 143(3) of the Act on the ground that the assessee 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 assessees 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities. By virtue of introduction of clause(4) in sec.80P, the "Co-operative banks' have been taken out of the purview of exemption granted under sec.80P whereas other entities/cooperative societies specified in other clauses of sec.80P continue to enjoy such exemptions. The Explanation to sec.80P provides that "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). 6.1.2 Following the provisions of aforesaid Explanation 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 obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d withdrawal by cheque, draft, order or otherwise." The A.O has come to the conclusion that the appellant co-operative society is doing banking business as "providing credit facilities to members' is akin to banking business and since the membership is open to public, it is accepting deposits from public which can be withdrawn by any one of the specified means within the meaning of above mentioned definition of banking. 6.1.4. Similar issue is also involved in a number of cases pertaining to credit co-operative societies which are also in appeal and they have all contested the action 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of "income". This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years." The appellants have thus contended that it was clear that the intention of the Finance Minister was to tax 'co-operative banks' only. 6.2.3 The appellants have relied on the decision in the cases of (i) Karnataka High Court (Dharwad Bench )0rder in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ITA 5006/2013 dt 5th Feb 2014 wherein apart from the deciding on section 263 it has also held, on section 80P that " 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 primary agricultural credit society or a primary co-operative agricultural 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 orders of the Assessing Officer. He could not point out any specific error in the above quoted orders 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 after following the decision of the Hon'ble Bombay High Court at Panaji in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT in Tax Appeals No. 22-24/2015 dated 17/04/2015. No contrary decision could be cited by the Departmental Representative. We, therefore, do not find any good and justifiable reason to interfere with the orders of the Commissioner of Income Tax (Appeals), which are hereby confirmed and this ground of appeal of the Revenue is dismissed." 6 Respectfully following the precedent in assessee's own case, we dismiss the ground of appeal of the Revenue. 7. At the time of hearing, the Authorized Representative of the assessee submitted that he is not pressing the Cross Objections filed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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