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TMI Blog2015 (11) TMI 1842X X X X Extracts X X X X X X X X Extracts X X X X ..... No.851/Bang/2015 - - - Dated:- 4-11-2015 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER For the Appellant : Shri G.R. Venkatanarayana, CA For the Respondent : Shri G.R. Reddy, CIT-I(DR) ORDER Per Asha Vijayaraghavan, Judicial Member This appeal by the assessee is against the order dated 31.3.2015 passed by the Principal Commissioner of Income-tax, Bengaluru 4, Bengaluru [hereinafter referred to as the Pr. CIT ] u/s. 263 of the Incometax Act, 1961 [ the Act ]. 2. The assessee is a cooperative credit society and derives its income from business of accepting deposit and lending loans to its members. The society derived income of ₹ 25,00,066/- and declared NIL income in its return filed on 23-09-2010 after claiming deduction of the entire profit u/s. 80P(2)(a)(i). The same was processed and assessment concluded u/s. 143(3) dated 13-12-2012 accepting NIL income. 3. The ld. Pr. CIT in the course of inspection of the case observed as follows:- (1) Clause (viia) of Section 2(24) of the Finance Act 2006 (w.e.f 1/4/2007) has been inserted to include the profits and gains of any business of banking (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1949. He was therefore of the view that the order passed by the Assessing Officer u/s 143(3) on 13/12/2012 was erroneous and prejudicial to the interests of revenue and action u/s .263 was initiated by issuance of a proposal to the assessee. 5. The basic issue that arose in this case before the Pr. CIT was with regard to the status of the assessee which is primarily engaged in giving financial assistance to its members and accepting deposits from them. The case of the assessee was that it is not registered under the provisions of Banking Regulation Act, 1949 but registered under the provisions of Karnataka Co-operative Societies Act, 1959. As such, it was claimed that the assessee could not be considered to be a cooperative bank, since it does not possess a license from Reserve Bank of India to carry on business of Co-operative Bank. 6. However, the ld. Pr. CIT was of the view that the assessee is a cooperative credit society, engaged in accepting deposits from and extending credit facilities to its members. According to Sec 2(24)(viia) the profits and gains of any business of banking carried on by a cooperative society with its members (which includes providing credit fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot commented on the specific applicability of the enabling conditions laid down in Part V of the Banking Regulating Act, 1949 in the above mentioned order. 8. The Pr. CIT concluded that the Assessing Officer has failed to apply the conditions set out in Part V of the Banking Regulation Act, 1949 read with Section 2(24)(viiia) of the Income-tax Act, 1961 to the facts of the assessee s activities which are admittedly to accept deposits from and provide credit facilities to, its members, which was the society s primary activity. He therefore held the order u/s 143(3) dated 13/12/2012 by the AO as erroneous and prejudicial to the interest of revenue therefore set aside the same with a direction to the AO to redo the assessment after applying the conditions of Part V of the Banking Regulation Act 1949 and Section 2(24)(viia) of the Income-tax Act, 1961 to the facts of the case. 9. Aggrieved, the assessee is in appeal before us on the issue of deduction u/s. 80P(2)(a)(i) of the Act. It is the case of the assessee that it has not obtained any banking license and it cannot carry on any banking business. It is engaged in the activity of providing credit facilities to its members and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cooperative bank shall have the meaning assigned to it in part V of the Banking Regulation Act, 1949. In Part V of the Banking Regulation Act, cooperative bank means a State Cooperative Bank, a Central Cooperative Bank and a Primate Cooperative Bank. 9.2 From the above section, it is clear that the provisions of section 80P(4) has got its application only to cooperative banks. Section 80P(4) does not define the word cooperative society . The existing sub-section 80P(2)(a)(i) shall be applicable to a cooperative society carrying on credit facility to its members. This view is clarified by Central Board of Direct Tax vide its clarification No.133/06/2007-TPL dated 9th May, 2007. The difference between a cooperative bank and a cooperative society are as follows:- Nature Cooperative society registered under Banking Regulation Act, 1949 Cooperative society registered under Karnataka Cooperative Society Act, 1959. Registration Under the Banking Regulation Act, 1949 and Cooperative Societies Act, 1959. Cooperative Societies Act, 1959. Nature Of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee s case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act. Hence, we are of the view that the order of the CIT(A) is correct and in accordance with law and no interference is called for. 13. The Hon ble Gujarat High Court in the case of Tax appeal No.442 of 2013 with Tax appeal No.443 of 2013 with Tax appeal No.863 of 2013 in the case of CIT Vs. Jafari Momin Vikas Co-op Credit Society Ltd. by judgment dated 15.1.2014 on had to deal with the following question of law: Whether the Hon ble Tribunal is correct in allowing deduction under section 80P(2)(a)(i) to assessee s society even though same is covered under section 80P(4) rws 2(24) (viia) being income from providing credit facilities carried on by a co-operative society with its member? The Hon ble Court held as follows: 4. As per section 80P(4), the provisions of section 80P would not apply in relation to any co-operative bank other than primary agricultural credit society or primary co-operative agricultural and rural development bank. As per the explanation, the terms co-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t V of the Banking Regulation Act, 1949, subsection(4) of section 80P will not apply in this case. 5. The issues with the approval of Chairman,Central Board of Direct Taxes. 7. From the above clarification, it can be gathered that subsection( 4) of section 80P will not apply to an assessee which is not a co-operative bank. In the case clarified by CBDT, Delhi Coop Urban Thrift Credit Society Ltd. was under consideration. Circular clarified that the said entity not being a cooperative bank, section 80P(4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenue s contention that section 80P(4) would exclude not only the cooperative banks other than those fulfilling the description contained therein but also credit societies, which are not cooperative banks. In the present case, respondent assessee is admittedly not a credit co-operative bank but a credit cooperative society. Exclusion clause of sub-section (4) of section 80P, therefore, would not apply. In the result, Tax Appeals are dismissed. 14. The Hon ble High Court of Karnataka in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot (supra) c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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