TaxTMI 
TaxTMI 
2017 (7) TMI 855
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....tive society, providing credit facility to its members, so income is deductible u/s 80P of the Act". 3. The Assessing Officer denied the deduction u/s 80P for the following reasons :- (a) The assessee society is registered with the Registrar of Society for receiving deposits and providing credit facility to its members. (b) The society is created for the benefit of employees of M/s Sri Ram Pistons and Rings Ltd., (c) The object of society was as under :- From perusal of the object of society, he concluded that the society had declared itself as banking organization providing credit facility to its members. He pointed out section 80P provides the deduction in respect of income of co-operative society. Further, the Finance Act, 2006 w.e.f. 01.04.2007 had inserted section 80P(4) which provides that the provisions of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank". (d) He rejected the assessee's claim that society was registered cooperative society observing that part V of the Banking Regulations Act, 1949 defines primary agricultural credi....
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.... difference in rate of interest charged by bank and by it. In the bye laws, there is no mention of the fact that it is open to other cooperative society except cooperative bank. The relevant clause regarding the membership in bye laws is as under :- "The term Sewayojak" does not translate to cooperative. Thus, membership is not open to other cooperative society. Therefore, for the purpose of Section 80P(4) the society is deemed to be primary cooperative bank as per Section 56(ccv) of BRA 1949 irrespective of the fact that it has not sought or been granted license for banking. Having license is not material. This is altogether a different matter that the assessee society despite coming under definition of primary cooperative bank by virtue of Section 56(ccv) of Banking Regulation Act, 1949, it has not taken the requisite license." 5. Ld. counsel for the assessee submitted that a co-operative society has been treated as a co-operative bank. He referred to the assessment order page 2 and pointed out that the Assessing Officer has not disputed that the assessee's society is registered with the Registrar of Society for receiving deposits and providing credit facilit....
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.... Regulations Act, 1949 is contained, which deals with the application of the Act to co-operative banks. He referred to relevant sections of this section as under :- "56. Act to apply to co-operative societies subject to modifications.-- The provisions of this Act, as in force for the time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to banking companies subject to the following modifications, namely:-- .......... (c) in section 5,-- [(i) after clause (cc), the following clauses shall be inserted, namely:-- (cci) "Co-operative bank" means a state co-operative bank, a central cooperative bank and a primary co-operative bank; (ccii) "co-operative credit society" means a co-operative society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank; .......... (ccv) "primary co-operative bank" means a co-operative society, other than a primary agricultural credit society,-- (1) the primary object or principal business of which is the transaction of banking business; (2) the p....
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.... are : i. Whether the benefit of deduction, under Section 80P(2)(a)(i) of the IT Act, could be denied to the assessee on the footing that, though the respondent was said to be a Co-operative Society, it was in fact a cooperative bank, within the meaning as assigned to such bank under Part V of the BR Act. ii. Whether the Authorities under the IT Act were competent and possessed the jurisdiction to resolve the controversy as to whether the assessee was a co-operative society or co-operative bank, as defined under the provisions of the BR Act? .......... Attention is also drawn to the relevant portion of the Finance Minister's Budget Speech explaining the reasons for withdrawal of tax benefits to some Societies by way of insertion of sub-section 80P(4) and insertion of new sub-clause (viia) in clause (24) of Section 2 definition of "income" by the Finance Act, 2006, with effect from 1.4.2007, is as under: The Co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefits. It is, therefore proposed to amend section 80P by inserting a new sub-section (4) so as to provide that the provisions of the ....
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....ted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural and rural development bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a Co-operative bank which is exclusively carrying on banking business i.e. the purport of this amendment. Therefore, as the assessee is not a Co-operative bank carrying on exclusively banking business and as it does not possess a licence from Reserve Bank of India to carry on of lending money to its members which is covered under Section 80(2)(a)(i) i.e. carrying on the amendment is not to exclude the benefit extended under Section 80P(1) to such society. Therefore, there was no error committee by the Assessing Authority." In Bangalore Commercial Transporter Credit Society (supra), this court has cited with approval the following differences between a co-operative society and a cooperative bank - as depic....
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....ITA 237/2012 3. CIT v. Mysore University Employees Co-operative Credit Society Ltd. in ITA 298/2013 4. CIT v. Vasavi Credit Co-operative Society Ltd. in ITA No.118/2012 5. CIT v. Sri Vasavi Multi Purpose Souharda Sahakari Sangha Niyamitha in ITA No.505/2013 6. CIT v. General Insurance Employees Co-operative Society Ltd. in ITA No.273/2013. 10. We are in respectful agreement with the general view taken as to the interpretation of the relevant provisions of law, by the co-ordinate bench of this court, in the above and several other judgments adopting the same view. However, it is to be noticed that there is a seriously disputed question of fact which the Authorities under the IT Act have taken upon themselves to interpret in the face of the BR Act prescribing that in the event of a dispute as to the primary object or principal business of any cooperative society referred to in clauses (cciv), (ccv) and (ccvi) of Section 56 of the BR Act, a determination thereof by the Reserve Bank shall be final, would require the dispute to be resolved by the Reserve Bank of India, before the authorities could term the assessee as a co-operative bank, for....
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....cles intended for agriculture for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributed to any one or more of such activities are entitled for deduction. First limb of sub-clause (i) of clause (a) states that "carrying on the business of banking" and after "or" second limb states that "as providing credit facilities to its members", therefore, it construed that income from business of banking as well as income from credit facilities restricted to its members only are entitled for deduction and income from nonmembers is not included and entitled for deduction under said provisions. But in the present case, it was not in dispute that credit facilities and supply of seeds, urea etc. were given only to the members of the appellant society. Only with regard to the deposits, the appellant banking society accepted from nonmembers does not, in any way, affect the revenue generated by the appellant in providing credit facilities and supply of other agriculture related equipments and fertilizers etc. to its members. Banking cooperative society does not earn income from deposits but it has to pay interest on the deposits, th....
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....ommercial Transport Credit Cooperative Society Ltd. in ITA No. 1069/Bang/2010 dated 8.4.2011. The operative portion is reproduced as under :- "9.3. If the intention of the legislature was not to grant deduction u/s 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 cooperative societies. The intention of the legislature of bring in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-operative 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 u/s 80P(2)(a)(i) of the Act............". The facts being similar, the decision squarely applies." The Hon'ble Gujarat High Court also considered this issue in the case of CIT vs. Surat Vankar Sahakari Sangh Ltd. in Tax Appeal No.1150 of 2013 dated 17.01.2014. The operative portion is reproduced as under :- ....
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....its members .......... bank other than a primary agricultural credit society or a primary cooperative 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. 13. A bare reading of aforementioned section makes it clear that section 80P(2)(a)(i) uses the term 'carrying on the business of banking' whereas section 80P(4) uses the term 'co-operative bank'. Explanation to section 80P(4) defines co-operative bank as meaning assigned to them in Part V of the Banking Regulations Act. This takes me to section 3 of BRA which restricts its applicability to co-operative societies as under :- (a) a primary agricultural credit society; (b) a co-operative land mortage bank; ....
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....the Banking Regulations Act, 1949, it cannot be held to be cooperative bank. Ld. CIT(A) has referred to the provisions of section 56(ccv) of Banking Regulations Act, 1949 for concluding the assessee as 'primary cooperative bank'. In this regard, it is necessary to examine as to what is the primary object or principal business of assessee. From the forgoing discussion, it is clear that there cannot be any dispute that if the primary object or principal business is banking as contemplated under BRA then only the cooperative society will come within the ambit of primary cooperative bank. Now what is banking has been defined in section 5(b) of the Banking Regulations Act, 1949 and section 56, nowhere states that the context in which primary cooperative bank has been defined is in context different from that as contemplated u/s 5(b) of the Banking Regulations Act, 1949. Therefore, only those transactions of banking business come within the ambit of clause (ccv) of section 56 which meet the mandate of section 5(b) of the Banking Regulations Act, 1949. I find that Hon'ble Karnataka High Court in the case of Shri Laxmi Credit Souhard Sahakari Ltd. (supra) has upheld the claim of assessee u....
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