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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 ..... rred in deleting the addition of Rs. 71,30,500/- on account of disallowance u/s 80P(2)(a)(i) of the I.T. Act. 2.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting above relief to the assessee without appreciating the fact that the assessee is carrying on the business of accepting deposits and advancing loans to its members which are the primary activities of any bank whether co-operative or otherwise. 2.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the assessees is a cooperative society whose share capital and reserves exceed Rs. l,00,000/-. 2.3 Whether on the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in not appreciating the fact that the assessee is registered under the Maharashtra state co-operative societies Act. 3. The appellant craves leave to add, amend, alter or delete any ground of appeal. 4. The order of the CIT(A) may be vacated and that of the assessing officer may be restored." 3. The brief facts of the case are that the assessee is co-operative credit society. The assessee is an AOP e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, amount of Rs. 71,30,500/- claimed as deduction u/s 80P is disallowed....." 5. The assessee being aggrieved by an assessment framed by the AO u/s 143(3) filed first appeal with Ld. CIT(A) who was pleased to allow the claim of the assessee by following the decision of tribunal in assesse's own case for AY 2012-13 and 2013-14. Presently we are concerned with AY 2014-15 which is immediately succeeding year to AY 2013-14. The Ld. CIT(A) granted relief to the assessee by holding that the assessee is entitled for deduction u/s 80P(2)(a)(i) of the 1961 Act, vide appellate order dated 30.11.2017, by holding as under:- " 8. I have carefully considered the facts of the case, findings of the AO, submission of the appellant, past history and material placed on record. From the facts of the case it is noticed that 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 is required to be ascertained from the nature and modus operand of the appellant's business. As per the AO, the appellant is doing the business of acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Regulation Act defines a primary cooperative bank to mean a cooperative society which cumulatively satisfies the following three conditions : (1) Its principal business or primary object should be banking business of Banking; (2) Its paid up share capital and reserves should not be less that rupees one lakh. (3) Its bye-laws do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, which it admittedly does not have, is not being considered. 12. So far as condition No. 3 of the definition/meaning of Primary 'Cooperative Bank as provided in Section 5(ccv) of the Banking Regulation Act is concerned, the same requires the Bye laws of society to contain a prohibition from admitting any other cooperative society as its member. In fact the bye-laws of the appellant society originally in bye-law 9(d) clearly provided that no co-operativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellant and against the respondent-Revenue. 10, In view of the detailed facts of the case discussed as above and relying on the judgments of the Hon'ble Bombay High Court, Gujrat High Court and Karnataka High Court, as discussed above, it is held that the appellant is a Primary Co-operative Credit Society providing credit facilities to its members and not a Primary Co-operative Bank, Therefore, the provisions of section 80P(4) of the I.T. Act are not applicable in the appellant's case and the appellant is eligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 80P(2)(a)(i) of the 1961 Act. The learned counsel for the assessee relied upon decision of ITAT, Mumbai in assessee's own case for AY 2012-13 and 2013-14. 7. We have considered rival contentions and we have perused the material on record including cited case laws. We have observed that the assessee is co-operative credit society and is only dealing with its members in providing credit facilities on which interest is charged and the assessee is also accepting deposits from its members on which interest is paid by the assessee. We have observed that the assessee is not dealing with outside public and had confined its dealings with members only as per the facts emerging from records and as stated by learned counsel for the assessee before the Bench. We have observed that in assesse's own case for AY 2012-13 and 2013-14, the tribunal has taken a consistent view that the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the 1961 Act. The decision of tribunal in assessee's own case in ITA no. 369/Mum/2016 for AY 2012-13, vide orders dated 11.11.2016 is as under:- " 4. We have considered the rival contention of the parties and further gone through the orders of authorities belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Bye laws 43 does not permit receipt of deposits from persons other then members, the word "any person" is a gloss added in the impugned order as it is not found in Bye law 43. It is undisputed that the transactions with non members are insignificant/miniscule. 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 impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship 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 appellant. Thus even the aforesaid qualifying condition (3) for being considered as a primary cooperative bank is not satisfied. Thus, the three conditions as provided under Section 5 (CVV) of the Banking Regulation Act, 1949, are to be satisfied cumulatively and except condition (2) the other 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk sub-section (4) has taken care to ensure that the Primary Agricultural Credit Societies and Primary Co-operative Agricultural and Rural Development Banks are kept out of the purview of the said provision. Sub-section (4) of Section 80P therefore, in its application is confined ill relation to Co-operative Banks only. In the instant case the Assessee being a Co-operative Credit Society which in turn is providing for certain credit facilities to its members alone but not to the general public at large and which also does not receive monies by way of deposit from the general public, it does not answer the description of a Cooperative Bank. Consequently, the main provision contained under subsection (i) of Section 80P gets attracted and consS9uently the Assessee is entitled to seek the deduction which has been provided for under Section 80P." 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 deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;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 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. SOP(J) is taken away in terms of section 80P(4) of the I.T. 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)l fix claimed by the appellant. The main reason why the AO had disallowed deduction to the appellant h 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 Us members, the same was akin to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of deposits for the purpose of lending of investment^ of deposit of money from the which: repayable on demand or otherwise. The impugned order juxtaposes the 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 taw 43 leads to conclusion that it is carrying on banking business. This fact of accepting deposits from people who are not members has been so recorded by she C1T(A) in his order dated 15 July, 2014. Before the Tribunal Also She appellant did tint dispute the fad that in a Jew 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 Bye laws 43 does not permit receipt of deposits from persons other than members, 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a co-operative society. As rightly pointed out on behalf of the appellant the word society ax referred to bye law 9(d) would include the co-operative society. This is TO as the definition of a society under the Co-operative Act is co-operative society registered under the Cooperative Act. Besides She qualifying condition 3 for being considered as a primary Cooperative bank 14- 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 arty other cooperative society to its member ship. The Revenue has not been able to show any such prohibition in the bye laws of the appellant. Thus even the aforesaid qualifying condition (3) for being considered us a primary cooperative bank is not satisfied Thu the three conditions 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 avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfered with at this appellate stage. 6. In the result, the appeal filed by the revenue is hereby ordered to be dismissed." 7.3. We have observed that the facts have remained the same in the year under consideration as learned DR did not brought to our notice any change in factual matrix of the case and Respectfully following the decision of the tribunal in assessee's own case for AY 2012-13 and 2013-14 vide afore-stated orders, we hold that the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the 1961 Act. We have also noted that Hon'ble Bombay High Court in the case of Quepem Urban Co-operative Credit Society Limited v. ACIT, reported in (2105) 58 taxmann.com 113 (Bom) has decided this issue in favour of the tax-payer. We have also noted that SLP filed by Revenue in the case of ACIT v. Quepem Urban Co-operative Credit Society Limited reported in (2015) 63 taxmann.com 300(SC) has been admitted by Hon'ble Supreme Court and the status as of date is shown to be pending (CA No. 008295, 008296 and 008297 of 2015). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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