The Kadamba Employees Co-op. Credit Society Ltd., Panaji V. Income Tax Officer, Ward-1 (2), Panaji., Panaji

CO 40/PAN/2014

• Counselvise Citation: [2014] 123 COUNSELVISE.COM (IT) 0168 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RATNAKAR ACIT
• Assessee Lawyers: CHINMAY S KAMAT
• Keywords: Share purchase agreement
• Section: 263; 15

Judgement 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 NO S . 3 0 0 & 301 /PNJ/201 4 : (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) INCOME TAX OFFICER, WARD 1(2) , PANAJI, GOA. (APPELLANTS) VS. AND THE KADAMBA EMPLOYEES CO - OPERATIVE CREDIT SOCIETY LTD, KTC BUS STAND, PANAJI, GOA. PAN : AACAT3775G . (RESPONDENTS) C.O NOS. 40 & 4 1/PNJ/2014 : (ASST. YEARS :2008 - 09 &2011 - 12) (A RISING OUT OF ITA NOS. 300 & 301/PNJ/2014) THE KADAMBA EMPLOYEES CO - OPERATIVE CREDIT SOCIETY LTD, KTC BUS STAND, PANAJI, GOA. PAN : AACAT3775G . (APPELLANTS) VS. INCOME TAX OFFICER, WARD 1(2), PANAJI, GOA. (RESPONDENTS) REVENUE BY : SHRI RATNAKAR , ACIT . ASSESSEE BY : SHRI CHINMAY S. KAMAT , C.A. DATE OF HEARING : 24 /1 2 /2014 DATE OF PRONOUNCEMENT : 24 / 1 2 /2014 O R D E R PER P.K. BANSAL BOTH THESE APPEAL S HA VE BEEN FILED BY THE REVENUE AGAINST THE DIFFERENT ORDER S OF CIT(A), PANAJI DTD. 2 7 . 0 6 . 201 4 WHEREAS THE CR OSS OBJECTIONS HAVE BEEN FILED BY THE ASSESSE E FOR THE ASSESSMENT YEAR S 20 08 - 09 AND 20 1 1 - 12 BY TAKING THE FOLLOWING COMMON GROUNDS OF APPEAL : - 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 2. THE LD. CIT(A) HAS ERRED IN DELETING ADDITION ON ACCOUNT OF DISALLOWANCE OF DEDUCTION IN RESPECT OF INCOME OF CO - OPERATIVE SOCIETY U/S. 80P(2)(A)(I) ON THE GROUNDS THAT THE ASSESSE IS A CO - OPERATIVE SOCIETY, ACCEPTS DEPOSITS ONLY FROM ITS MEMBERS AND CAN LEND MONEY ONLY TO ITS ME MBERS AND IT CANNOT ISSUE CHEQUE BOOKS, WHEN THE ASSESSEE ACCEPTS DEPOSITS AND GRANTS LOANS TO ITS MEMBERS ON WHICH IT MAKES PROFIT AND GAIN BY WAY OF CHARGING INTEREST, THUS PROVIDING CREDIT FACILITY IS AKIN TO BANKING BUSINESS AS PER SECTION 2(24)(VIIA) AND PART - V OF THE BANKING REGULATION ACT, HENCE THE ASSESSE IS NOT ELIGIBLE FOR DEDUCTION U/S.80P. 3. THE LD. CIT(A) HAS ERRED IN STATING THAT THE ASSESSE E IS ENTITLED FOR DEDUCTION U/S.80P(2) WHEN THE ASSESSE E IS A PRIMARY CO - OPERATIVE BANK AS PER SECTION 80P(4) READ WITH SECTION 2(24)(VIIA) OF I.T. ACT, 1961 AND ALSO FULFILLS ALL THREE REQUIREMENTS AS GIVEN IN SECTION 5(CCV) OF THE BANKING REGULATION ACT, 1949 TO QUALIFY AS PRIMARY CO - OPERATIVE BANK, ALSO THERE IS NO RESTRICTION ON ANY PUBLIC PERSO N TO BECOME A MEMBER, TO OPEN ACCOUNT AND TAKE CREDIT FACILITY FROM THE SOCIETY WHICH IS NOTHING BUT BANKING BUSINESS. 4 . THE LD. CIT(A) HAS ERRED IN DELETING ADDITION ON ACCOUNT OF DISALLOWANCE U/S.40(A)(IA) FOR NON DEDUCTION OF TDS U/S.194, WHEN ASSES SEE IS PRIMARY CO - OPERATIVE BANK AS PER SECTION 80P(4) OF I.T. ACT, 1961 . 2. SINCE BOTH THE APPEALS AS WELL AS THE CROSS OB J ECTIONS INVOLVE THE COMMON ISSUE THEREFORE THEY ARE DISPOSED O F BY THIS COMMON ORDER. BOTH THE PARTIES AGREED ALL THESE APPE ALS BE DECIDED ON THE BASIS OF THE FACTS FOR THE ASSESSMENT YEAR 2008 - 09. THE GROUND NO.1 TO 3 IN REVENUES APPEAL AS WELL AS GROUND NO.1 TO 2 IN CROSS OBJECTIONS RELATE TO THE ISSUE WHETHER THE ASSESSE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OR NOT. THE BRIEF FACTS OF THE CASE FOR THE ASSESSMENT YEAR 20 0 8 - 09 ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE GOA CO - OPERATIVE SOCIETIES ACT , 2001 . THE ASSESSEE FILED RETURN DECLARING GROSS TOTAL INCOME OF RS. NIL 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. 24 , 20, 1 50 / - . THE AO WHILE DENYING THE DEDUCTION TO THE 3 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) ASSESSEE U/S 80P(2)(A)(I) TOO K 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) ALLOWED THE APPEAL OF THE ASSESSEE. 2. 1 THE LD. DR, VEH EMENTLY 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 HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY VS. ADDL. CIT IN ITA NOS. 100 3/HYD/2011 & 1004/HYD/2011 DT. 2.7.2012. THE CIT(A) WITHOUT EXAMINING TOOK THE VIEW THAT SOCIETY HAS ACCEPTED DEPOSITS FROM MEMBERS. IT WAS ALSO CONTENDED THAT OTHER TWO CONDITIONS AS HAS BEEN HELD BY THIS BENCH IN THE CASE OF DECISIONS AS RELIED BY THE CIT(A) HAVE ALSO BEEN COMPLIED WITH FOR BECOMING PRIMARY CO - OPERATIVE BANK. 2.2 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 AS SESSEE IS NOT A CO - OPERATIVE BANK. THE ASSESSEE IS A CO - OPERATIVE SOCIETY DULY REGISTERED UNDER THE GOA CO - OPERATIVE SOCIETIES ACT, 2001 . THE ASSESSEE IS A CREDIT SOCIETY. HE CONTENDED THAT THE WORD CREDIT IS OF OUTMOST IMPORTANT TO DECIDE THE STATUS OF T HE 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 THERETO BUT RELIED ON BANKING REGULATI ON 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. 4 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) THE PAID UP CAPITAL OF THE ASSESSEE, NO DOUBT, IS MORE THAN RS. 1 LACS. IT WAS CONTENDED THAT THE ISS UE 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 2013. ATTENTION WAS ALSO DRAWN TOWAR DS 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 SOCIETY IS REQUIRED TO ADVANCE LOAN TO I TS 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 BANKING ACTIVITIES AS CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949. RELIANCE WAS ALSO 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 2009 - 10 IN WHICH IT WAS HELD THAT T HE 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 PLACED IN ACIT VS PALHAWAS PRIMAR Y 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 OF CIT VS SRI BILURU GURUBASAVA PAT TANA 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 5 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER U/S 263 WITHOUT THE FOUNDATIONAL FACT OF THE ASSESSEE BEING CO - OPERATIVE BANK. 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 ENTIRE MATERIAL AND CASE LAWS REFERRED TO BEFORE US. THE QUESTION BE FORE US IS WHETHER THE ASSESSEE IS ENTITLED 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 S ECTIONS ARE RE - PRODUCED FOR OUR READY REFERENCE 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 SECTION, 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 ENGA GED 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 S HALL 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 'PRIMAR Y 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 OPERATIO N CONFINED TO A TALUKA AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG - TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 3.1 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 PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE CO - OPERATIVE SOCIETY IS ENTITLED FOR DEDUCTION 6 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 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 - OPERATIVE 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 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 AGRICULTURAL 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 FIN D THAT THE PROVISIONS OF SEC. 80P(4) MANDATES 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 SOCIETY 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 CAN NOT BE REGARDED TO BE A CO - OPERATIVE BANK. 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 NO T A CO - OPERATIVE BANK. IF WE READ THE PROVISIONS 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 BAN K, THEN, THE PROVISIONS OF SEC. 80P(2)(A)(I)WILL BECOME REDUN DANT. THEREFORE, IN OUR OPINION, 7 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 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 DEVELOPMENT 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 TH AN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND 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 PROVID ING CREDIT FACILITIES TO ITS MEMBERS. THIS 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). 4. 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 CARRIES ON ONE OR BOTH OF THE ACTIVITIES, IT WILL BE ELIGIBLE FOR DEDUCTION. THESE TWO ACTIVITIES ARE (A) CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR (B) PROVIDING CREDIT FACILITIES TO ITS MEMBERS. BOTH THE ACTIVITIE S 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 DED UCTION U/S 80P(2)(A)(I) ON THE INCOME WHICH IT DERIVES FROM CARRYING ON 8 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 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 PROVID ING 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 PROHIBITIO N U/S 80P NOT TO ALLOW DEDUCTION TO SUCH CO - OPERATIVE SOCIETIES IN RESPECT OF BUSINESS RELATING TO ITS MEMBERS. 4.1 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: 5. FROM THE DEFINITION OF CO - OPERATIVE BANK IT IS APPARENT THAT CO - OPERATIVE BANK MEANS STATE CO - OPERAT IVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK. IT IS NOT THE CASE OF THE REVENUE OR ASSESSEE 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. 6. 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 AGRICULTURAL 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 ADMISSION 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 FUNDS PROVIDED BY THE STATE GO VERNMENT FOR THE PURPOSE. 9 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 7. 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 - OPERATIVE BANK. IF CO - OPERATIVE SOCIETY DOES NOT FULFIL ANY OF THE CONDITIONS, IT CANNOT BE REGARDED TO BE A PRIMARY CO - OPERATIVE BANK. THEREFORE, IN THE CASE OF THE ASSESSEE WE HAVE TO EXAMINE ON THE BASIS OF THE FACTS AND MATERIALS ON RECORD WHETHER THE ASSESSEE CO - OPERATIVE SOCIETY C OMPLIES 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 APPLICABL E IN THE CASE OF THE ASSESSEE. ONCE, THE ASSESSEE WILL NOT FALL WITHIN THE PROVISION S OF SEC. 80P(4), THE ASSESSEE, I N 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 THE BUSINESS OF BANKING OR PROVI DING CREDIT FACILITIES TO ITS MEMBERS. 8. 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 ASSESSEE HAS NOT SUBMITTED THE COPY OF THE BYE - LAWS BEFORE US SO THAT WE COULD L OOK INTO THE OBJECTS AND DECIDE WHETHER PRIMARY OBJECT IS CARRYING ON THE BANKING BUSINESS OR NOT. BANKING BUSINESS HAS BEEN DEFINED U/S 5(B) OF THE BANKING REGULATION ACT IN THE FOLLOWING MANNER : - ' BANKING' MEANS THE ACCEPTING, FOR THE PURPOSE OF LENDI NG OR INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC , REPAYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWABLE BY CHEQUE, DRAFT, ORDER OR OTHERWISE . 10 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) FROM THE SAID DEFINITION IT IS CLEAR THAT BANKING MEANS ACCEPTING DEPOSIT OF MONEY FROM THE PUBLIC WHICH IS R EPAYABLE 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. 9 . WE NOTED THAT THE ASSESSE HAS EVEN THOUGH HAS TAKEN THE CONTENTION THAT HE HAS RECEIVED DEPOSITS FROM THE MEMBERS ONLY AND NOT FROM THE PUBLIC BUT NO EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE IN THIS REGARD EVEN WE NOTED THE CIT(A) HAS ALSO NOT GIVEN ANY FINDING OF FACT ON THIS WHETHER THE ASSESSEE COMPLY WITH CONDITION NO.1 AND ACCEPTED DEPOSITS ONLY FROM MEMBERS. IN OUR OPINION THE FACTUAL FINDING AND VERIFICATION IN THIS REGARD IS REQUIRED BY THE ASSESSING OFFICER. MERELY THE BYE - LAWS OF THE ASSESSEE PR OVIDES IT CAN ACCEPT DEPOSITS FROM THE MEMBERS IT CANNOT BE HELD THAT THE ASSESSEE HAS RECEIVED THE DEPOSITS AND ADVANCED THE LOAN TO THE MEMBER. ON THIS ISSUE, WE ARE SETTING ASIDE THE ORDER OF CIT(A) AND RESTORING THIS ISSUE ABOUT THE COMPLIANCE OF CON DITION NO.1 FOR BECOMING PRIMARY CO - OPERATIVE BANK TO THE FILE OF THE ASSESSING OFFICER. 10. 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. 11 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 11. 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. 12. SO FAR AS THE THIRD CONDITION IS CONCERNED, WE NOTED THAT SEC. 21 OF THE GOA CO - OPERATIVE SOCIETIES ACT, 2001 PERMITS ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER. THE PROVISIONS OF SEC. 21 ARE LAID DOWN AS UNDER : - 21. PERSON WHO MAY BECOME MEMBER - (1) ANY PERSON, WHO NEEDS THE SERVICES OF THE SOCIETY, ACCEPTS THE RESPONSIBILITIES OF MEMBERSHIP AND FULFILS SUCH OTHER CONDITIONS AS MAY BE SPECIFIED IN THE BYE - LAWS OF THE SOCIETY, MAY BE ADMITTED AS A MEMBER. (2) NO PERSON SHALL BE ADMITTED AS A MEMBER OF A SOCIETY EXCEPT THE FOLLOWING, THAT IS TO SAY : - (A) AN INDIVIDUAL, WHO IS A CITIZEN OF INDIA AND WHO IS COMPETENT TO CONTRACT UNDER THE CONTRACT ACT, 1872 (9 OF 1872); (B) A FIRM, COMPANY OR ANY OTHER BODY CORPOR ATE CONSTITUTED UNDER ANY LAW FOR THE TIME BEING IN FORCE, OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (XXI OF 1860); (C) A SOCIETY REGISTERED, OR DEEMED TO BE REGISTERED, UNDER THIS ACT OR ANY OTHER CO - OPERATIVE SOCIETIES ACT; (D) A PUBLIC TRUST REGISTERED UNDER ANY LAW FOR THE TIME BEING IN FORCE FOR THE REGISTRATION OF SUCH TRUSTS. [(E) ANY SELF HELP GROUP FORMED BY WOMEN FOR MUTUAL ASSISTANCE OR WITH AN OBJECTIVE TO AVAIL ANY TYPE OF ASSISTANCE FROM THE GOVERNMENT OR ANY ORGAN IZATION FOR THEIR SOCIAL, ECONOMIC, CULTURAL AND EDUCATIONAL IMPROVEMENT.] (3) ADMISSION OF MEMBERS MAY BE MADE ONLY BY AN ELECTED BOARD OF DIRECTORS OR BY THE GENERAL BODY WHERE SUCH A BOARD DOES NOT EXIST: 12 [OMITTED ]. 12 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) (4) A PERSON ADMITTED AS A MEMBER MAY EXERCISE THE RIGHTS OF MEMBERSHIP, INCLUDING THE RIGHT TO VOTE, ONLY ON FULFILMENT OF SUCH CONDITIONS AS MAY BE LAID DOWN FROM TIME TO TIME IN THE BYE - LAWS. 22. OPEN MEMBERSHIP . (1) NO SOCIETY SHALL, WITHOUT SUFFICIENT CAUSE, REFUSE ADMISSI ON TO MEMBERSHIP TO ANY PERSON DULY QUALIFIED THEREFORE UNDER THE PROVISIONS OF THIS ACT AND ITS BYE - LAWS. (2) WHERE A PERSON IS REFUSED ADMISSION AS A MEMBER OF A SOCIETY, THE DECISION, WITH THE REASON THEREFORE, SHALL BE COMMUNICATED TO THAT PERSON WITH IN FIFTEEN DAYS OF THE DATE OF THE DECISION, OR WITHIN THREE MONTHS FROM THE DATE OF THE APPLICATION FOR ADMISSION, WHICHEVER IS EARLIER. (3) ANY PERSON AGGRIEVED BY THE DECISION OF A SOCIETY REFUSING HIM ADMISSION OF ITS MEMBERSHIP, MAY APPEAL TO THE CO - OPERATIVE AUTHORITY. (4) WHERE A SOCIETY REFUSES TO ACCEPT THE APPLICATION FROM AN ELIGIBLE PERSON FOR ADMISSION AS MEMBER, OR THE PAYMENT MADE BY HIM IN RESPECT OF MEMBERSHIP, OR HAVING ACCEPTED THE MEMBERSHIP APPLICATION, A SOCIETY DOES NOT CONVEY ITS DECISION WITHIN THREE MONTHS FROM THE DATE OF RECEIPT OF APPLICATION, THE MEMBERSHIP SHALL BE DEEMED TO HAVE BEEN REFUSED AND THE PERSON AGGRIEVED MAY APPEAL TO THE CO - OPERATIVE AUTHORITY. (5) AN APPEAL UNDER SUB - SECTION (3) SHALL BE FILED WITHIN TWO MON THS OF THE DATE OF COMMUNICATION OF REFUSAL AND UNDER SUB - SECTION (4) WITHIN TWO MONTHS OF DEEMED REFUSAL. AS FAR AS POSSIBLE, BE DISPOSED OF BY THE CO - OPERATIVE AUTHORITY WITHIN A PERIOD OF THREE MONTHS FROM THE DATE OF ITS RECEIPT. (6) EVERY SUCH APPEAL UNDER SUB - SECTION (3) OR (4) SHALL, AS FAR AS POSSIBLE, BE DISPOSED OF BY THE CO - OPERATIVE AUTHORITY WITHIN A PERIOD OF THREE MONTHS FROM THE DATE OF ITS RECEIPT. 23. JOINT MEMBER . (1) SUBJECT TO THE PROVISIONS OF SECTION 21, A SOCIETY MAY ADMIT ANY PE RSON AS A JOINT MEMBER. A JOINT MEMBER SHALL HOLD JOINTLY A SHARE OF THE SOCIETY WITH ANOTHER BUT HIS NAME SHALL NOT STAND FIRST IN THE SHARE CERTIFICATE. (2) A MEMBER OF A SOCIETY MAY APPOINT NOT MORE THAN ONE JOINT MEMBER. (3) WHEN A PERSON WHOSE NAM E STANDS FIRST IN THE SHARE CERTIFICATE CEASES TO BE A MEMBER, THE PERSON ADMITTED AS JOINT MEMBER SHALL AUTOMATICALLY BE THE FIRST MEMBER. IN THE EVENT OF THE CESSATION OF MEMBERSHIP OF THE FIRST MEMBER BY DEATH, THE JOINT MEMBER SHALL BE THE FIRST MEMBER AND THE NOMINEE, IF ANY, OF THE DECEASED MEMBER SHALL BE THE JOINT MEMBER. (4) THE JOINT MEMBER SHALL HAVE EQUAL RIGHT IN THE CAPITAL AND PROPERTY OF THE SOCIETY WITH THE FIRST MEMBER. (5) THE JOINT MEMBER SHALL HAVE THE RIGHT TO VOTE ONLY IN THE ABSENC E OF THE MEMBERS WHOSE NAME STANDS FIRST IN THE SHARE CERTIFICATE. 13 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) THE AFORESAID PROVISION OF SEC.21 MANDATES ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER OF THE CO - OPERATIVE SOCIETY. THE WORD USED IN SEC. 21 (2) IS SHALL. THIS FACT IS C LARIFIED FURTHER BY SECTION 22 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 SOCIETY PROVIDES OTHERWISE, THE CO - OPERATIVE SOCIETY MAY NOT BE ADMITTED AS A MEMBER OF THE CO - OPERATIVE SOCIETY. THE PERSON, AS PER SECTION 22, MUST BE QUALIFIED FOR BEC OMING MEMBER NOT ONLY U/S 21(2) 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 C O - OPERATIVE SOCIETY. HAD THAT BEEN THE INTENTION OF THE LEGISLATURE, THEY WOULD HAVE NOT USED THE WORDS UNDER THE PROVISION OF THIS ACT AND BYE - LAWS IN SECTION 22. 13. THE ASSESSEE HAS NOT SUBMITTED THE COPY OF THE BYE - LAWS BEFORE US. EVEN WE NOTED TH AT CIT(A) HAS ALSO NOT GIVEN ANY SPECIFIC FINDING IN THIS REGARD EVEN THE BYE - LAW RELATING TO THE MEMBERSHIP WAS ALSO NOT DISCUSSED OR REPRODUCED. THUS WE CANNOT HOLD WHETHER THE THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK IS COMPLIED WITH OR NO T . ON THIS ISSUE ALSO WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE BYE - LAWS OF THE ASSESSE AND LOOK INTO WHETHER THE BYE - LAWS SPECIFICALLY PROVIDE FOR THE ADMISSION OF OTHER CO - OPERATIVE S OCIETY AS MEMBER OR NOT . IF THE BYE - LAWS SPECIFICALLY PROVIDE FOR THE ADMISSION OF OTHER CO - OPERATIVE SOCIETY AS MEMBER, HE SHOULD HOLD THAT THE ASSESSE COMPLIES WITH THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK. OTHERWISE NOT. 14 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 14. WE HAVE GON E 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 TRI BUNAL 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 GOVERNED 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 FINDING, THE ASSESSEE WAS DENIED DEDUCTION U/S 80P(2)(A)(I). WE HAVE ALSO GONE THROUGH THE DECISIO N 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 NOTED THAT THE HON'BLE TRIBUNAL CONFIRMED THE ORDER OF CIT(A) FOLLOWING THE DECISION OF THE TRIB UNAL 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 B ANK. 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 SAHAKA RA 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 RE LATE TO THE CLAIM OF 15 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) 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 POSSIBLE 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 THE FINANCING AGENCIES AND REPAY THE SAME. MERELY BECAUSE THE PETITIONERS - THE CO - OPERATIVE SOCIE TIES 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 BANKING COMPANIES. IT IS ALSO NOT POSSIBLE TO HOLD THAT THESE ACTIVITIES OF THE PETITIONERS AMOU NT TO BANKING AS CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949, INASMUCH AS THESE CO - OPERATIVE SOCIETIES ARE NOT ESTABLISHED FOR THE PURPOSE OF DOING BANKING AS DEFINED IN SECTION 5(B) OF THE BANKING REGULATION ACT, 1949. 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 M EMBERS 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 SOUHARDA 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 ALL OWS 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 CONDITION IS SATISFIED, IT CANNOT BE SAID THAT THE PRIME OBJECT OR PRINCIPAL BUSINESS OF THE ASSESS EE 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 REGULATION ACT, 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE ASSESSEE, THEREFORE, CANNOT BE REG ARDED 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. ACCORDINGLY, IN OUR OPINION THE PROVISIONS OF SECTION 80P (4) 16 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) READ WITH EXPLANATION THERE UNDER WI LL 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 CONFIRM THE ORDER OF CIT(A) ALLOWING DEDUCTION TO THE ASSESSEE. 15. WE HAVE ALSO GONE THROUGH T HE 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 ALS O 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 DISTINC TION MADE UNDER THE BANKING REGULATION ACT CANNOT BE IMPORTED U/S 80P(2)(A)(I). THIS DECISION IN OUR OPINIO N WILL NOT ASSIST THE ASSESSEE. WE HAVE 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 PATTANA SAHAKARI SANGH NIYAMITHA DATED 5.2.2014, RELATES TO AN APPEAL FILED AGAINST THE ORDE R 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 ASSESSEE BEING CO - OPERATIVE BANK. THEREFORE, THIS DECISION IS NOT APPLICABLE. 16. WE, THEREFO RE, IN VIEW OF OUR AFORESAID DISCUSSION SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE WHETHER THE ASSESSE IS A PRIMARY CO - OPERATIVE BANK OR NOT AS PER OUR FINDING GIVEN IN THE PRECEDING PARAGRAPH . WE MA Y ALSO MENTION THE PROVISION OF SECTION 2(24)(VIIA) ARE NOT RELEVANT TO DECIDE WHETHER THE ASSESSE IS A PRIMARY CO - OPERATIVE BANK AS SECTION 80P(2)(A)(I) ALLOWS THE DEDUCTION EVEN TO THE 17 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) ASSESSEE IN CASE IF THE ASSESSEE DERIVES INCOME FROM CARRYING ON THE BANKING BUSINESS TO ITS MEMBERS. 17. THUS THE GROUND NO S . 1 TO 3 IN REVENUES APPEAL FOR BOTH THE YEARS AND GROUND NO S . 1 TO 2 IN ASSESSEES CROSS OBJECTIONS FOR BOTH THE YEARS ARE STATISTICALLY ALLOWED. 18. THE FOURTH GROUND IN THE APPEAL FILED BY THE REVENUE AND THIRD GROUND IN THE C.O FILED BY THE ASSESSE RELATES TO THE ISSUE WHETHER THE PROVISION OF SECTION 194A ARE APPLICABLE IN THE CASE OF THE ASSESSEE SO AS IN CASE ASSESSEE FAILS TO DEDUCT TDS. THE INTEREST PAID BY IT ON THE DEPOSITS IS LIA BLE TO BE DISALLOWED U/S 40AI. 19. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT SECTION 194A(3) LAYS DOWN THE VARIOUS CASES UNDER WHICH THE PROVISION OF SECTION 194A ARE NOT APPLICABLE. SECTION 194A(3)(V) EXEMPTS A CO - OPERATIVE SOCIETY FROM DEDUCTION OF THE TAX ON SUCH INCOME CREDITED OR PAID BY A CO - OPERATIVE SOCIETY TO A MEMBER THEREOF OR TO ANY OTHER CO - OPERATIVE SOCIETY. SECTION 194A(3)(VIIA)(B) EXEMPTS A CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS O F BANKING FROM DEDUCTION OF THE TAX ON DEPOSITS OTHER THAN TIME DEPOSITS MADE ON AFTER THE 1 ST DAY OF JULY, 1995. BOTH THE PROVISIONS IN OUR OPINION ARE INDEPENDENT. IF THE CO - OPERATIVE SOCIETY IS ENGAGED IN THE CARRYING OF THE BUSINESS OF BANKING THE G ENERAL PROVISION AS LAID DOWN U/S 194A(3)(V) WILL NOT APPLY. THE PROVISION OF SECTION 194A(3)(VIIA)(B) ARE APPLICABLE IN CASE CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING ON THE BUSINESS OF BANKING.WE NOTED THAT CIT(A) HAS DELETED THE DISALLOWANCE MERELY BY OBSERVING THAT THE ASSESSEE IS A CO - OPERATIVE CREDIT SOCIETY. HE HAS NOT GONE INTO THE QUESTION WHETHER THE ASSESSEE IS ENGAGED IN THE CARRYING ON THE BUSINESS OF BANKING OR NOT. CARRYING 18 ITA NO S . 3 0 0 & 301 /PNJ/201 4 & C.O.NOS.40&41/PNJ/2014 (ARISING OUT OF ITA NOS.300 &301/PNJ/ 2014) (ASST. YEAR S : 2008 - 09 & 20 1 1 - 1 2 ) ON THE BUSINESS OF BANKING MAY BE TO ITS MEMBERS OR TO OUTSIDERS . THE SECTION DOES NOT DIVIDE THE CO - OPERATIVE SOCIETY AS CREDIT CO - OPERATIVE SOCIETY OR OTHERS. WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSI NG OFFICER WITH THE DIRECTION TO GIVE A CLEAR CUT FINDING WHETHER THE ASSESSE SOCIETY IS CARRYING ON THE BANKING BUSINESS OR NOT. IN CASE IT IS FOUND THAT THE ASSESSEE SOCIETY IS CARRYING ON THE BANKING BUSINESS THE ASSESSE IS LIABLE TO DEDUCT TDS OTHERWIS E NOT. THUS THIS GROUND IS STATISTICALLY ALLOWED WHILE THE GROUND TAKEN IN C.O STANDS DISMISSED. 20. IN THE RESULT, BOTH THE APPEAL S AS WELL AS CROSS OBJECTIONS FILED BY THE REVENUE AND ASSESSE ARE STATISTICALLY ALLOWED. 21 . ORDER PRO NOUN CED IN T HE OPEN COURT ON 24 . 1 2 .2014. SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 24 . 1 2 .2014 *A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA