TaxTMI 
TaxTMI 
2017 (6) TMI 231
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....uction u/s. 80P to the assessee even though assessee carries on banking and other business in the name of a credit co-operative society." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing deduction u/s. 80P(2)(a)(i) without considering insertion of sec. 80P(4) and sub clause (viia) to sec. 2(24) vide Finance Act, 2006 w.e.f. 01-04-2007." 3. " On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the facts that the assessee falls under the category of "Primary Co-operative Bank" as per the definition part V of the Banking Regulation Act, 1949"." 3. Briefly stated facts are that the assessee is a co-operative society registered under Maharashtra Co-operative Societies Act, 1960 for the relevant AY 2010-11. The assessee filed nil return of income after claiming deduction under section 80 P of the Act on the total income of Rs. 24,32,807/-. According to AO, the assessee co-operative society is doing banking business and it is collecting deposits from members by way of fixed deposits, saving deposits and recurring deposits etc. The assessee has declared profit for the relevant FY 200....
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....s providing facility to its members to deposit their savings on which interest is paid and also loan/advance on which interest is charged from the members for such loan/advance. As submitted, the appellant has received aggregate interest from various co-operative and scheduled bank of Rs. 20,42,220/- on FDs and it is maintaining current accounts with certain scheduled banks and cooperative banks." 4. According to CIT(A), the Bank Regulation Act 1949 does not affect to the assessee being a co-operative society and accept deposits in the manner and to the extent specified in Part 5 of the State Act and he also noted that as per Bank Regulation Act, the assessee is not a Co-Operative Bank and since it is neither a State Co-Operative Bank nor a central Co-operative Bank, it cannot be said to be transacting the business of banking, hence, he noting the provision of section 80IP(2)(a)(i) allowed the claim of the assessee by observing in Para 3.1.17 and 3.1.18 as under: - "3.1.17 Further, Provisions of sec.80P(2)(a) are applicable to all co-operative societies in respect of their incomes as mentioned in various sub-clauses therein. Sub clause (1) reads as under: - "carrying on the ....
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....n terms of Section 80P of the Act the meaning of the words Cooperative Bank is the meaning assigned to it in Chapter V of the Banking Regulation Act, 1949. A cooperative bank is defined in Section 5(cci) of Banking Regulation Act to mean a State Cooperative Bank, a Central Cooperative Bank and a primary cooperative bank. Admittedly, the appellant is not a State Cooperative Bank, a Central Cooperative Bank. Thus what has to be examined is whether the appellant is a primary Cooperative Bank as defined in Para V of the Banking Regulation Act. Section 5(ccv) of the Banking Regulation Act defines a primary cooperative bank to mean a cooperative society which cumulatively satisfies the following 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 that rupees one lakh. (3) Its bye-laws do not permit admission of any other cooperative society as its member. It is accepted position that condition No.(2) is satisfied as the share capital in an excess of rupees one lakh. It has been the appellant's contention that the conditions No. (1) and (3) provided above are not sa....
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....after draws no sequiter to conclude that the primary object is Banking. 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 Cooperative Bank. 11. In the above view, the alternative contention of the appellant that it is not in the business of Banking as the sine quo non to carry on banking business is a licence to be issued by the Reserve Bank of India, which it admittedly does not have, is not being considered. 12. So far as condition No.3 of the definition/meaning of Primary Cooperative Bank as provided in 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 cooperative 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 w.e.f. 12 January, 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 me....
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....e order of this Court, the authorities under Act would restrict the benefit of deduction under Section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. 14. Accordingly, the substantial question of law as framed is answered in the negative i.e. in favour of the appellant and against the respondent-Revenue." 6. As the issue is squarely covered in favour of assessee in the given facts and circumstances of the case and by the decision of Hon'ble Bombay High Court in the case of Quepem Urban Co-Operative Credit Society Ltd. (supra). Respectfully, following the same, we confirm the order of CIT(A) and this issue of Revenue's appeal is dismissed. 7. As regards to the assessee's appeal the issue is against the confirmation of disallowance of deduction on interest income on FDRS for this assessee has raised following grounds: - "i) Holding that the income of interest on investments is not covered by the provisions of section 80IP(2)(a)(i) of the Income Tax Act 1961. ii) In holding that the interest on F.D.S. of Rs. 20,42,220/- credited to the Profit and Loss Account is not covered by....