AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 1162
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.... following the said decision of the jurisdictional High Court allowed the claim of the Assessee as the Assessee is not a cooperative bank conducting banking business but it is a cooperative society engaged in the business of providing credit facilities to its members only. 4. On the other hand, the Ld. DR placing reliance on the decision of the Supreme Court in the case of The Totgars' Cooperative Sale Society Limited Vs. ITO in civil appeal 1622/2010 submits that the Assessee is not entitled for deduction u/s 80P of the Act. 5. We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. In the decision relied on by the Ld. DR in the case of The Totgars' Cooperative Sale Society Limited, the issue was whether the interest on surplus funds is eligible for deduction u/s 80P(2)(a)(i) of the Act or not and it was not the question as to whether the Assessee a Cooperative Society engaged in the business of providing credit facilities to its members is entitled for deduction u/s 80P(2) or not. The facts in the case before Hon'ble Supreme Court was that the Assessee earned interest income on deposits from surplus funds which were part in ....
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....es." This is the only finding of fact given by the AO in the assessment order. The AO proceeded to analyze the provisions of sec 80P, the Banking Regulation Act, more particularly sec 56(c)(ccv) and a number of case laws. The AO therefore held the appellant to be a cooperative bank and not a cooperative society. He has however not led any facts to show that the appellant is engaged in the business of banking. The AO has examined the provisions of the Banking Regulation Act 1949 and tried to demonstrate how the appellant is a bank. Whether the appellant satisfies the core ingredients of banking business or not has not been examined by the AO at all. Merely because deposits have been accepted and loans advanced, it cannot be held that the appellant is in the business of banking. It is not the case of the AO that public in general could also participate in the activities of the appellant in accepting deposits or granting loans. The bye laws of the appellant do not permit it to open the facilities of accepting deposits and granting loans to the general public. These activities are restricted to it's own members. In fact the AO has clearly acknowledged this fact as reproduced supr....
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....overed by the decision of the jurisdictional Bombay High Court in its decision in the case of Quepem Urban Cooperative Credit Society [2015] 58 taxmann.com 113 (Bombay). Quoting from the same :- Section 80P, of the Income-tax Act, 1961 - Deductions - lncome from co-operative societies (Primary Co-operative bank) - Assessment years 2008-09, 2009-10, 2011-12 - Assessee, a co-operative society was registered under Co-operative Society Act - It was engaged in providing credit facilities to its members - It claimed deduction under section 80P(2)(a)(i), which was disallowed by Assessing Officer holding that assessee was a primary co-operative bank, therefore hit by provisions of section 80P(4), which excluded benefit of section 80P - It was found that assessee-society was providing credit mainly to its members and its transactions with non-members were insignificant - Moreover, it was undisputed that bye laws of society did not allow any co-operative society to become its member - Whether on facts, assessee was not a co-operative bank rather it was a co-operative society and, therefore, its claim for deduction was to be allowed - Held, yes (Paras 12, 13) (In favour of assessee) FACTS *....
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....y, not being a cooperative bank the provisions of section 80P(4) would not exclude the appellant from claiming the benefit of deduction under section 80P(2)(a)(i). However in terms of section 80P the meaning of the words Co-operative Bank is the meaning assigned to it in Chapter V of the Banking Regulation Act, 1949. A co-operative bank is defined in section 5(ccv) of Banking Regulation Act to mean a State Co-operative Bank, a Central Co-operative bank and a primary co-operative bank. Admittedly, the appellant is not a State Co-operative Bank, a Central Co-operative Bank. Thus what has to be examined is whether the appellant is a primary co-operative bank as defined in Para V of the Banking Regulation Act. Section 5(ccv) of the Banking Regulation Act defines a primary co-operative bank to mean a co-operative society which cumulatively satisfies its three conditions: (1) Its principal business or primary object should be banking business of Banking; (2) Its paid up share capital and reserves should not be less than rupees one lakh. (3) Its bye-laws do not permit admission of any other co-operative society as its member. * It is accepted position that condition no. (2) is sati....
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....r gives no finding on that basis to deprive the appellant the benefit of section 80P. Consequently there is no occasion to deal with the same as that is not the basis on which the impugned order holds that it is a Primary Co-operative Bank. [Para 10] * So far as condition no. 3 of the definition/meaning pf primary Co-operative bank as Section 5(ccv) of the Banking Regulation Act is concerned, the same requires the Bye Laws of society to contain a prohibition from admitting any other co-operative society as its member. In fact the bye-laws of the appellant society originally in bye-law 9(d) clearly provided that no co-operative society shall be admitted to the membership of the society. Thus there was a bar but the same was amended with effect from 12-1-2001 as to permit a society to be admitted to the membership of the society. Therefore for the subject assessment years there is no prohibition to admitting a society to its membership and one of three cumulative conditions precedent to be a primary co-operative bank is not satisfied. However the impugned order construed the amended clause 9(d) of the appellant's bye-laws to mean that it only permits a society to be admitted to ....