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TMI Blog2014 (9) TMI 1243X X X X Extracts X X X X X X X X Extracts X X X X ..... ities to its members and not a co-operative bank, the assessee is entitled to the grant of exemption u/s 80P(2)(a)(i) - Decided against revenue. - ITA Nos.1348 & 1349/Bang/2013 - - - Dated:- 26-9-2014 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER Appellant by: Shri P.Dhivahar, JCIT(DR) Respondent by: Shri Prateek Marlecha, CA. ORDER Per JASON P BOAZ, AM: These appeals by the revenue a re against the orders dated 15-7-2013 of the CIT(Appeals), Belgaum, relating to assessment years 2009-10 and 2010-11. 2. The assessee is a co-operative society. It is engaged in banking business also. The assessee had claimed deduction u/s. 80P(2)(a)(i) of the Act. Under Sec.80P(2)(i) of the Act where the gross total income of a co- operative society includes income from carrying on the business of banking or providing credit facilities to its members, the same is allowed deduction. By the Finance Act, 2006 w.e.f. 1-4-2007, Sub-section (4) was inserted in Sec.80-P which provides as follows: (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 prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking activity. According to the AO, the following features make the assessee ineligible to exemption contemplated in section 80P of the Act: i. Since membership is open to anyone paying a sum of ₹ 10/- to ₹ 100/- for membership and no other condition is imposed. In other words, membership as is available in any banking institution is available in the case of the appellant society. ii. The purpose of accepting deposits from the public is for making investments and for lending to members. Confining the lending only to members makes no difference. iii. Deposits collected from the depositors are repayable on demand and do not go into the corpus of the appellant. iv. Though withdrawal of money is not done by cheques, drafts or pay-out slips, pay orders are issued in favour of a person on behalf of the depositor. v. The assessee society came within the Explanation to sub- section (4) of section 80P of the Act as a banking institution. 4. In the light of the above-mentioned observations, the AO held that the appellant was not entitled to exemption u/s 80P(2)(a)(i) of the Act and brought the same to tax. 5. On appeal by the assessee, the CIT(Appeals) allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or long term credit for agricultural and rural development activities . 9.1 The above sub-section 4 of section 80P provides that deduction under the said section shall not be available to any cooperative bank other than a primary agricultural credit society or rural development bank. For the purpose of the said sub section, 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 Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The new proviso to section 80P(4) which is brought into statute is applicable only to cooperative banks and not to credit cooperative societies. The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a cooperative 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. 8. 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banking Regulation Act, 1949. 3. In part V of the Banking Regulation Act, Co- operative Bank means a State Cooperative bank, a Central Co-operative Bank and a primary Co-operative bank. 4. Thus, if the Delhi Co op Urban T C Society Ltd. does not fall within the meaning of Co-operative Bank as defined in part 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 sub- section(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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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