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TMI Blog2015 (8) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... t doing banking business and therefore, the provisions of section 80P(4) are not applicable to them and where the assessee cooperative society engaged in providing credit facilities to its members and not accepting deposit from public as evidenced from their bye laws or the cooperative societies accepting other cooperative societies as members have held that those cooperative societies are entitles to the benefit of deduction u/s 80P(2)(a)(i). As no contrary decision could be cited by the Departmental Representative. We, therefore, do not find any good and justifiable reason to interfere. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (1) shall be the following, namely:- (a) in the case of co-operative society engaged in - (i) carrying on the business of banking or providing credit facilities to its members, or (ii)-------------------------- the whole of the amount of profits and gains of business attributable to any one or more of such activities: 6.1.1 The clause (4) of sec.80P inserted by the Finance Act,2006 w.e.f. 01-04-2007, which has been invoked by the Assessing Officer to deny deduction to the appellant co-operative society reads as under: (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 primary co-operative agricultural and rural development bank. Explanation: For the purposes of this sub-section: (a) "co-operative bank" and "Primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has concluded that the appellant co- operative society satisfies all the above mentioned three conditions and therefore it is held to be a 'Primary Cooperative Bank' and hence its claim of deduction u/s 80P(2)(a)(i) has been denied u/s 80P(4). Before arriving at this conclusion the Assessing Officer has also referred to the newly inserted provisions of Sec.2(24)(viia), inserted by the Finance Act,2006 w.e.f. 01-04- 2007 which reads as under: "(24) "Income" includes - (viia) The profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;" The Assessing Officer has contended that the purpose of introduction of these provisions was to tax the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members. The Assessing Officer has also referred to the definition of 'Banking' as provided in sec.5(b) of the Banking Regulation Act,1949 which reads as under: "(b)"Banking" means the accepting for the purpose of lending or investment, of deposit of money from public, repayable on demand or otherwise, and withdrawal by cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in the business of banking or providing credit facilities to its members, or business of cottage industry, or of marketing of agricultural produce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc. The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefits. It is, therefore, proposed to amend section SOP by inserting a new sub-section (4) so as to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than primary credit society or a primary co-operative agricultural and rural development bank. It is also proposed to define the expressions "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank". It is also proposed to insert a new sub-clause (viia) in clause (24) of the section 2 so as to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition of "income". This amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal ITAT Panjim bench has also in a number of cases where the assessee cooperative society engaged in providing credit facilities to its members and not accepting deposit from public as evidenced from their bye laws or the cooperative societies accepting other cooperative societies as members have held that those cooperative societies are entitles to the benefit of deduction u/s 80P(2)(a)(i) of the I.T. Act. 8. Now, after the Gujarat High Court in the case of CIT Vs Jafari Mom in Vikas Coop Credit Society Ltd ITA 442, 443 & 863 of 2013 deciding the issue in favour of the assessee, the Karnataka High Court in the cases of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ITA 5006/2013 dt 5th Feb 2014, Commissioner of Income Tax (A), Mysore & Others Vs General Insurance Employees Cooperative Credit Society Ltd ITA No 273/2013 dt 27.6.2014 and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014 has also decided the issue in favour of the assessee. 8.1 Now a question which may be asked in the case of the appellant being a 'Souharda' is; whether, 'Souharda' is a 'co operative society' w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sealed by the Registrar shall be conclusive evidence that the co-operative mentioned therein, is a cooperative registered or deemed to be registered under this Act. c. Section 10(1) - Bye Laws - Subject to the provisions of this Act or rules, every cooperative shall function in accordance with its bye-laws which as far as possible shall adhere to the co-operative principles. d. Section 32(1) - Maintenance of records, Accounts, etc :- Every co-operative shall maintain at its registered office the following, namely:- e. Section 33(1) - Audit :- Every Cooperative shall get its accounts audited atleast once a year f. Section 35(1) - Inquiry:-The Registrar may conduct an inquiry or cause an inquiry to be conducted expeditiously into any specific matter touching the constitution, management, working or financial conditions of a Cooperative. g. Section 47(1) - Winding up of a Co-operative :- On an application made by not less than one-fifth of the members of a co-operative to wind up the affairs of the said cooperative, the board shall convene a general- meeting by issuing a notice to each member 8.1.2 Souhardas satisfy the second part of the definition also as they are regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a. primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a Co-operative bank which is exclusively carrying on banking business i.e. the purport of this amendment. Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve Bank of India to carry on business, it is not a Co-operative bank. It is a Cooperative society which also carries on the business of lending money to its members which is covered under Section 80P{2)(a}(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society ........................................In the instant case, when the status of the assessee is a Co-operative society and is not a Co-operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act is correct. " 8.3 The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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