AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 561
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....to be maintained. 2. Because the honorable C.I.T. (Appeals) has erroneously upheld disallowance of Rs. 37,28,310/- made by the Assessing Officer u/s 80P of the Income Tax Act, 1961. 3. Because in preceding year assessment of the appellant has been completed u/s 143(3) of Income Tax Act, 1961 and deduction claimed u/s 80P of the Income Tax Act, 1961 has been allowed. 4. Because deduction claimed u/s 80P is liable to be allowed in the case of the appellant society. 5. Because the main object of Co-operative Credit Societies is to encourage habit of thrift among members rather than provide loans to them at reasonable rate of interest. To facilitate the organization, administration and functionary of Cooperative societies with the objects not confined to one state serving the interest of members of such societies from more than one state, the multi unit Co-operative societies act was enacted. No tax is payable on the profits and gains of business carried by Railwaymen's Co-operative credit Societies/Banks as they engaged in providing credit facilities to their members. 6. Because the assessment was completed for A.Y. 2009-10 and notice of demand u/s 156 of Income Tax Act, 196....
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....ho are railway employees and therefore, sub section 4 of section 80P is not applicable in the case of the assessee. The AO did not accept the contention of the assessee and held that the assessee is a Cooperative Bank as per Banking Regulation Act, 1949. The assessee was granted banking license by the Reserve Bank of India vide license dated 20.11.2007 therefore, deduction under section 80P is not available to the assessee as per the provisions of section 80P(4) of the Act. The AO accordingly disallowed the claim of deduction under section 80P to the assessee. The assessee challenged the action of the AO before the CIT(A) but could not succeeded as the CIT(A) has upheld the order of the AO denying the claim of deduction under section 80P. 3. Before the Tribunal, the learned AR of the assessee has submitted that the assessee is a Cooperative Credit Society carrying on Finance / banking business i.e. financing only their members who are employees of Indian Railway and collecting deposits. The assessee filed its return of income under section 139 of the Act declaring nil income after claiming deduction under section 80P of the Income Tax Act. The main object of the assessee Cooperati....
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....society to seek license from Reserve Bank of India to form and operate as cooperative bank. The assessee being a cooperative society was neither authorized nor had undertaken any of the banking business as are carried out by the primary cooperative bank but had only provided financial societies / credits to its members. He has thus contended that all cooperative societies other than thus coming under the control of Reserve Bank of India are eligible for deduction under section 80P. The cooperative society conducting banking activity is not a cooperative bank licensed by the Reserve Bank of India and therefore eligible for deduction under section 80P(2) of the Income Tax Act. In support of his contention, he has relied upon the decision of Delhi Benches of the Tribunal in the case of M/s The Veer Co-operative Group Housing Society Ltd. vs. Income Tax Officer in ITA.Nos.2787 & 2788/Del/2018. He has also relied upon the decision of Hon'ble Allahabad High Court in the case of CIT v. M/s Muzaffar Nagar Kshetriya Gramin Bank Ltd., in ITA No. 86 of 2007. The issue involved in the present appeal is also covered by the decisions of Bangalore Benches of the Tribunal in the case of M/s Samrud....
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....elf-help and mutual aid in accordance with Co-operative principles. B. OBJECTS: (1) To prevent members from falling into permanent indebtness and to assist them in the time of difficulty. (2) To raise funds by means of issue of shares, borrowing money, accepting money on deposits at interest or otherwise. (3) To lend money to its members at interest with or without security. (4) To invest the money or funds of the Bank upon such securities and in such manners as may be from time to time determined by the Board in accordance with the Act, Rules and Bye-laws of the Bank. (5) To encourage thrift and self-help and Co-operation among the shareholders. (6) To raise the moral and economic standard of the shareholders. (7) Generally to do all or such other things as are incidental and conducive to the attainment of the above objects." 7. The assessee filed its return of income for the assessment year 2009-10 on 30th September, 2009 declaring total income at nil after claiming deduction /exemption under section 80P(2)(a)(i) of the Income Tax Act at Rs. 37,28,310/-. The Assessing Officer issued notice under section 148 to initiate the proceedings under section 147 of the Inc....
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....inition of cooperative bank and primary agricultural credit society is as per the meaning assigned to them in part V of the banking regulation Act 1949. Whereas the primary cooperative agricultural and rural development bank has defined as a society whose areas of operation is confined to a taluk and the principal object is to provide long term credit for agricultural and rural development activity. The appellant society is neither a primary agricultural credit society nor a primary cooperative agricultural and rural development bank. The appellant society is listed as non-scheduled urban cooperative bank in the list as per the Reserve Bank of India website. Further as clarified in the CBDT circular no. 6/2010 dated 20.09.2010 section 80P does not apply to any cooperative bank other than those specifically mentioned in the sub section of the section 80P. In view of the above, I find that the appellant is not eligible for exemption for u/s 80P(2)(a)(i) of the Act. Accordingly, addition made by the Assessing Officer is upheld and the ground of appeal is dismissed." 8. The CIT(A) has held that the assessee is not eligible for exemption under section 80P(2)(a)(i) and therefore, the ....
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....t of profits and gains of business attributable to any one or more of such activities: Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:- (1) the individuals74 who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government;] (b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to- (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the publ....
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....tion 80-I,] [section 80-IA,] [section 80J and section 80JJ]].] (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.]" 10. A Cooperative Society qualifies for exemption under section 80P(1) subject to the income from the activity or business activity as provided under sub section (2) of section 80P. The eligibility of the society to claim the exemption under section 80P does not mean that if entire income is exempted as the income from the business activities as provided under various Clause of sub section (2) are only exempted from tax. Therefore, if....
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....ty" means a co- operative society, the primary object of which is to provide financial accommodation to its members and includes a cooperative land mortgage bank; (cciia) "co-operative society" means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi- State co-operative societies, or any other Central or State law relating to cooperative societies for the time being in force; (cciii) "director", in relation to a co-operative society, includes a member of any committee or body for the time being vested with the management of the affairs of that society; (cciiia) "multi-State co-operative bank" means a multi-State co-operative society which is a primary co-operative bank; (cciiib) "multi-State co-operative society" means a multi-State co-operative society registered as such under any Central Act for the time being in force relating to the multi State co-operative societies but does not include a national co-operative society and a federal co-operative; (cciv) "primary agricultural credit society" means a co-operative society,- (1) the primary object or principal business of which is to provide fin....
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....ary Cooperative Bank. The Cooperative Banks are now excluded from the scope of exemption under section 80P by considering them as a lending institutions and they are treated distinctly from primary Agriculture Credit Societies and primary Agriculture and Rural Development Banks. Therefore, the Legislature intended to tax their profits. The CBDT Circular dated 28.12.2006 containing explanatory note on the insertion of sub section 4 vide Finance Act, 2006 reads as under:- "Withdrawal of tax benefits available to certain co-operative banks ** ** ** 22.2 The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new sub-section (4) has been inserted to provide that the provisions of the said 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. The expressions "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" have also been defined to lend clarity to them. 11.1 It was explained that Coope....
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....s as provided under Banking Regulation Act, 1949 for the primary Cooperative Bank are also satisfied in case of the assessee and hence, once the assessee falls in the definition of Cooperative Bank, the benefit of deduction under section 80P is not available to the assessee. The decisions relied upon by the assessee are not on the point of Cooperative Bank not eligible for deduction under section 80P but the issue and dispute in those cases were either regarding exemption of interest income under section 80P(2)(a)(i) or the dispute of eligibility of the Cooperative Society for deduction under section 80P but prior to the insertion of sub section (4) by Finance Act, 2006 w.e.f. assessment year 2007-08. Therefore, those decisions would not help the case of the assessee. Section 80P is a benevolent provision enacted by the Parliament to increase and promote the growth of cooperative sector in the country. Once a cooperative society is entitled to avail the deduction under section 80P, the amount of profit and gain of business that are attributable to anyone or more activities mentioned in sub section (2) of section 80P shall not be part of the total income of the society. Sub Section ....