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TMI Blog2019 (7) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... t Society Ltd [ 2015 (6) TMI 573 - BOMBAY HIGH COURT] and further the decision of Kalpadi Cooperative Township Ltd [ 2016 (9) TMI 952 - MADRAS HIGH COURT] is squarely applicable upon the facts of the present case and the assessee was entitled for the deductions claimed u/s 80P(2)((a) (i). Also see assessee's own case for AY 2013-14 [ 2018 (10) TMI 1690 - ITAT MUMBAI] - Decided in favour of assessee. - I.T.A. No.780/Mum/2018 - - - Dated:- 1-7-2019 - Shri Ramit Kochar, Accountant Member And Shri Ravish Sood, Judicial Member For the Assessee : Shri. Kumar Kale (AR) For the Revenue : Shri. Manoj Kumar Singh (DR) ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed by Revenue, being ITA No. 780/Mum/2018, is directed against appellate order dated 30.11.2017, passed by learned Commissioner of Income Tax (Appeals)-1, Mumbai (hereinafter called the CIT(A) ), for assessment year 2014-15, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 02.12.2016 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accepting deposits and providing credit facilities to its members on which interest is paid on deposits received by the assessee from its members as well as interest is received by the assessee from its members on credit facilities/loans advanced by the assessee to its members. 4. The AO held against the assessee by disallowing deduction u/s. 80P(2)(a)(i) of the 1961 Act, vide assessment order dated 02.12.2016 passed u/s 143(3) of the 1961 Act, by holding as under: 4.4. Final conclusions: - 4.4.1 Subjected to the above discussion, legalities and provisions, the claim of the assessee u/s 80P(2)(a)(i) of the Act is hereby rejected on the following grounds:- a) The assessee is a Co-operative Credit Society. b) As per the definition of Co-operative Bank in the Banking Regulation Act, 1949 as referred to in explanation to sub-section (4) of section 80{P) and the definition, it is concluded that, the assessee though not a Co-operative Bank, has accepted deposits and provided credit facilities to its members which is akin to the primary activity of any bank, Co-operative or otherwise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the claim by holding, inter-alia, as under - 8. I have carefully considered the appellant's submissions, observations of the AO in the assessment order and the facts of the case. The appellant is a Primary Co-operative Credit Society accepting deposits and providing credit facilities from and to its members only. The issue involved in this case is whether the appellant is a Co-operative Bank or not because if the appellant is held to be a Co-operative Bank as has been held by the AO, then deduction allowed u/s, 80P(1) is taken away in terms of section 80P(4) of the IT. Act, otherwise, if the appellant is a Co-operative Credit Society providing credit facilities to its members, then whole of the profits earned by the appellant Society are allowed to the society as deduction u/s. 80P(2) (a) (i), as claimed by the appellant. The main reason why the AO had disallowed deduction to the appellant is that according to the AO though the appellant is not a Co-operative Bank but as the appellant had accepted deposits and provided credit facilities to its members, the same was akin to the primary activity of any bank. The fact that the appellant accepts deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es condition No. (1) and (3) above. The impugned order after referring to the definition of 'Banking Business' as defined in Section 5b of the Banking Regulation Act, held that the principal business of the Appellant is Banking. Section 5b of the Banking Regulation Act defines banking to mean accepting of deposits for the purpose of lending or investment, of deposit of money from the public repayable on demand or otherwise. The impugned order juxtaposes the above definition with the finding of fact that the appellant did deal with non members in a few cases by seeing deposits. This read with Bye law 43 leads to the conclusion that it is carrying on banking business. This fact of accepting deposits 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 Bye-law 43 only permits the society to accept deposits from its members. It is submitted that By laws 43 does not permit receipt of depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society to its membership and one of three cumulative conditions precedent to be a primary cooperative bank is not satisfied. However the impugned order construed the amended clause 9(d) of the appellant's bye laws to mean that it only permits a society to be admitted to the membership of the appellant and not a co-operative society. According to the impugned order, a society and a co-operative society are clearly words of different and distinct significance and the membership is only open to society and not to a co-operative society. As rightly pointed out on behalf of the appellant the word society as referred to bye law 9(d) would include the co-operative society. This is so as the definition of a society under the Co-operative Act is co-operative society registered under the Cooperative Act, Besides the qualifying 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the claim of deduction u/s. 80P(2)(a)(i) of the Act to the appellant which have duly been endorsed and upheld by the Hon'ble ITAT, Bench 'C', Mumbai, in A.Y. 2012-13, vide their order dated 11.11.2016, decided in ITA No. 369/Mum/2016,by holding, inter-alia, as under - 6. In view of the above discussion we find that the decision of Hon'ble jurisdictional High Court in Quepem Urban Co-operative Credit Society Ltd. (supra) and further the decision of Madras High Court in Kalpadi Cooperative Township Ltd. (supra) is squarely applicable upon the facts of the present case and the assessee was entitled for the deductions claimed u/s. 80P(2)(a)(i) of the Act. Thus we do not find any illegality on infirmity in the order passed by Commissioner (Appeals) has the appeal filed by revue is dismissed. 10. From the above discussion it is crystal clear that the issue as well as facts under dispute are squarely covered by the orders of the CIT (A), as reproduced above and also upheld by the jurisdictional ITAT, 'C' Bench, Mumbai, in the appellant's own case for A.Y. 2012-13 2013-14. In view of the above facts, it is held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r; 9. There is no dispute between the parties that the appellant is a cooperative society as the same is registered under the Co-operative Societies Act. The appellant is claiming deduction of income earned on providing credit facilities to its members as provided under Section 80P(2)(a)(i) of the Act. It is appellant's case that, it is not carrying on the business of the banking. Consequently, not being a co-operative bank the provisions of Section 80P(4) of the Act would not exclude the appellant from claiming the benefit of deduction under Section 80P(2)(a)(i) of the Act. However in terms of Section 80P of the Act the meaning of the words Cooperative Bank is the meaning assigned to it in Chapter V of the Banking Regulation Act, 1949. A cooperative bank is defined in Section 5(cci) of Banking Regulation Act to mean a State Cooperative Bank, a Central Cooperative Bank and a primary cooperative bank. Admittedly, the appellant is not a State Cooperative Bank, a Central Cooperative Bank. Thus what has to be examined is whether the appellant is a primary Cooperative Bank as defined in Para V of the Banking Regulation Act. Section 5(ccv) of the Banking Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 the appellant's principal business is of Banking is perverse as it is not supported by the evidence on record. So far as the issue of primary object of the appellant is concerned the impugned order gives no finding on that basis to deprive the appellant the benefit of Section 80P of the Act. The impugned order sets out the object clause of the appellant, which has 24 objects but thereafter draws no sequiter to conclude that the primary object is Banking. Consequently there is no occasion to deal with the same as that is not the basis on which the impugned order holds that it is a Primary Cooperative Bank. 11. In the above view, the alternative contention of the appellant that it is not in the business of Banking as the sine quo non to carry on banking business is a licence to be issued by the Reserve Bank of India, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. Therefore, to the extent the income earned is attributable to dealings with the non-members are concerned the benefit of Section 80P of the Act would not be available. In the above view of the matter, at the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction under Section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. 14. Accordingly, the substantial question of law as framed is answered in the negative i. e. in favour of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nship Ltd(supra) is squarely applicable upon the facts of the present case and the assessee was entitled for the deductions claimed u/s 80P(2)((a) (i) of the Act. Thus we do not find any illegality on infirmity in the order passed by Commissioner (Appeals) has the appeal filed by revenue is dismissed. 7.2 We have also observed that for AY 2013-14, the tribunal has again held in favour of the assessee by allowing deduction u/s. 80P(2)(a)(i) of the 1961 Act in ITA no. 5175/Mum/2017 for AY 2013-14 in assessee s own case, vide order dated 31.10.2018, by holding as under:- 4. All the issues are in connection with the allowance of the claim by the CIT(A) u/s 80P(2)(a)(i) of the Act. The Ld. Representative of the Revenue has argued that the assessee was doing the banking business, therefore, the assessee was not entitled to the claim u/s 80P(4) of the Act but the CIT(A) has wrongly allowed the claim of the assessee, therefore, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the primary activity of any bank. The fact that the appellant accepts deposits and provide credit facilities members only, has not been disputed by the AO. Under these circumstances, cannot be held to be engaged in the business of banking as held in relied upon by the appellant as under 9. In the case of Quepem Urban Co-op Credit Society Ltd (supra) the Hon'ble Bombay High Court held as under 9. There is no dispute between the parties that the appellant is a cooperative society as the same is registered under the Cooperative Societies Ad. The appellant is claiming deduction of income earned on providing credit facilities to its members as provided tinder Section 80P(2)(a)(i) of the Act. It is appellant's case that, it is not carrying on the business of the banking. Consequently, not being a co-operative hank the provisions of Section 80P(4) of the Act would not exclude the appellant from claiming the benefit of deduction under Section 80P(2)(a}(i) of the Act However in terms of Section SOP of the Act the meaning of the words Cooperative Bank is the meaning assigned fail in Chapter F of the Banking Regulation Act, 1949. A cooperative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, the word any person is a gloss added the impugned order as it is not found in Bye law 43. Il is undisputed that the transactions with non-members. 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 byelaw 4$ 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 lo conclude that ii enables the appellant to receive deposits from any person is riot correct. Thus in the present fads she finding that the appellant's principal business is of Banking is perverse as it is not supported by the evidence on record So far as the issue of primary object of the appellant is concerned the impugned order gives no finding on that basis to deprive the appellant the benefit of Section 80P of the Act. The impugned order sets out the object clause of the appellant, which has 24 objects hut thereafter draws no sequiter to conclude that the primary object ja flanking. Consequently there is no occasion to deal with the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions its provided under Section 5(CVV) of the Banking Regulation Act. 1949 are to be satisfied cumulatively and except condition are not satisfied. Ergo 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 ihe 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 nonmembers cannot be upheld. This for the reason (hat Section 80P(l) of the Act restricts the benefits of deduction of income of cooperative society So the extent it is earned by providing credit facilities to Us members. Therefore^ to the extent the income earned is attributable to dealings with the non-members fire concerned the benefit of Section 80P of the Act would not be available. In the above view of the matter, a! the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction under Sectio ..... 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