Shri. Kalika Daivadnya Co-op. Credit Society ltd., Belgaum v. Income Tax Officer Ward-1 (2), Belgaum

ITA 396/PAN/2013 | 2010-2011
Pronouncement Date: 19-11-2014 | Result: Dismissed

Appeal Details

RSA Number 39624114 RSA 2013
Assessee PAN AAAAS4114J
Bench Panaji
Appeal Number ITA 396/PAN/2013
Duration Of Justice 11 month(s) 9 day(s)
Appellant Shri. Kalika Daivadnya Co-op. Credit Society ltd., Belgaum
Respondent Income Tax Officer Ward-1 (2), Belgaum
Appeal Type Income Tax Appeal
Pronouncement Date 19-11-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 19-11-2014
Date Of Final Hearing 12-11-2014
Next Hearing Date 12-11-2014
Assessment Year 2010-2011
Appeal Filed On 10-12-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI P.K. BANSAL HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER ITA NOS. 39 5 & 39 6/PNJ/201 3 : (ASST. YEARS :2009 - 10 & 2010 - 11) SHRI KALIKA DAIVADNYA CO - OPERATIVE CREDIT SOCIETY LTD. 1843/44 BAPAT GALLI BELGAUM . PAN :AAAA S4114J (APPELLANTS) VS. INCOME TAX OFFICER WARD 1( 1 ) BELGAUM. (RESPONDENTS) APPELLANT BY : SHRI BHARAT R. PORWAL C.A & SHRI CHETAN V. CHOUGULE C.A. RESPONDENT BY : SHRI RATNAKAR LD. DR. DATE OF HEARING : 1 2 / 11 /2014 DATE OF PRONOUNCEMENT : 19 / 11 /2014 O R D E R PER P.K. BANSAL BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF CIT(A) BELGAUM DTD. 07.10 .2013 BY TAKING THE FOLLOWING COMMON GROUNDS OF APPEAL : - 1. BECAUSE T HE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING THE DEDUCTION CLAIM ED U/S 80P(2)(A)(I) OF THE INCOME TAX ACT 1961. 2. BECAUSE THE FOLLOWING OBSERVATIONS OF THE LEARNED CIT(APPEALS) IN THE ORDER ARE PERVERSE ARBITRARY AND MISLEADING : - A) ALL THE ARGUMENTS RAISED BY THE APPELLANT HAVE ALREADY BEEN SUCCESSFULLY MET BY THE A.O IN HIS ORDER THE RELEVANT PORTION OF WHICH HAS BEEN REPRODUCED ABOVE. THE ONLY NEW POINT PERTAINS TO ACCEPTANCE OF DEPOSITS BY THE APPELLANT FROM THE PUBLIC WHICH HAS BEEN FURTHER CLARIFIED BY A.O VIDE HIS ABOVE MENTIONED REMAND REPORT (PAGE NO 27 AT THE BEGINNING OF PARA 9). B) IN THIS CONNECTION IT MAY BE MENTIONED HERE THAT THE RELEVAN T 2 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) PROVISIONS OF INCOME TAX ACT DO NOT MANDATE THE APPLICABI LITY OF THESE ACTS AS PREREQUISITES FOR A COOPERATIVE SOCIETY TO BE TREATED AS COOPERATIVE BANK. (PARA NO 9 OF PAGE NO 27) C)THEREFORE ALL THE THREE LIMBS OF THE DEFINITION OF BANKING ARE APPLICABLE TO THE APPELLANTS CASE. ON THE FACTS OF THE CASE IT IS ALSO SEEN THAT THE APPELLANT CARRIES ON THE BANKING BUSINESS AND FOR ALL PRACTICAL PURPOSES IT ACTS LIKE A CO - OPERATIVE BANK. (PAGE NO 27 OF PARA NO 9). D) )HENCE THE APPELLANT ASSESSEE IS A CO - OPERATIVE BANK WITHIN THE MEANING OF P ART V OF THE BANKING REGULATION ACT 1949. THEREFORE THE PROVISIONS OF SEC.80P(4) ARE APPLICABLE TO IT AND IT IS NOT ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT. (PARA NO 9.2 OF PAGE 29). 3. BECAUSE T HE LEARNED LOWER AUTHORITIES HAVE ERRED IN DENYING THE DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(I) OF INCOME TAX ACT 1961 BY ADJUDICATING THE ASSESSEE AS C OOPERATIVE BANK INSTEAD OF TRE ATING IT AS COOPERATIVE CREDIT S OCIETY. 2. BOTH THE PARTIES AGREED THAT BOTH THESE APPEALS BE DECIDED ON THE BASIS OF THE FACTS RELATING TO THE ASSESSMENT YEAR 2009 - 10 AS THE ISSUE INVOLVED IN BOTH THE YEARS IS THE SAME. THE BRIEF FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2009 - 10 ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIET Y REGISTERED UNDER THE KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT 1959 . THE ASSESSEE FILED RETURN DECLARING GROSS TOTAL INCOME OF RS.17 11 604/ - AND CLAIMED DEDUCTION U/S 80P(2)(A)(I) AND THEREFORE NET TAXABLE INCOME WAS SHOWN TO BE NIL. THE AO DID NOT ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(I) AND THE INCOME WAS ASSESSED AT RS.20 22 580/ - . THE AO WHILE DENYING THE DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(I) TOOK THE VIEW THAT THE ASSESSEE IS A PRIMARY CO - OPERATIVE BANK AND THEREFORE PROVISIONS OF SEC.80P(4) ARE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) DISMISSED THE APPEAL S OF THE ASSESSEE. 3 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 2 . 1 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE PROVISIONS OF SEC. 80P(4) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE MAIN CONTENTIONS OF THE ASSESSEE ARE THAT ASSESSEE IS NOT A CO - OPERATIVE BANK. THE ASSESSEE IS A CO - OPERATIVE SOCIETY DULY REGISTERED UNDER THE KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT 1959. (NOW REGISTERED UNDER THE K ARNATKA SOUHARD ACT 1997). THE PRIMARY OBJECT OF THE ASSESSEE IS TO RENDER THE IMPROVEMENT OF FINANCIAL ASSISTANCE TO THE MEMBERS OF THE CO - OPERATIVE AND LIMIT THE EXPENSES AND SAVINGS AND SUPPORT THE HELP IN BETWEEN. COLLECT THE AMOUNT FOR THE IMPROVEMENT OF THE FINANCE UNDER THE SCHEME AND COLLECT THE AMOUNT AS STATED IN THE SUB RULE. FOR THIS OUR ATTENTION WAS DRAWN TOWARDS THE BYE - LAWS OF THE ASSESSEE FROM (I) TO (X VI ). THE ASSESSEE IS A CREDIT SOCIETY. HE CONTENDED THAT THE WORD CREDIT IS OF OUTMOST I MPORTANT TO DECIDE THE STATUS OF THE ASSESSEE UNDER THE BANKING REGULATION ACT 1949. ACCORDING TO HIM THE ASSESSEE IS A CO - OPERATIVE CREDIT SOCIETY BUT WHEN WE QUESTION THAT SECTION 80P DOES NOT TALK OF CO - OPERATIVE CREDIT SOCIETY HE COULD NOT REPLY THER ETO BUT RELIED ON BANKING REGULATION ACT FORGETTING THAT THE SECTION 80P ONLY USES THE WORD CO - OPERATIVE SOCIETY ENGAGED IN - . THE ACTIVITIES OF THE ASSESSEE ARE LIMITED TO ITS MEMBERS. THE PAID UP CAPITAL OF THE ASSESSEE NO DOUBT IS MORE THAN RS. 1 LA CS. IT WAS CONTENDED THAT THE ISSUE IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD. IN TAX APPEAL NOS. 442 OF 2013 443 OF 2013 AND 863 OF 201 3. ATTENTION WAS ALSO DRAWN TOWARDS THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF VYAVASAYA SEVA SAHAKARA SANGHA VS. STATE OF KARNATAKA & ORS. FOR THE PROPOSITION OF LAW BY REFERRING TO PARA 12 THAT MERELY BECAUSE THE CO - OPERATIVE SOCIET Y IS REQUIRED TO ADVANCE LOAN TO ITS MEMBERS IT DOES NOT CEASE TO BE A CO - OPERATIVE SOCIETY GOVERNED BY THE CO - OPERATIVE SOCIETIES ACT NOR CAN THEY BE TREATED AS BANKING COMPANIES. THE ACTIVITIES CARRIED OUT BY THE SOCIETY CANNOT BE REGARDED TO BE BANKIN G ACTIVITIES AS CONTEMPLATED UNDER THE BANKING REGULATION ACT 1949. RELIANCE WAS ALSO 4 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) PLACED ON THE DECISION OF THE BANGALORE BENCH OF THIS TRIBUNAL IN ITA NO. 72/BANG/2013 IN THE CASE OF ITO VS. DIVYAJYOTHI CREDIT CO - OPERATIVE SOCIETY LTD. FOR THE A.Y 2 009 - 10 IN WHICH IT WAS HELD THAT THE PROVISIONS OF SEC. 80P(4) ARE APPLICABLE ONLY TO CREDIT CO - OPERATIVE BANKS AND NOT TO CREDIT CO - OPERATIVE SOCIETY. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE PANAJI BENCH IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012. RELIANCE WAS ALSO PLACED ON THE DECISION OF PANAJI BENCH IN ITA NO. 229 & 230/PNJ/2013 IN THE CASE OF TARARANI MAHILA CO - OPERATIVE CREDIT SOCIETY VS ITO. RELIANCE WAS ALSO P LACED IN ACIT VS PALHAWAS PRIMARY AGRICULTURE CO - OPERATIVE SOCIETY LTD 23 TAXMAN.COM 318 (DELHI) ITO VS JANKALYAN NAGRI SAHAKARI PAT SANSTHA LTD 24 TAXMAN.COM 127 (PUNE). RELIANCE WAS ALSO PLACED ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE O F CIT VS SRI BILURU GURUBASAVA PATTANA SAHAKARI SANGH NIYAMITHA DATED 5.2.2014 WHICH RELATES TO AN APPEAL FILED AGAINST THE ORDER PASSED U/S 263 AND THE QUESTION INVOLVED WAS WHETHER THE REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER U/S 263 WIT HOUT THE FOUNDATIONAL FACT OF THE ASSESSEE BEING CO - OPERATIVE BANK. 2.2 THE LD. DR ON THE OTHER HAND VEHEMENTLY CONTENDED THAT THE ASSESSEE IS A CO - OPERATIVE BANK IN VIEW OF THE DEFINITION OF THE CO - OPERATIVE BANK GIVEN UNDER EXPLANATION TO SEC. 80P(4) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING. SEC. 80P(4) PUTS AN EMBARGO W.E.F. 1.4.2007 THAT IF A CO - OPERATIVE SOCIETY IS CARRYING ON BANKING BUSINESS THE ASSESSEE WILL NOT BE ENTITLED FOR THE EXEMPTION. RELIANCE WAS PLACED ON THE DECISION OF HY DERABAD BENCH OF THE TRIBUNAL IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY VS. ADDL. CIT IN ITA NOS. 1003/HYD/2011 & 1004/HYD/2011 DT. 2.7.2012. 3 . WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE DECISIONS AND THE 5 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) ENTIRE MATERIAL AND CASE LAWS REFERRED TO BEFORE US. THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS ENTI TLED FOR DEDUCTION U/S 80P(2)(A)(I) AND WHETHER THE ASSESSEE IS HIT BY THE PROVISIONS OF SEC. 80P(4) WHICH WAS INTRODUCED IN THE STATUTE BY THE FINANCE ACT 2006 W.E.F. 1.4.2007. THE RELEVANT PROVISIONS OF BOTH THE SECTIONS ARE RE - PRODUCED FOR OUR READY R EFERENCE AS UNDER : - 80P. (1) WHERE IN THE CASE OF AN ASSESSEE BEING A CO - OPERATIVE SOCIETY THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB - SECTION (2) THERE SHALL BE DEDUCTED IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECT ION THE SUMS SPECIFIED IN SUB - SECTION (2) IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING NAMELY : (A) IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. 80P(4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO - OP ERATIVE 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 HA VE 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 TALUKA AND THE PRINCIPA L OBJECT OF WHICH IS TO PROVIDE FOR LONG - TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 4 . FROM THE PLAIN READING OF SEC. 80P(2)(A)(I) IT IS APPARENT THAT IF THE CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING OF BUSINESS OF BANKING OR PROVI DING CREDIT FACILITIES TO ITS MEMBERS THE CO - OPERATIVE SOCIETY IS ENTITLED FOR DEDUCTION ON WHOLE OF THE INCOME RELATING TO ANY ONE OR MORE OF SUCH BUSINESS. FROM THE READING OF SEC. 80P(4) IT IS APPARENT THAT THIS SECTION DENIES DEDUCTION TO A CO - OPERAT IVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE PROVISIONS OF SEC. 80P(4) WAS INTRODUCED IN THE STATUTE BY THE FINANCE ACT 2006 W.E.F. 1.4.2007. THE EXPLANATION TO THE SECTION DEFINES THE CO - OPERATIVE BANK AND PRIMARY 6 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) AGRICULTURAL CREDIT SOCIETY TO HAVE THE SAME MEANING AS ASSIGNED TO THEM IN PART - V OF THE BANKING REGULATION ACT 1949. IT IS NOT THE CASE OF EITHER OF THE PARTIES THAT THE ASSESSEE IS A PRIMARY CO - OPERATIVE AGRI CULTURAL AND RURAL DEVELOPMENT BANK. IT IS ALSO NOT THE CLAIM OF THE ASSESSEE THAT ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY. IF WE READ BOTH THE SECTIONS SEC. 80P(2)(A)(I) AND SEC. 80P(4) TOGETHER WE FIND THAT THE PROVISIONS OF SEC. 80P(4) MAN DATES THAT THE PROVISIONS OF SEC. 80P WILL NOT APPLY TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK BUT AS PER THE PROVISIONS OF SEC. 80P(2)(A)(I) A CO - OPERATIVE SO CIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS ENTITLED FOR DEDUCTION. AFTER THE INSERTION OF SEC. 80P(4) THE PROVISIONS OF SEC. 80P(2)(A)(I) WERE NOT AMENDED RATHER THE CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS CONTINUED TO BE ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). THIS PRE - SUPPOSES THAT EVERY CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING CANNOT BE REGARDED TO BE A CO - OPERATIVE BAN K. THE EMBARGO PUT U/S 80P(4) ARE APPLICABLE ONLY TO A CO - OPERATIVE BANK. IN OUR OPINION IT CANNOT BE SAID THAT A CO - OPERATIVE SOCIETY CANNOT CARRY ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS EVEN IF IT IS NOT A CO - OPERATIVE BANK. IF WE READ THE P ROVISIONS IN THE MANNER THAT EVERY CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING EVEN FOR ITS MEMBERS IS REGARDED TO BE A CO - OPERATIVE BANK THEN THE PROVISIONS OF SEC. 80P(2)(A)(I)WILL BECOME REDUNDANT. THEREFORE IN OUR OPINION BEFORE DECIDING THE ISSUE WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) IT IS ESSENTIAL TO DECIDE WHETHER THE ASSESSEE IS A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEV ELOPMENT BANK. IN CASE IT IS FOUND THAT THE ASSESSEE IS A CO - OPERATIVE BANK THE ASSESSEE WILL NOT BE ENTITLED FOR DEDUCTION AS STIPULATED U/S 80P(2)(A)(I) BUT IN CASE THE ASSESSEE IS NOT A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIET Y OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND 7 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) RURAL DEVELOPMENT BANK THE PROVISIONS OF SEC. 80P(2)(A)(I) WILL BE APPLICABLE TO THE ASSESSEE PROVIDED THE ASSESSEE IS ENGAGED IN CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. T HIS SECTION NOWHERE STATES CO - OPERATIVE CREDIT SOCIETY EXCEPT MENTIONED UNDER PROVISO 2 TO SECTION 80P WHICH IS RELEVANT FOR SUB - CLAUSE 6 OR 7. IT HAS NOTHING TO DO WITH SECTION 80P(2)(A)(I). 5 . IN OUR OPINION SEC. 80P(2)(A)(I) PROVIDES TWO TYPES OF ACTIVITIES IN WHICH THE CO - OPERATIVE SOCIETY MUST BE ENGAGED TO BE ELIGIBLE FOR DEDUCTION UNDER SUB - CLAUSE (I). THESE TWO ACTIVITIES ARE NOT ALTERNATE ONES BECAUSE THE SECTION ALLOWS DEDUCTION TO THE CO - OPERATIVE SOCIETY ON THE WHOLE OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. THIS PRE - SUPPOSES THAT ELIGIBLE CO - OPERATIVE SOCIETY CAN CARRY ON EITHER ONE OF THESE TWO BUSINESSES OR CAN CARRY BOTH THESE BUSINESSES FOR THE MEMBERS. IF THE ASSESSEE CO - OPERATIVE SOCIETY C ARRIES ON ONE OR BOTH OF THE ACTIVITIES IT WILL BE ELIGIBLE FOR DEDUCTION. THESE TWO ACTIVITIES ARE (A) CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR (B) CO - OPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACI LITIES TO ITS MEMBERS. BOTH THE ACTIVITIES CAN BE CARRIED ON BY THE CO - OPERATIVE SOCIETY FOR ITS MEMBERS. IF A CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING ON THESE ACTIVITIES/FACILITIES FOR THE PERSONS OTHER THAN ITS MEMBERS THE CO - OPERATIVE SOCIETY IN OUR OPINION WILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) ON THE INCOME WHICH IT DERIVES FROM CARRYING ON THE ACTIVITIES NOT RELATING TO ITS MEMBERS. THEREFORE WHERE A CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS AND TO THE PUBLIC OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR TO THE PUBLIC THE INCOME WHICH RELATES TO THE BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS WILL ONLY BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). THERE IS NO PROHIBITION U/S 80P NOT TO ALLOW DEDUCTION TO SUCH CO - OPERATIVE SOCIETIES IN RESPECT OF BUSINESS RELATING TO ITS MEMBERS. 8 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 6 . NOW THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS A CO - OPERATIVE BANK OR NOT. CO - OPERATIVE BANK IS DEFINED IN PART V OF THE BANKING REGULATIONS ACT 1949 AS UNDER : - CO - OPERATIVE BANK MEANS A STATE CO - OPERATIVE BANK A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK: 7 . FROM THE DEFINITION OF CO - OPERATIVE BANK IT IS APPARENT THAT CO - OPERATIVE BANK MEANS STATE CO - OPERATIVE BANK A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE IS A STATE CO - OPERATIVE BANK OR CENTRAL CO - OPERATIVE BANK. WE HAVE THEREFORE TO FIND WHETHER THE ASSESSEE IS A PRIMARY CO - OPERATIVE BANK. 8 . THE PRIMARY CO - OPERATIVE BANK IS DEFINED UNDER SECTION 5 CLAUSE (CCV) OF BANKING REGULATION ACT 1949 AS UNDER: - (CCV) PRIMARY CO - OPERATIVE BANK MEANS A CO - OPERATIVE SOCIETY OTHER THAN A PRIMARY AGRIC ULTURAL CREDIT SOCIETY - (1) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS TRANSACTION OF BANKING BUSINESS: (2) THE PAID - UP SHARE CAPITAL AND RESERVES OF WHICH ARE NOT LESS THAN ONE LAKH OF RUPEES: AND (3) THE BYE - LAWS OF WHICH DO NOT PERMIT ADMISS ION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER: PROVIDED THAT THIS SUB - CLAUSE SHALL NOT APPLY TO THE ADMISSION OF A CO - OPERATIVE BANK AS A MEMBER BY REASON OF SUCH CO - OPERATIVE BANK SUBSCRIBING TO THE SHARE CAPITAL OF SUCH CO - OPERATIVE SOCIETY OUT OF F UNDS PROVIDED BY THE STATE GOVERNMENT FOR THE PURPOSE. 9 . FROM THE AFORESAID DEFINITION IT IS APPARENT THAT IF THE CO - OPERATIVE SOCIETY COMPLIED WITH ALL THE THREE CONDITIONS; FIRSTLY THAT THE PRIMARY OBJECT OR PRINCIPLE BUSINESS TRANSACTED BY IT IS A BANKING BUSINESS SECONDLY THE PAID UP SHARE CAPITAL AND RESERVE OF WHICH ARE 1 LAKH OR MORE AND THIRDLY BY LAWS OF THE CO - OPERATIVE SOCIETY DO NOT PERMIT ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER IT WILL BE REGARDED TO BE PRIMARY CO - OPER ATIVE BANK. IF CO - OPERATIVE SOCIETY DOES NOT FULFIL L ANY OF THE CONDITIONS IT CANNOT BE REGARDED TO BE A PRIMARY CO - OPERATIVE BANK. THEREFORE IN THE CASE OF THE ASSESSEE WE HAVE 9 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) TO EXAMINE ON THE BASIS OF THE FACTS AND MATERIALS ON RECORD WHETHER THE A SSESSEE CO - OPERATIVE SOCIETY COMPLIES WITH ALL THE THREE CONDITIONS. IN CASE IT DOES NOT COMPLY WITH ALL THE THREE CONDITIONS IT CANNOT BE REGARDED TO BE A CO - OPERATIVE BANK AND THE PROVISIONS OF SEC. 80P(4) IN OUR OPINION WILL NOT BE APPLICABLE IN TH E CASE OF THE ASSESSEE. ONCE THE ASSESSEE WILL NOT FALL WITHIN THE PROVISIONS OF SEC. 80P(4) THE ASSESSEE IN OUR OPINION WILL BE ELIGIBLE TO GET DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF WHOLE OF THE INCOME WHICH THE ASSESSEE DERIVES FROM CARRYING ON T HE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 1 0 . WHETHER CONDITION NO. 1 IS APPLICABLE IN THE CASE OF THE ASSESSEE FOR THIS WE HAVE TO LOOK INTO THE BYE - LAWS OF THE ASSESSEE. THE OBJECTS OF THE ASSESSEE IN THIS CASE ARE ENUMERA TED AS UNDER : - I) T O RENDER THE IMPROVEMENT OF FINANCIAL ASSISTANCE TO THE MEMBERS OF THE CO - OPERATIVE AND LIMIT THE EXPENSES AND SAVINGS AND SUPPORT THE HELP IN BETWEEN. COLLECT THE AMOUNT FOR THE IMPROVEMENT OF THE FINANCE UNDER THE SCHEME AND COLLECT THE AMOUNT AS STATED IN THE SUB RULE. II) TO PROVIDE THE LOAN TO THE MEMBERS OF THE CO - OPERATIVE FOR BUSINESS . III) TO PROVIDE THE FINANCE FOR THE HIGHER EDUCATION FOR THE CHILDRENS OF THE MEMBERS AND ALSO FOR BASED ON AGRICULTURAL INDUSTRY. IV) TO CONDUCT THE PROGRAMMES HELPFUL IN THE PROGRESS OF THE EDUCATION AND SOCIAL OF THE MEMBERS AND ALSO SUPPORT TO THEIR WELFARE . V) TO PERFORM THE SCHEME FOR THE DEVELOPMENT OF DISTRESS PEOPLE IN THE SOCIETY. VI) TO CONDUCT THE PROGRAMMES FOR THE IMPROVEMENT OF SPECI AL FINANCE TO THE SCHEDULE CASTE AND SCHEDULE TRIBES PEOPLE AND TO THE LADIES MEMBERS . VII) TO PROVIDE THE LOAN FOR PURCHASE OF MOTOR MACHINES MENTIONED UNDER THE MOTOR VEHICLE ACT BY INSTALLMENT OR ON HYPOTHECATION TO THE MEMBERS . VIII) TO GIVE THE LOAN ON GOLD - SILVER ORNAMENTS TO THE MEMBERS OF THE CO - OPERATIVE . IX) TO SANCTION THE LOAN ON THE INDUSTRY AND COMMERCIAL PRODUCTIVE MATERIAL WHICH WAS GIVEN SECURITY TO THE CO - OPERATIVE. X) TO HELP THE FINANCE AND TECHNICAL ESTABLISHMENT FOR OF SELF EMPLOY INDUSTRY. XI) TO ACCEPT THE DEPOSITS FROM RELIGIOUS INSTITUTIONS VISHWANATH BOARD AND ALSO FROM PUBLIC SOCIETY INSTITUTIONS. XII) TO FULFILLMENT OF THE OBJECT IN THE CO - OPERATIVE TO FRAME THE UNION UNDER RULES OF THIS ACT AND ESTABLISHMENT OF SELF INDUST RY AND ESTABLISHMENT OF SELF INDUSTRY AND ESTABLISHMENT OF PARTNERSHIP INSTITUTION AS A ADDITIONAL ORIGINATION. 10 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) XIII) TO DO THE ALL TYPES OF NECESSARY FOR THE IMPROVEMENT OF THE BUSINESS OF THE CO - OPERATIVE AND STRONG AND THE EXPAND THE SERVICE BY USING THE OTHER MODERN TECHNIQUE OF ALL INTERNAL ACTIVITIES OF THE CO - OPERATIVE AND SUPPORT THE CO - OPERATIVE EDUCATION. XIV) INVOLVING THE OTHER NECESSARY ACTIVITIES FOR THE ACHIEVEMENT OF THE OBJECT MENTIONED IN THIS SUB - RULE. 1 1 . ON THE BASIS OF THESE OBJECTS WHETHER IT CAN BE SAID THAT THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF THE ASSESSEE IS TRANSACTION OF BANKING BUSINESS? BANKING BUSINESS HAS BEEN DEFINED U/S 5(B) OF THE BANKING REGULATION ACT IN THE FOLLOWING MANNER : - ' BANKING' MEANS THE ACCEP TING FOR THE PURPOSE OF LENDING OR INVESTMENT OF DEPOSITS OF MONEY FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWABLE BY CHEQUE DRAFT ORDER OR OTHERWISE . FROM THE SAID DEFINITION IT IS CLEAR THAT BANKING MEANS ACCEPTING DEPOSIT OF MO NEY FROM THE PUBLIC WHICH IS REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWAL OF THESE DEPOSITS BY CHEQUE DRAFT ORDER OR OTHERWISE AND THESE DEPOSITS ARE ACCEPTED FOR THE PURPOSE OF LENDING OR INVESTMENT. THESE DEPOSITS MUST BE ACCEPTED FROM THE PUBLIC NOT ONLY FROM THE MEMBERS. THESE DEPOSITS MUST BE REPAYABLE ON DEMAND OR OTHERWISE AND COULD BE WITHDRAWN BY THE DEPOSITOR BY CHEQUE DRAFT OR OTHERWISE. WE NOTED THAT THE ASSESSEE HAS CATEGORICALLY ACCEPTED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE WAS ACCEPTING DEPOSITS OF MONEY FROM THE GENERAL PUBLIC WHO ARE NON - MEMBERS. THIS FACT IS CLEAR AS PER THE REMAND REPORT OF A.O DATED 18.03.2013 . 1 2 . THE DEPOSITS SO ACCEPTED ARE USED BY THE ASSESSEE CO - OPERATIVE SOCIETY FOR LENDING OR INVESTMENT. THIS FACT HAS NOT BEEN DENIED BY THE ASSESSEE OR BY HIS COUNSEL IN THE SUBMISSION MADE BEFORE US. EVEN OUT OF THE DEPOSITS SO RECEIVED THE LOANS HAVE BEEN GIVEN TO THE MEMBERS OF THE SOCIETY IN ACCORDANCE WITH THE OBJECTS AS ENUMERATED ABOVE. THUS IN OUR OPI NION CONDITION NO.1 DOES STAND SATISFIED AND IT CAN BE SAID THAT THE ASSESSEE SOCIETY WAS CARRYING ON BANKING BUSINESS. 11 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 1 3 . THE AUTHORISED REPRESENTATIVE TOOK THE PLEA THAT THE ASSESSEE HAS NOT OBTAINED BANKING LICENCE. IN OUR OPINION IT IS NOT NECESSARY THAT THE CO - OPERATIVE SOCIETY SHOULD HAVE A BANKING LICENCE AS PER THE DEFINITION UNDER THE INCOME TAX ACT FOR CARRYING ON BANKING BUSINESS. IF LICENCE IS NOT OBTAINED IT MAY BE AN ILLEGAL BANKING BUSINESS UNDER THE OTHER STATUTE. WHAT WE HAVE TO SEE WHETHER THE NATURE OF THE BUSINESS CARRYING ON BY THE ASSESSEE IS A BANKING BUSINESS OR NOT. THE INCOME TAX IN OUR OPINION IS NOT CONCERNED WHETHER THE BANKING BUSINESS CARRIED ON BY THE ASSESSEE IS LEGAL OR ILLEGAL. THE INCOME HAS TO BE ASSESSED U/S 14 OF THE INCOME TAX ACT UNDER THE SAME HEAD EVEN IF THE NATURE OF THE BUSINESS IS ILLEGAL. IF WE LOOK INTO THE BYE - LAWS WHICH CONSISTS OF FUND OF THE SOCIETY WE NOTED THAT THE TYPES OF THE DEPOSITS WHICH THE ASSESSEE HAS ACCEPTED AS PER BYE - LAWS ARE THE SAME AS ARE BEING ACCEPTED DURING THE COURSE OF THE CARRYING OUT THE BANKING ACTIVITIES. 1 4 . SO FAR AS THE SECOND CONDITION IS CONCERNED THERE IS NO DISPUTE THAT THE PAID UP SHARE CAPITAL AND RESERVES IN THE CASE OF THE ASSESSEE IS MORE THAN RS. 1 LAC . THEREFORE THE ASSESSEE SATISFIES THE SECOND CONDITION. 1 5 . SO FAR AS THE THIRD CONDITION IS CONCERNED WE NOTED THAT SEC. 16 OF THE KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT 1959 PERMITS ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER. T HE PROVISIONS OF SEC. 16 ARE LAID DOWN AS UNDER : 16. PERSONS WHO MAY BECOME MEMBERS - [(1) SUBJECT TO THE PROVISIONS OF SECTION 17 NO PERSON SHALL BE ADMITTED AS A MEMBER OF A CO - OPERATIVE SOCIETY EXCEPT THE FOLLOWING NAMELY: -- [(A) AN INDIVIDUAL WHO N EEDS THE SERVICES OF SUCH CO - OPERATIVE SOCIETY [AND IS RESIDING IN THE AREA OF THE OPERATION OF THE SOCIETY] AND IS COMPETENT TO ENTER INTO CONTRACT UNDER THE CONTRACT ACT 1872 (CENTRAL ACT IX OF 1872);] [(A - 1) A DEPOSITOR;] (B) ANY OTHER CO - OPERATIVE SOC IETY; (C) THE STATE GOVERNMENT OR THE CENTRAL GOVERNMENT; 12 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) (D) THE LIFE INSURANCE CORPORATION OF INDIA STATE WAREHOUSING CORPORATION AND SUCH OTHER INSTITUTIONS AS MAY BE APPROVED BY THE STATE GOVERNMENT; (E) A FIRM A COMPANY OR ANY OTHER BODY CORPORATE CONSTITUTED UNDER ANY LAW FOR THE TIME BEING IN FORCE INCLUDING A SOCIETY REGISTERED UNDER THE KARNATAKA SOCIETIES REGISTRATION ACT 1960 (KARNATAKA ACT 17 OF 1960); (F) A MARKET COMMITTEE ESTABLISHED UNDER THE KARNATAKA AGRICULTURAL PRODUCE MARKETING (REG ULATION) ACT 1966 (KARNATAKA ACT 27 OF 1966); (G) A LOCAL AUTHORITY. EXPLANATION. - FOR THE PURPOSE OF THIS CLAUSE LOCAL AUTHORITY MEANS A MUNICIPAL CORPORATION MUNICIPAL COUNCIL TOWN PANCHAYAT ZILLA PANCHAYAT TALUK PANCHAYAT OR GRAMA PANCHAYAT CONSTI TUTED UNDER ANY LAW FOR THE TIME BEING IN FORCE] (2) NO CO - OPERATIVE SOCIETY SHALL WITHOUT SUFFICIENT CAUSE REFUSE ADMISSION TO MEMBERSHIP TO ANY PERSON DULY QUALIFIED THEREFORE UNDER THE PROVISIONS OF THIS [ACT RULES AND BYE - LAWS] THE AFORESAID PROVI SION OF SEC.16 MANDATES ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER OF THE CO - OPERATIVE SOCIETY. THE WORD USED IN SEC. 16(1) IS SHALL. THIS FACT IS CLARIFIED FURTHER BY SUB - SECTION (2) AS RE - PRODUCED HEREINABOVE THAT NO CO - OPERATIVE SOCIETY SHALL REFUSE ADMISSION TO THE MEMBERSHIP WITHOUT SUFFICIENT REASON TO ANY PERSON WHO IS QUALIFIED TO BECOME MEMBER UNDER THE PROVISIONS OF THIS ACT RULES AND BYE - LAWS. THIS CLEARLY PROVES THAT IN CASE THE RULES AND BYE - LAWS OF THE OTHER CO - OPERATIVE S OCIETY PROVIDES OTHERWISE THE CO - OPERATIVE SOCIETY MAY NOT BE ADMITTED AS A MEMBER OF THE CO - OPERATIVE SOCIETY. THE PERSON AS PER SUB - SECTION (2) MUST BE QUALIFIED FOR BECOMING MEMBER NOT ONLY U/S 16(1) BUT ALSO AS PER THE RULES AND BYE - LAWS OF THE CO - OPERATIVE SOCIETY. WE CANNOT READ SUB - SECTION (2) IN THE MANNER THAT THE RULES AND BYE - LAWS CANNOT PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER OF THE CO - OPERATIVE SOCIETY. HAD THAT BEEN THE INTENTION OF THE LEGISLATURE THEY WOULD HAVE NOT USED THE WORDS THIS ACT RULES AND BYE - LAWS IN SUB - SECTION (2). 1 6 . WE HAVE GONE THROUGH THE BYE - LAWS WHICH CONTAINS THE MEMBERSHIP OF BYE - LAWS NO.6 . IT STATES AS UNDER : - 6. ELIGIBIL E FOR MEMBERSHIP : THE PERSONS ARE ELIGIB L E TO BE COME THE MEMBERSHIP TO THE CO - OPERATIVE MENTIONED BELOW. 13 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) I. AS PER INDIAN CONTRACT ACT 1872 U/S.11 HE IS ELIGIBLE TO DO THE AGREEMENT AND HE MUST BE PERMANENT RESIDENT OF WITHIN THE JURISDICTION OF THE CO - OPERATIVE AND READY TO SERVE THE CO - OPERATI VE AND MUST ACCEPT THE RESPONSIBILITY OF THE MEMBERSHIP. II. PARTNERSHIP INSTITUTION OR SOCIETY REGISTERED UN DER THE KARNATAKA SOCIETY REGISTRATION ACT 1960 (RULE 17 OF THE KARNATAKA 1960). III. THE PERSON DESCRIBED AS PER SUB - REGISTRAR RULE 4(12) AND SELF SEVA GROUP. FROM CLAUSE 6 IT IS APPARENT THAT THE BYE - LAWS OF SOCIETY DOES PERMIT THE ADMISSION OF ANY OTHER SOCIETY AS MEMBER BUT NOT COOPERATIVE SOCIETY. THE CO - OPERATIVE SOCIETY IS DIFFERENT FROM THE SOCIETY. THEY ARE DIFFERENT LEGISLATURE FOR REGISTR ATION OF CO - OPERATIVE SOCIETY AND SOCIETY. THE CO - OPERATIVE SOCIETY IS DEFINED U/S 2(19) OF THE INCOME TAX ACT TO MEAN A CO - OPERATIVE SOCIETY REGISTERED UNDER THE CO - OPERATIVE SOCIETIES ACT 1912 OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE IN ANY ST ATE FOR THE REGISTRATION OF CO - OPERATIVE SOCIETY. IN KARNATAKA CO - OPERATIVE SOCIETY IS REGISTERED UNDER THE KARNATAKA CO - OPERATIVE SOCIETIES ACT 1959 WHILE SOCIETY IS REGISTERED UNDER THE KARNATAKA SOCIETIES ACT 1960. THUS THE THIRD CONDITION FOR BECOMI NG PRIMARY CO - OPERATIVE BANK IS ALSO COMPLIED WITH. SINCE THE ASSESSEE SOCIETY DOES COMPLY WITH ALL THE THREE CONDITIONS THEREFORE IN OUR OPINION THE ASSESSEE SOCIETY DOES BECOME A PRIMARY CO - OPERATIVE BANK AND IN VIEW OF EXPLANATION (A) OF SECTION 80P(4 ) IT HAS TO BE REGARDED AS A CO - OPERATIVE BANK AND IS HIT BY SECTION 80P(4). 17 . WE HAVE GONE THROUGH THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF THE CITIZEN COOPERATIVE SOCIETY VS. ADDL. CIT ( SUPRA ). WE NOTED THAT THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US. IN THIS DECISION UNDER PARA 23 THE TRIBUNAL HAS GIVEN A FINDING THAT THE ASSESSEE IS CARRYING ON BANKING BUSINESS AND FOR ALL PRACTICAL PURPOSES IT ACTS LIKE A CO - OPERATIVE BANK. THE SOCIETY IS GOVE RNED BY THE BANKING REGULATIONS ACT. THEREFORE THE SOCIETY BEING A CO - OPERATIVE BANK PROVIDING BANKING FACILITIES TO MEMBERS IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80P(2)(A)(I) AFTER THE INTRODUCTION OF SUB - SECTION (4) TO SECTION 80P. IN VIEW OF THIS FIND ING THE ASSESSEE WAS DENIED DEDUCTION U/S 80P(2)(A)(I). WE HAVE ALSO GONE THROUGH THE 14 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. DIVYAJYOTHI CREDIT CO - OPERATIVE SOCIETY LTD. ( SUPRA ) IN ITA NO. 72/BANG/2013. IN THIS CASE WE N OTED THAT THE HON'BLE TRIBUNAL CONFIRMED THE ORDER OF CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT CIRCLE 3(1) BANGALORE VS. M/S. BANGALORE COMMERCIAL TRANSPORT CREDIT CO - OPERATIVE SOCIETY LTD. IN ITA NO. 1069/BANG/2010 HOLDING THAT SEC. 80P(2)(A)(I) IS APPLICABLE ONLY TO CREDIT CO - OPERATIVE SOCIETY A AND NOT TO CO - OPERATIVE BANK. WITH DUE REGARDS TO THE BENCH WE ARE UNABLE TO FIND ANY TERM CREDIT CO - OPERATIVE SOCIETY U/S 80P(2)(A)(I) OR U/S 80P(4) THEREFORE THIS DECISION CANNOT ASSIST US. WE NOTED THAT THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD. IN TAX APPEALS NO. 442 OF 2013 443 OF 2013 AND 863 OF 2013 ( SUPRA ) VIDE ORDER DT. 15.1.2014 TOOK THE VIEW THAT SEC. 80P(4) WILL NOT APPLY TO A SOCIETY WHICH IS NOT A CO - OPERATIVE BANK. IN THE CASE OF VYAVASAYA SEVA SAHAKARA SANGHA VS. STATE OF KARNATAKA & ORS. ( SUPRA) WE NOTED THAT THE ISSUE BEFORE THE HON'BLE HIGH COURT IN THE WRIT PETITION FILED BY THE PETITIONER RELATED TO THE LEGISLATIVE COMPETENCE OF THE STATE LEGISLATURE FOR ISSUING A CIRCULAR. THE ISSUE DOES NOT RELATE TO THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I). WHILE DEALING WITH THIS ISSUE THE HON'BLE HIGH COURT UNDER PARA 12 OBSERVED AS UNDER : - 12. IT IS NOT POSSIBL E TO ACCEPT THIS CONTENTION. THE PETITIONERS ARE NOT THE BANKING INSTITUTIONS COMING UNDER THE PURVIEW OF THE BANKING REGULATION ACT. THEY ARE THE CO - OPERATIVE SOCIETIES REGISTERED UNDER THE ACT AND AS SUCH THEY ARE GOVERNED BY THE PROVISIONS OF THE ACT PASSED BY THE STATE LEGISLATURE. CONSEQUENTLY THE STATE GOVERNMENT HAS CONTROL OVER THEM TO THE EXTENT THE ACT PERMITS. MAJOR ACTIVITIES OF THE PETITIONERS ARE TO FINANCE ITS MEMBERS. FOR THE PURPOSE OF FINANCING ITS MEMBERS THEY BORROW MONEY FROM TH E FINANCING AGENCIES AND REPAY THE SAME. MERELY BECAUSE THE PETITIONERS - THE CO - OPERATIVE SOCIETIES IN QUESTION - ARE REQUIRED TO ADVANCE LOANS TO THEIR MEMBERS THEY DO NOT CEASE TO BE CO - OPERATIVE SOCIETIES GOVERNED BY THE ACT NOR CAN THEY BE TREATED AS BA NKING COMPANIES. IT IS ALSO NOT POSSIBLE TO HOLD THAT THESE ACTIVITIES OF THE PETITIONERS AMOUNT TO BANKING AS CONTEMPLATED UNDER THE BANKING REGULATION ACT 1949 INASMUCH AS THESE CO - OPERATIVE SOCIETIES ARE NOT ESTABLISHED FOR THE PURPOSE OF DOING BA NKING AS DEFINED IN SECTION 5(B) OF THE BANKING REGULATION ACT 1949. 15 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) THIS DECISION IN OUR OPINION IS NOT APPLICABLE TO THE CASE BEFORE US BECAUSE THE PROVISIONS OF SEC. 80P(2)(A)(I) AS WE HAVE ALREADY HELD IN THE PRECEDING PARAGRAPHS ARE APPLICABLE TO A CO - OPERATIVE SOCIETY WHICH IS ENGAGED IN CARRYING ON BANKING BUSINESS FACILITIES TO ITS MEMBERS IF IT IS NOT A CO - OPERATIVE BANK. WE HAVE ALSO GONE THROUGH THE DECISION OF THIS BENCH IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARD A SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012 ( SUPRA) FOR WHICH THE UNDERSIGNED IS THE AUTHOR. WHILE DISCUSSING THIS ISSUE AFTER ANALYSING THE AIMS AND OBJECTS OF THE CO - OPERATIVE SOCIETY UNDER PARA 12 OF ITS ORDER THIS TRIBUNAL HAS HELD AS UNDER : - 12. FROM THE AFORESAID OBJECTS IT IS APPARENT THAT NONE OF THE AIMS AND OBJECTS ALLOWS THE ASSESSEE COOPERATIVE SOCIETY TO ACCEPT DEPOSITS OF MONEY FROM PUBLIC FOR THE PURPOSE OF LENDING OR INVESTMENT. IN OUR OPINION UNTIL AND UNLESS THAT COND ITION IS SATISFIED IT CANNOT BE SAID THAT THE PRIME OBJECT OR PRINCIPAL BUSINESS OF THE ASSESSEE IS BANKING BUSINESS. THEREFORE THE ASSESSEE WILL NOT COMPLY WITH THE FIRST CONDITION AS LAID DOWN IN THE DEFINITION AS GIVEN U/S. 5(CCV) OF THE BANKING REGUL ATION ACT 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE ASSESSEE THEREFORE CANNOT BE REGARDED TO BE PRIMARY COOPERATIVE BANK AND IN CONSEQUENCE THEREOF IT CANNOT BE A CO - OPERATIVE BANK AS DEFINED UNDER PART V OF THE BANKING REGULATION ACT 1949. ACC ORDINGLY IN OUR OPINION THE PROVISIONS OF SECTION 80P (4) READ WITH EXPLANATION THERE UNDER WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE THEREFORE IN OUR OPINION WILL BE ENTITLED FOR THE DEDUCTION U/S 80P(2)(A)(I). WE ACCORDINGLY CON FIRM THE ORDER OF CIT(A) ALLOWING DEDUCTION TO THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE DECISION OF ACIT VS PALHAWAS PRIMARY AGRICULTURE CO - OPERATIVE SOCIETY LTD 23 TAXMAN.COM 318 (DELHI). SECTION 80P(4) CLEARLY EXCLUDES PRIMARY AGRICULTURE CREDIT SOCIETY FROM ITS DOMAIN. THEREFORE THIS DECISION WILL NOT ASSIST THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE DECISION OF PUNE BENCH IN THE CASE OF ITO VS JANKALYAN NAGRI SAHAKARI PAD SANSTHA LTD 24 TAXMAN.COM 127 PUNE. THIS WE HAVE ALREADY STATED THAT SECTION 80P(2)(A)(I) NOWHERE TALKS OF CO - OPERATIVE CREDIT SOCIETY AND THEREFORE THE DISTINCTION MADE UNDER THE BANKING REGULATION ACT CANNOT BE IMPORTED U/S 80P(2)(A)(I). THIS DECISION IN OUR OPINION WILL NOT ASSIST THE ASSESSEE. WE HAVE 16 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) ALSO GONE THROUGH THE DECISION OF TARARANI MAHILA CO - OPERATIVE CREDIT SOCIETY LTD TO WHICH THE UNDERSIGNED IS THE AUTHOR SIMILAR FINDING AS HAS BEEN GIVEN IN THIS ARE GIVEN IN THAT CASE ALSO. THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS SRI BILURU GURUBASAVA P ATTANA SAHAKARI SANGH NIYAMITHA DATED 5.2.2014 RELATES TO AN APPEAL FILED AGAINST THE ORDER PASSED U/S 263 AND THE QUESTION INVOLVED WAS WHETHER THE REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER U/S 263 WITHOUT THE FOUNDATIONAL FACT OF THE ASSE SSEE BEING CO - OPERATIVE BANK. THEREFORE THIS DECISION IS NOT APPLICABLE. 1 8 . WE THEREFORE IN VIEW OF OUR AFORESAID DISCUSSION HOLD THAT THE ASSESSEE HAS TO BE REGARDED TO BE A PRIMARY CO - OPERATIVE BANK AS ALL THE THREE BASIC CONDITIONS ARE COMPLIED WI TH THEREFORE IT IS A PRIMARY CO - OPERATIVE BANK AND THE PROVISIONS OF SEC. 80P(4) ARE APPLICABLE IN THE CASE OF THE ASSESSEE AND ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). WE THEREFORE CONFIRM THE ORDER S OF THE CIT(A) NOT ALLOWING DEDUCTI ON U/S 80P(2)(A)(I) TO THE ASSESSE E FOR BOTH THE YEARS . 19 . IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED . 2 0 . ORDER PRO NO UNCED IN THE OPEN COURT ON 19 . 11 .2014. SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 19 . 11 .2014 *A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED 17 ITA NOS. 395 & 396 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT PANAJI GOA