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TMI Blog2015 (8) TMI 1450X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (2014 (6) TMI 912 - KARNATAKA HIGH COURT). 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 the ground of appeal of the Revenue is dismissed. - ITA No. 170/PNJ/2015, ITA Nos. 171/PNJ/2015, ITA No. 172/PNJ/2015, ITA Nos. 173/PNJ/2015, ITA Nos. 175/PNJ/2015, ITA Nos. 176/PNJ/2015, C.O.No. 61/PNJ/2015, ITA Nos. 175/PNJ/2015 - - - Dated:- 5-8-2015 - SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ORDER The appeals filed by the Revenue and the Cross Objection filed by the assessee are directed against the separate orders of Commissioner of Income Tax (Appeals), Belagavi, each dated 02/03/2015, 13/02/2015, 18/02/2015 and Commissioner of Income Tax (Appeals), Hubli, each dated 28/01/2015. 2. Since the issue involved in all these appeals is similar and were heard together, so these are being disposed of by this common order. For the sake of convenience, facts are taken from I.T.A.No. 170/PNJ/2015. 3. The sole issue involved in this appeal is that the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of co-operative society engaged in (i) carrying on the business of banking or providing credit facilities to its members, or (ii) ------------------------------ the whole of the amount of profits and gains of business attributable to any one or more of such activities: 6.1.1 The clause (4) of sec.80P inserted by the Finance Act,2006 w.e.f. 01-04-2007, which has been invoked by the Assessing Officer to deny deduction to the appellant co-operative society reads as under: (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation: For the purposes of this sub-section: (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 ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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-operative 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. 6.1.3 The Assessing Officer has concluded that the appellant co-operative society satisfies all the above mentioned three conditions and therefore it is held to be a ‗Primary Cooperative Bank and hence its claim of deduction u/s 80P(2)(a)(i) has been denied u/s 80P(4). Before arriving at this conclusion the Assessing Officer has also referred to the newly inserted provisions of Sec.2(24)(viia), inserted by the Finance Act,2006 w.e.f. 01-04-2007 which reads as under: (24) Income includes - (viia) The profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fts 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 Finance Bill, 2006 wherein the Hon'ble Finance Minister explains the reasons for withdrawal of tax benefits available to certain co-operative banks, the relevant portion of the said notes is reproduced hereinbelow: Section 80P, inter alia, provides for a deduction from the total income of the cooperative societies engaged in the business of banking or providing credit facilities to its members, or business of cottage industry, or of marketing of agricultural produce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc. The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefits. It is, therefore, proposed to amend section SOP by inserting a new sub-section (4) so as to provide that the provisions of the said section shall not apply in relation to any co-operative bank other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the country. The jurisdictional ITAT of Bangalore bench in a number of cases while deciding the issue in favour of the assessees has held that the cooperative societies are not doing banking business and therefore, the provisions of section 80P(4) are not applicable to them. The jurisdictional ITAT Panjim bench has also in a number of cases where the assessee cooperative society engaged in providing credit facilities to its members and not accepting deposit from public as evidenced from their bye laws or the cooperative societies accepting other cooperative societies as members have held that those cooperative societies are entitles to the benefit of deduction u/s 80P(2)(a)(i) of the I.T. Act. 8. Now, after the Gujarat High Court in the case of CIT Vs Jafari Mom in Vikas Coop Credit Society Ltd ITA 442, 443 863 of 2013 deciding the issue in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is correct. 8.2 The fact that the appellant is a cooperative society registered under the Karnataka Co operative Societies Act,1959 engaged in providing credit facilities to its members has been clearly mentioned by the A.O in para 3 of his aforesaid assessment order. It is also not the case of the assessing officer that the assessee is registered with the RBI as a bank. In its aforesaid submissions dated 04/02/2015 the appellant has clearly stated with the help of necessary evidence and an affidavit dated 04/02/2015 to this effect that the appellant is a cooperative society registered under the Karnataka Co operative Societies Act, 1959 engaged in providing credit facilities only to its members 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 decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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