TaxTMI 
TaxTMI 
2015 (4) TMI 720
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Finance Act, 2006 with effect from April 1, 2007 sub-section (4) was inserted in section 80P 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 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 agricultural and rural development activities." 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; (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 abovementioned observations, the Assessing Officer held that the appellant was not entitled to exemption under section 80P(2)(a)(i) of the Act and brought the same to tax. 5. On appeal by the assessee, the Commissioner of Income-tax (Appeals) denied the claim of the assessee for deduction under section 80P(2)(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eason of introduction of sub-section (4) to section 80P. Section 80P(4) reads 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 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 agricultural and rural development activities.' ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Society are bound by rules and regulations as specified by in the Co-operative Societies Act Filing of returns Co-operative banks have to submit annual return to RBI every year Society has to submit the annual return to Registrar of Societies Inspection RBI has the power to inspect accounts and overall functioning of the bank. Registrar has the power to inspect accounts and overall functioning of the bank. Part V Part V of the Banking Regulation Act is applicable to co-operative banks. Part V of the Banking Regulation Act is not applicable to co-operative societies. Use of words The word "bank", "banker", "banking" can be used by a co-operative bank The word "bank", "banker", "banking" cannot be used by a co-operative society 9.3 If the intention of the Legislature was not to grant deduction under section 80P(2)(a)(i) to co-operative societies carrying on the business of providing credit facilities to its members, then this section would have been deleted. The new proviso to section 80P(4) which is brought into statute....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not apply. This, irre spective of the fact that the respondent would not fall within the expression 'primary agricultural credit society'. 6. Had this been the plain statutory provisions under consideration in isolation, in our opinion, the question of law could be stated to have arisen. When, as contended by the assessee, by virtue of sub- section (4) only co-operative banks other than those mentioned therein were meant to be excluded for the purpose of deduction under section 80P, a question would arise why then Legislature speci fied primary agricultural credit societies along with primary co-operative agricultural and rural development banks for exclusion from such exclusion and in other words, continued to hold such entity as eligible for deduction. However, the issue has been considerably simplified by virtue of the Central Board of Direct Taxes Circular No. 133 of 2007 dated May 9, 2007, Circular provides as under : 'Subject : Clarification regarding admissibly of deduction under section ....