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TMI Blog2015 (7) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... osh Kumar D. Lathe - CA For the Department : Shri Anand Shankar Marathe -DR ORDER PER BENCH: The appeals filed by the Revenue and the Cross Objections filed by the assessees are against the orders of Commissioner of Income Tax(Appeals), Belgaum, dated 24/11/2014, 03/11/2014, 25/11/2014 & 18/12/2014. 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. The facts of the case are that the assessees filed return 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 (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development 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‖ h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has contended that the purpose of introduction of these provisions was to tax the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members. The Assessing Officer has also referred to the definition of "Banking' as provided in sec.5(b) of the Banking Regulation Act,1949 which reads as under: "(b)"Banking" means the accepting for the purpose of lending or investment, of deposit of money from public, repayable on demand or otherwise, and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment bank. It is also proposed to define the expressions "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank". It is also proposed to insert a new sub-clause (viia) in clause (24) of the section 2 so as to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA 5006/2013 dt 5th Feb 2014, Commissioner of Income Tax (A), Mysore & Others Vs General Insurance Employees Cooperative Credit Society Ltd ITA No 273/2013 dt 27.6.2014 and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014 has also decided the issue in favour of the assessee. 8.1 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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 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 by following the decisions of the Hon'ble Karnataka High Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra) and in the case of General Insurance Employees Cooperative Credit Society Ltd. (supra). No contrary decision could be cited by the Departmental Representative. We, therefore, do n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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