2015 (11) TMI 739

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....aim of deduction made by the society under section 80P(2)(a)(i) of the Act. The claim of deduction so denied, being totally contrary to the provisions of law and facts may kindly be allowed as claimed. (3) The learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts of the case in confirming the application of the provisions of section 80P(4) of the Act and consequently, denying the claim of deduction made by the society under section 80P(2)(a)(i) of the Act. The claim of deduction so denied, being totally contrary to the provisions of law and facts kindly be allowed as claimed. 2. The assessee-society is engaged in the business of banking. The Assessing Officer observed that the assessee filed its return of income on September 30, 2008 declaring total income at nil. The case was scrutinised under section 143(3) of the Income-tax Act. The Assessing Officer gave show-cause notice after considering the amendment made in section 80P with effect from April 1, 2007. During the year under consideration the assessee-society had claimed deduction under section 80P(2)(a)(i) of Rs. 50,32,244 stating that the bank is a agricultural credit society and primary co-....

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....e facts would lead to a conclusion, which would support the appellant's case. In the light of the above delib erations, eventually, I find that the Assessing Officer is quite justified, while holding that the appellant-bank is not entitled for the benefit extended under section 80P of the Act, for the following reasons :  (i) The plain reading of the provisions of relevant sections, i.e., 80P(2)(a)(i) and 80P(4) stipulate that a co-operative society engaged in carrying on business of banking and providing credit facilities to its members would be entitled for such benefit provided such co-oper ative bank/society should be fulfilling the following conditions- a. Such bank/society must be having its area of operation confined to a taluka (tehisel), and b. The principal object of such bank should be providing a long- term credit for the 'agriculture and rural development' activities. 2.3.1 In view of the divergent understanding of law on the part of the Assessing Officer and the learned authorised representative, to perceive the exact meaning and ambit of the above provisions, the help of the principle of interpretation of law was considered relevant and e....

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....he major object of the bank/society is providing long-term loan for agriculture and rural developments only The objects of the bank are providing loan for immovable properties, agriculture land, residential plots and houses, and also to buy NSC, KVC and towards FDR also. Since agriculture and rural developments object is one of the several objects of the appellant-bank, thus the condition is not found fulfilled. 3. Being not an ordinary co-operative bank, the eligible bank/society cannot accept loans/deposits from its member's/non-member's. The manual of the appellant-bank authorises them to accept such deposits also. In view of such fact, the appellant-bank assumes the characteristic of a ordinary co-operative bank thus does not qualify for deduction under section 80P of the Act.             2.3.3 As far as the issue of allowability of impugned deduction in the assessment year 2007-08 by my learned predecessor is concerned, the same is not found rel....

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....credit societies including those which are primary agricultural credit society, engaged in providing credit facilities to its members, eligible to the deduction. Thus the assessee's case is covered under section 80P(2)(a)(i). Section 80P(4) was inserted by the Finance Act, 2006 with effect from April 1, 2007, i.e., for and from the assessment year 2007-08. However, the learned Assessing Officer allowed the deduction under section 80P(2)(a)(i) in the assessment year 2007-08. Therefore, the present year also covered by the order of the Assessing Officer himself. Though the doctrine of res judicata do not apply to the Income-tax proceedings yet however, unless there is a change in the facts and circumstances, the view taken earlier should normally be taken consistently. For this he relied on in the case of Sardar Kehar Singh v. CIT [1992] 195 ITR 769 (Raj) and a very recent decision in CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC). This view is also supported by Central Board of Direct Taxes Circular No. 14 of 2006 dated December 28, 2006 ([2007] 288 ITR (St.) 9 ) . He further drew our attention to definition of "banking", "co-operative bank". He further relied on the follo....

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....land and production therefrom under the Rajasthan Co- operative Societies Act. 6. In any case, if a contrary decision is available, the issue becomes debatable and the view which is favourable to the assessee, has to be adopted as held in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). Therefore, he requested to allow the deduction under section 80P(2)(a)(i) of the Act. 7. At the outset, the learned Departmental representative supported the order of the learned Commissioner of Income-tax (Appeals). 8. We have heard rival contentions and perused the material on record. The intention of the amendment made in section 80P(4) has been explained by the Central Board of Direct Taxes vide Circular No. 14 of 2006 dated December 28, 2006 which is reproduced as under (page 9 of 288 ITR (St.)) : "Circular No. 14 of 2006, dated December 28, 2006. 1. Introduction 1.1. The Finance Act, 2006 (hereafter referred to as the Act) as passed by Parliament, received the assent of the President on 18th April, 2006 and has been enacted as Act No. 21 of 2006 See [2006] 282 ITR (St.) 14  This circular explains the substance of the provisions of the Act relating to....

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....efit under section 80P(2)(a)(i) of the Act in the case of the assessee. This issue has been considered by the various High Courts as well as the Income-tax Appellate Tribunals particularly in the case of Asst. CIT v. Bangalore Commercial Transport Credit Co-operative Society Ltd. in I. T. A. No. 1069/Bang/2010 dated April 8, 2011. The operative portion is reproduced as under : "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 is applicable only to co-operative banks and not to credit co-operative societies. The intention of the Legislature to bring in co-operative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-oper ative society and not a co-operative bank, the provisions of section 80P(4) will not have application in the assessee's case and, therefore, it is entitled to deduction under section 80P(2)(a)(i) of the Act . . . The facts being similar, the decision squ....