TaxTMI 
TaxTMI 
2015 (8) TMI 1592
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....Tax (Appeals) erred in allowing deduction to the assessee under sec. 80P(2)(a)(i) of the Income Tax Act, 1961. 3. The facts of the case are that the assessees filed return of income after claiming deduction under sec. 80P(2)(a)(i) of the Act. It was claimed that the society is entitled to deduction under sec. 80P(2)(a)(i) as it was a Cooperative Society carrying on the business of banking or providing credit facilities to its members. However, the claim of the assessee for deduction under sec. 80P(2)(a)(i) was rejected by the Assessing Officer in the order passed under sec. 143(3) of the Act on the ground that the assessee was a cooperative bank, and hence, not entitled to claim deduction by virtue of sec. 80P(4). 4. On appeal, Commissioner of Income Tax (Appeals) allowed the claim of the assessees by observing as under:- "6. I have carefully perused and considered the aforesaid submission made by the appellant and the contents of the Assessment Order passed by the Assessing Officer. I have also perused the case laws relied upon by the appellant and the Assessing Officer. The main plank of argument of the Assessing Officer has been that after careful analysis of Sect....
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....ank" 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. By virtue of introduction of clause(4) in sec.80P, the 'Co-operative banks' have been taken out of the purview of exemption granted under sec.80P whereas other entities/cooperative societies specified in other clauses of sec.80P continue to enjoy such exemptions. The Explanation to sec.80P provides that "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). 6.1.2 Following the provisions of aforesaid Explanation to sec.80P, the Assessing Officer, with a view to find out the definition of "co- operative bank" has taken recourse to the relevant provisions of The Banking Regulation Act, 1949. Sl. No. Category Clause/section of the Banking Regulation Act, 1949 Definition 1 2 3 4 1 Co- operative Bank Clause(cci)of section 5 Co-operative Bank means a State Co- operative Bank, a Central Co-operative Bank and a Primary co-operativ....
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....has also referred to the definition of 'Banking' as provided in sec.5(b) of the Banking Regulation Act,1949 which reads as under: "(b)"Banking" means the accepting for the purpose of lending or investment, of deposit of money from public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise." The A.O has come to the conclusion that the appellant co- operative society is doing banking business as 'providing credit facilities to members' is akin to banking business and since the membership is open to public, it is accepting deposits from public which can be withdrawn by any one of the specified means within the meaning of above mentioned definition of banking. 6.1.4. Similar issue is also involved in a number of cases pertaining to credit co-operative societies which are also in appeal and they have all contested the action of the AO is invoking the provisions of Sec. 80P(4) in their respective cases on the basis of various contentions discussed herein below. 6.2 The appellants on the other hand has challenged the interpretation of Sections 80P(2), 80P(4) and relevant provision of the Banking Regulation Act, 1949 as....
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.... is also proposed to insert a new sub-clause (viia) in clause (24) of the section 2 so as to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition of "income". This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years." The appellants have thus contended that it was clear that the intention of the Finance Minister was to tax 'co-operative banks' only. 6.2.3 The appellants have relied on the decision in the cases of (i) Karnataka High Court (Dharwad Bench )order in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ITA 5006/2013 dt 5th Feb 2014 wherein apart from the deciding on section 263 it has also held, on section 80P that " As the assessee is not a cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve bank of India to carry on business , it is not a Cooperative Bank. (ii) The Karnataka High Court decision in the case ....
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....urance Employees Cooperative Credit Society Ltd ITA No 273/2013 dt 27.6.2014 and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014 has also decided the issue in favour of the assessee. 8.1 Now a question which may be asked in the case of the appellant being a 'Souharda' is; whether, 'Souharda' is a 'co operative society' within the meaning of section 80P/2(19) of the l.T. Act.? Since the deduction u/s80P of the Income Tax Act, 1961 is available to the co-operative societies, it is imperative to go into the definition of "Co- operative society" which has been specifically defined in Section 2(19) of the Act. Section 2(19) reads as follows; "co-operative society" means a co-operative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co- operative societies; This definition has two parts: "co-operative society" means (1) a co-operative society (2) registered (a) under the Co-operative Societies Act, 1912 (2 of 1912), or (b) unde....
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....trar may conduct an inquiry or cause an inquiry to be conducted expeditiously into any specific matter touching the constitution, management, working or financial conditions of a Cooperative. g. Section 47(1) - Winding up of a Co-operative :- On an application made by not less than one-fifth of the members of a co-operative to wind up the affairs of the said cooperative, the board shall convene a general- meeting by issuing a notice to each member 8.1.2 Souhardas satisfy the second part of the definition also as they are registered under the Karnataka Souharda Sahakari Act,1997, an Act in force in the state of Karnataka for the registration of Co-operative societies in addition to the co-operative societies Act. 8.1.3 Further, in a number of decisions by the Panjim and Bangalore benches of the ITAT and by the Karnataka High Court, no distinction has been drawn between the Souhardas and the co-operative societies as far as the applicability of the provisions of section 80P of the Act are concerned. Some of such decisions are: (i) Karnataka High Court (Dharwad Bench )Order in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamith....
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....iness of lending money to its members which is covered under Section 80P{2)(a}(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society ........................................In the instant case, when the status of the assessee is a Co-operative society and is not a Co-operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act is correct. " 8.3 The fact that the appellant is a cooperative society registered under the Karnataka Co operative Societies Act,1959 engaged in providing credit facilities to its members has been clearly mentioned by the A.O in para 3 of his aforesaid assessment order. It is also not the case of the assessing officer that the assessee is registered with the RBI as a bank. In its aforesaid submissions dated 27/10/2014 the appellant has clearly stated with the help of necessary evidence and an affidavit dated 20/10/2014 to this effect that the appellant is a cooperative ....