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TMI Blog2022 (6) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... tire income is exempted as the income from the business activities as provided under various Clause of sub section (2) are only exempted from tax. Therefore, if a society satisfy the condition as provided under sub section (2) under any Clause or sub Clause of Sub Section (2) the deduction is available to it in respect to the income which falls under any of the head provided under this sub section and other income which does not fall in the ambit of sub section (2) would effect the eligibility of the assessee society to claim the deduction so far as the it falls in the ambit of sub section (2). After the insertion of sub section (4) by Finance Act, 2006, deduction under section 80P(1) and (2) shall not be admissible to a Cooperative Bank other than a primary agriculture credit society or a primary Cooperative Agriculture and Rural Development Bank. Deduction u/s 80P shall not be allowable to a Cooperative Bank other than the primary agricultural credit society or a primary co-operative agricultural and rural development bank. The definition of Cooperative Bank is adopted as provided in part V of Banking Regulation Act, 1949 therefore, there is no ambiguity on the point that a Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving a license from RBI to do a banking business would fall within the mischief of Sub Section (4) section 80(4) and consequently the deduction under section 80P (1) and (2) is not available. Hence, in the facts and circumstances of the case when the assessee is a cooperative society bank as defined as per part V of the Banking Regulation Act, 1949, it is not eligible for deduction under section 80P. - Decided against assessee. - ITA No.80/VNS/2018 And ITA No.81/VNS/2018 And ITA No.82/VNS/2018 - - - Dated:- 9-6-2022 - Hon ble Sh. Vijay Pal Rao, Judicial Member And Hon ble Sh. Ramit Kochar, Accountant Member For the Appellant : Anil Kumar Pandey, Advocate For the Respondent : Sh. A.K. Singh, Sr. D.R. ORDER SHRI VIJAY PAL RAO, JUDICIAL MEMBER: These three appeals are directed against the three separate orders of the CIT(A) all dated 13th August, 2018 for the assessment years 2009-10, 2013-14 and 2014-15 respectively. The assessee has raised common grounds in the appeals for the three assessment years except the quantum of disallowance. For the purpose of recording the facts, the appeal for the assessment year 2009-10 is taken as a lead case with the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Credit Society established under Indian Railway Establishment Manual with the object to increase habit of thrift among its member who are employees of Indian Railways. The assessee filed its return of income declaring nil income after claiming deduction under section 80P of the Income Tax Act. The Assessing Officer noted that section 80P does not apply to any Cooperative Bank other than a primary agriculture credit society or a primary Cooperative Agriculture and Rural Development Bank. Accordingly, the AO issued a notice under section 142(1) on 14.10.2016 alongwith the questionnaire. In compliance of the said notice, the assessee filed its reply. The AO made reference to sub section 4 of section 80P which was inserted by Finance Act, 2006 w.e.f. assessment year 2007-08. The AO observed that the assessee is neither a primary agriculture cooperative society nor a primary cooperative agriculture and rural development bank but only a Cooperative Bank as per meaning assigned in para v of the Banking Regulation Act, 1949 as such the deduction under section 80P of the Act is not available to the assessee. The assessee objected to the denial of benefit of section 80P(2)(a)(i) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Societies / Banks as they are engaged in providing credit facility to their members. Therefore, as per Railway Establishment Manual page 56 serial no. 2345 of Staff Manual of Railway, the assessee society is exempted from tax. It is based on the Railway Board s Letter No. 87/E (Co-op) 25/2 dated 5.1.89. Thus the learned AR has given more thrust to the Railway Establishment Manual and serial no. 2345 of Staff Manual of Railway regarding levy of Income Tax on the profit of the Cooperative Society / Bank. The assessee is registered under Multi State Co-operative Societies Act, 2002. The Reserve Bank of India gave the license to the assessee under the Banking Regulation Act, 1949 to commence and the carry on banking business. He has referred to section 64 of Chapter VII of Multi-State Cooperative Societies Act Act, 2002 (Properties and Funds of Multi State Cooperative Societies) which provides the investment and deposits made by the Multi State Co-operative Society. The learned AR has submitted that as per the explanation, the definition of bank means any banking as defined in Clause (c) of sub section 5 of Banking Regulation Act, 1949. Thus, the assessee bank does not fall in any de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and rural development bank. The definition of cooperative bank and primary agriculture credit society is provided in part v of the Banking Regulation Act, 1949 which is adopted for the purpose of section 80P of the Income Tax Act. Primary cooperative agriculture and rural development bank are defined as societies whose area of operation is confined to Taluka and primary object is to provide long term credit for agriculture and rural development activity. The assessee is neither a primary agriculture society nor a primary cooperative agriculture and rural development bank. He has referred to the impugned order of the CIT(A) and submitted that the assessee is listed as non schedule urban cooperative bank as per the website of Reserve Bank of India. The learned DR has also referred to the CBDT Circular No. 6/2010 dated 20th September, 2010 which clarifies that 80P does not apply to any cooperative bank other than those specifically mentioned in sub section 4 of section 80P. He has relied upon the orders of the authorities below. 6. We have considered the rival submissions as well as relevant material on record. The assessee is a Multi-State Primary Cooperative Bank and registered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and held that the assessee is a Cooperative Bank as per Banking Regulation Act, 1949 and as per the provisions of section 80P(4) of the Income Tax Act deduction under section 80P is not available to the assessee. The Assessing Officer consequently disallowed the claim of deduction under section 80P and added the amount of Rs. 37,28,310/- to the total income of the assessee. Though the Assessing Officer has also made an addition of Rs. 5,56,855/- on account of a provision for bad and doubtful dates made by the assessee which was deleted by the CIT(A) and therefore, the said issue is not involved in the present appeal. The assessee challenged the action of the Assessing Officer before the CIT(A) and reiterated its contention that the assessee society is engaged in providing banking facility to its members and the object of which does not confine to one State therefore, the deduction under section 80P(2)(a)(i) is available to the assessee. The CIT(A) has concur with the order of the Assessing Officer as under:- The appellant has claimed deduction u/s 80P(2)(a)(i) of the Act. According to which income of a cooperative society engaged in business of banking or providing credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of proviso to section 80P(1)(2) a Cooperative Society was eligible for deduction of the income inter alia from the business of banking or providing credit facilities to its members. For ready reference, section 80P is quoted as under:- Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities69 to its members, or (ii) a cottage industry, or [(iii ) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses82 for storage, processing or facilitating the marketing of commodities82, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income82 does not exceed twenty thousand rupees, the amount of any income by way of interest on securities [***] or any income from house property chargeable under section 22. Explanation.-For the purposes of this section, an urban consumers' co-operative society means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a case where the assessee is entitled also to the deduction under [***] [section 80HH] [or section 80HHA] [or section 80HHB] [or section 80HHC] [or section 80HHD] [or section 80-I] [or se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80P, a Cooperative Bank is defined as per the meaning assigned to it in Part V of Banking Regulation Act, 1949. The relevant provision of Banking Regulation, 1949 in part (V) are as under:- 3. Act to apply to co-operative societies in certain cases.-Nothing in this Act shall apply to- (a) a primary agricultural credit society; (b) a co-operative land mortgage bank; and (c) any other co-operative society, except in the manner and to the extent specified in Part V. xxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxx xxxxxxxxxxx 56. Act to apply to co-operative societies subject to modifications.-The provisions of this Act, as in force for the time being, shall apply to, or in relation to, cooperative societies as they apply to, or in relation to, banking companies subject to the following modifications, namely:- (a) throughout this Act, unless the context otherwise requires,- (i) references to a banking company or the company or such company shall be construed as references to a co-operative bank, (ii) references to commencement of this Act shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are not less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose; (ccvi) primary credit society means a co-operative society, other than a primary agricultural credit society,- (1) the primary object or principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose. Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that deduction under the said section shall not be allowable to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. For the purpose of the said subsection, co-operative bank shall have the meaning assigned to it in part V of the Banking Regulation Act, 1949. 12. The above clarification reiterated that deduction under section 80P shall not be allowable to a Cooperative Bank other than the primary agricultural credit society or a primary co-operative agricultural and rural development bank. The definition of Cooperative Bank is adopted as provided in part V of Banking Regulation Act, 1949 therefore, there is no ambiguity on the point that a Cooperative Bank which is functioning at par with commercial Bank as per the license issued by the Reserve Bank of India it is not eligible for deduction under section 80P of the Income Tax Act because it falls in the mischief of sub section 4 of section 80P. If the definition of Cooperative Bank as provided in Part (V) of Banking Regulation Act, 1949 is taken into consideration then the assessee being a Multi-State Primary Cooperative Bank and not a primary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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