2012 (11) TMI 1223 - AT - Income Tax

Assessee Co-op Society Eligible for Deduction Under Section 80P(2)(a)(i)

The ITAT upheld the decision that the assessee co-operative society is classified as a co-operative credit society, not a co-operative bank, making it ... Entitled for deduction u/s. 80P - Held that:- It is well settled principle in the interpretation of the ‘taxing provisions’ that the same are to be strictly construed and there is n room for any intendment. There is no presumption as to tax. Nothing is to be read or nothing is to be implied. One has to fairly look into language used by the Parliament. The Parliament has adopted the definition of the Co-operative Bank by refering the same as given in the Banking Regulation Act, 1949. It is called Legislation by reference and we have to give the strict interpretation while interpreting the effect of Sub-sec. (4) to Sec. 80 P. In our opinion, Cooperative Credit Society is distinct and separate from the Co-operative Bank nor it can be said as a Primary Co-operative Bank within the meaning of Banking Regulation Act, 1949. Hence, the assessee being a Co-operative Credit Society is entitled for deduction u/s. 80 P(2)(a)(i) of the Act. Issues Involved:1. Eligibility of the assessee Co-operative Society for deduction under Section 80P of the Income Tax Act, 1961.2. Interpretation of the amendment by insertion of Sub-section 4 to Section 80P by the Finance Act, 2006.3. Definition and classification of Co-operative Banks and Co-operative Credit Societies under the Banking Regulation Act, 1949.Issue-wise Detailed Analysis:1. Eligibility of the assessee Co-operative Society for deduction under Section 80P of the Income Tax Act, 1961:The primary issue in this appeal is whether the assessee Co-operative Society is entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer (A.O.) disallowed the deduction claimed by the assessee, determining the total income at Rs. 50,43,534/-. The A.O. rejected the claim based on the assertion that the assessee is a primary co-operative bank and thus not eligible for the deduction as per the amendment introduced by the Finance Act, 2006.2. Interpretation of the amendment by insertion of Sub-section 4 to Section 80P by the Finance Act, 2006:The amendment to Section 80P by the Finance Act, 2006, introduced Sub-section 4, which states that the provisions of Section 80P shall not apply to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The A.O. contended that the assessee falls under the category of a primary co-operative bank and hence is not entitled to the deduction.3. Definition and classification of Co-operative Banks and Co-operative Credit Societies under the Banking Regulation Act, 1949:The A.O. argued that the assessee's activities are analogous to banking activities as defined in Section 5 of the Banking Regulation Act, 1949, and thus it should be classified as a primary co-operative bank. However, the Ld. CIT(A) and the ITAT Pune Bench found that the assessee is a co-operative credit society, which is distinct from a co-operative bank. The relevant definitions under the Banking Regulation Act, 1949, were considered, including:- Co-operative Bank (Clause cci): Includes State Co-operative Bank, Central Co-operative Bank, and Primary Co-operative Bank.- Primary Co-operative Bank (Clause ccv): A co-operative society whose primary objective is banking business, with paid-up capital and reserves of not less than Rs. 1,00,000, and by-laws that do not permit admission of other co-operative societies as members.- Co-operative Credit Society (Clause ccii): A co-operative society whose primary objective is to provide financial accommodation to its members.The ITAT referred to the decision in the case of ITO Vs. Jan Kalyan Nagari Sahakari Pat Sanstha Ltd., where it was held that a co-operative credit society is distinct from a co-operative bank and is entitled to the deduction under Section 80P(2)(a)(i). The Tribunal emphasized that the definitions provided in the Banking Regulation Act, 1949, must be strictly construed, and the term 'co-operative bank' does not include 'co-operative credit society.'Conclusion:The ITAT upheld the order of the Ld. CIT(A), confirming that the assessee co-operative society is not a co-operative bank but a co-operative credit society. Consequently, the assessee is entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The appeal filed by the Revenue was dismissed, and the order was pronounced in open court on 22nd November 2012.