ITO, Bagalkot V. M/s Ramalingeshwar Credit Co-Op Society Ltd., Bagalkot

ITA 1213/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95388 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 04-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1213(BNG)/2015 (ASSESSMENT YEAR : 2012-13) THE INCOME-TAX OFFICER, WARD-1, BAGALKOT APPELLANT VS M/S RAMALINGESHWAR CREDIT CO.OP. SOCIETY LTD. KUNDARGAI, TAL- BILAGI, DIST. BAGALKOT RESPONDENT REVENUE BY : DR.P.K.SRIHARI, ADDL.CIT ASSESSEE BY : NONE DATE OF HEARING : 07-12-201 5 DATE OF PRONOUNCEMENT : 11-12-2015 O R D E R PER SHRI INTURI RAMA RAO, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), BELAGAVI DATED 03-06-2015 FOR THE ASSESSMENT YEAR 2 012-13. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APP EAL; 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEE IS A CO-OPE RATIVE SOCIETY WHICH FULFILLS ALL THE THREE CONDITIONS OF BEING HELD A PRIMARY CO-OP. BANK, AS SPECIFIED IN SEC.5(CCV) OF THE BANKING REGULATION ACT, 1949. 2 ITA NO.1213(B)/2015 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE DEFINITION OF A CO-OP.BANK, WHEREI N THE EXPLANATION TO SEC.80P(4) OF THE IT ACT CLARIFIES T HAT THE CO-OP. BANK SHALL HAVE THE MEANING ASSIGNED TO IT IN PART- V OF THE BANKING REGULATION ACT. 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEE SOCIETY BEI NG A CREDIT CO-OP. SOCIETY WHICH IS ENGAGED IN BANKING BUSINESS IS A PRIMARY CO-OP. BANK WITHIN THE DEFINITION OF SEC.5( CCV) OF THE BANKING REGULATION ACT, 1949 AND AS SUCH, IS NOT EL IGIBLE FOR DEDUCTION U/S 80P(2)(I) OF THE IT ACT, 1961. 4. THE LD. CIT(A) ERRED IN NOT APPRECIATING THEFAC TS OF THE CASE AND ALSO RELYING UPON THEZ DECISION OF THE HIG H COURT OF KARNATAAKA IN CIT VS SRI BILURU GURUBASAVA PATTIN SAHAKARI SANGH NIYAMITT, BAGALKOT IN ITA NO.5006/20 13 DATED 5.2.2014 AND OTHER DECISIONS, IGNORING THE DE CISION OF THE ITAT, PANAJI BENCH. THE HONBLE BENCH IN THE CA SE OF SRI DURDUNDESHWAR WAS URBAN CO-OP.CREDIT SOCIETY LTD. H AS UPHELD THE STAND OF THE DEPARTMENT AND HAS CATEGORI CALLY DISTINGUISHED THE DECISION OF SRI BILURU GURUBASAVA PATTIN SAHAKARI SANGH NIYAMIT, IN VARIOUS CASES OF CO-OP. SOCIETIES. 2.1 THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGIST ERED UNDER THE PROVISIONS OF KARNATAKA STATE CO-OPERATIVE ACT, 195 9 FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 12-02-201 3, DECLARING THE TOTAL 3 ITA NO.1213(B)/2015 INCOME AT NIL AFTER CLAIMING DEDUCTION A SUM OF RS.67,84,013/- U /S 80P(2)(A)(I) OF THE ACT. AGAINST THE SAID RETURN OF INCOME THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, VIDE ORDER DATED 2 0-10-2014, THE AO HAD DISALLOWED THE ASSESSEES CLAIM FOR DEDUCTION U/S 8 0P(2)(A)(I)OF THE ACT AND DETERMINED THE TOTAL INCOME AT RS.67,84,013/-. 3. ON APPEAL BEFORE THE CIT(A), THE CIT(A) ALLOWED THE APPEAL BY HOLDING AS UNDER; 6. I HAVE CAREFULLY PERUSED AND CONSIDERED THE AFO RESAID SUBMISSION MADE BY THE APPELLANT AND THE CONTENTS O F THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. I HAVE ALSO PERUSED THE CASE LAWS RELIED UPON BY THE APPELLANT AND THE ASSESSING OFFI CER. THE MAIN PLANK OF ARGUMENT OF THE ASSESSING OFFICER HAS BEEN THAT AFT ER CAREFUL ANALYSIS OF SECTION 80P(4) READ WITH SECTION 2(24)(VIIA) OF THE INCOME-TAX ACT, 1961 AND PART V OF THE BANKING REGULATION ACT AND THE FACTS OF THE CASE, THE APPELLANT ASSESSEE CO-OPERATIVE CREDIT SOCIETY IS HELD TO BE A 'PRIMARY CO-OPERATIVE BANK' HENCE IS NOT ELIGIBLE FOR DEDUCTION UNDER SEC.80P(2 )(A)(I) IN VIEW OF THE NEWLY INSERTED PROVISIONS OF SECTION 80P(4). THE ASSESSIN G OFFICER HAS ARRIVED AT A CONCLUSION THAT IF A COOPERATIVE SOCIETY SATISFIES ALL THE THREE CONDITIONS AS LAID DOWN IN THE DEFINITION AS GIVEN U/S 5(CCV) IN PART V OF THE BANKING REGULATION ACT, 1949, THEN IT BECOMES A 'PR IMARY CO-OPERATIVE BANK', 2ND THEREFORE DEDUCTION U/S 801 3 (2)(A)(I) CAN BE DENIED BY VIRTUE OF SEC.80P(4). 6.1 THE RELEVANT PART OF SECTION 80P OF THE LT ACT UNDER WHICH THE APPELLANT COOPERATIVE SOCIETY HAS CLAIMED DEDUCTION READS AS UNDER: 'DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOC IETIES. 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 T O THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 4 ITA NO.1213(B)/2015 (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE TH E FOLLOWING, NAMELY:- (A) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN- (I) CARRYING ON THE BUSINESS OF BANKING OR PROV IDING CREDIT FACILITIES TO ITS MEMBERS, OR (II).. THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES: 6.1.1 THE CLAUSE (4) OF SEC.BOP INSERTED BY THE FINANCE A CT,2006 W.E.F. 01- 04-2007, WHICH HAS BEEN INVOKED BY THE ASSESSING OF FICER TO DENY DEDUCTION TO THE APPELLANT CO-OPERATIVE SOCIETY READS AS UNDE R: (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK. EXPLANATION: FOR THE PURPOSES OF THIS SUB-SECTI ON: (A) 'CO-OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL CREDI T 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 DEVELO PMENT 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. BY VIRTUE OF INTRODUCTION OF CLAUSE (4) IN SEC.80P, THE 'CO-OPERATIVE BANKS' HAVE BEEN TAKEN OUT OF THE PURVIEW OF EXEMPT ION GRANTED UNDER SEC.80P WHEREAS OTHER ENTITIES/COOPERATIVE SOCIETIE S SPECIFIED IN OTHER CLAUSES OF SEC.801 3 CONTINUE TO ENJOY SUCH EXEMPTIONS. THE EXPLANATION TO SEC.80P PROVIDES THAT 'CO-OPERATIVE BANK' AND 'PRIMARY AGRI CULTURAL CREDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO TH EM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949). 6.1.2 FOLLOWING THE PROVISIONS OF AFORESAI D EXPLANATION TO SEC.SOP, 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. 5 ITA NO.1213(B)/2015 SL.NO. CATEGORY CLAUSE/SECTION OF THE BANKING REGULATION ACT, DEFINITION 1 2 3 4 1 CO- OPERATIVE BANK CLAUSE (CCI) OF SECTION 5 CO-OPERATIVE BANK MEANS A STATE CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK 2 PR IMARY CO OPERATIVE BANK CLAUSE (CCV) OF SECTION 5 PRIMARY CO- OPERATIVE BANK MEANS A CO OPERATIVE SOCIETY OTHER THAN A P R I M A R Y A G R I C U L T U R A L C R E D I T S O C I E T Y ( 1 ) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS THE TRANSACTION OF BANKING BUSINESS; (2 ) THE PAID UP SHARE CAPITAL AND RESERVES OF WHICH ARE NOT LESS THAN ONE LAKHS OF RUPEES AND(3) THE BYE LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO- OPERATIVE SOCIETY AS A MEMBER 3 PRIMARY CREDIT SOCIETY CLAUSE (CCVI) OF SECTION 5 PRIMARY CO-OPERA TIVE SOCIETY MEANS A CO- OPERATIVE SOCIETY OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY (1) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS THE TRANSACTION OF BANKING BUSINESS; (2) THE PAID UP SHARE CAPITAL AND RESERVES OF WHICH ARE NOT LESS THA N ONE LAKHS OF RUPEES; AND (3) THE BYE- LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO- OPERATIVE SOCIETY AS A MEMBER. THE ASSESSING OFFICER HAS THUS MENTIONED THAT THE ' CO-OPERATIVE BANK' INCLUDES 'PRIMARY CO-OPERATIVE BANK' AND 'PRIMARY CO-OPERATI VE BANK' MEANS CO-OPERATIVE SOCIETY -THE PRIMARY OBJECT OR PRINCIPAL BUSINESS O F WHICH IS THE TRANSACTION OF BANKING BUSINESS;THE PAID UP SHARE CAPITAL AND RESE RVES OF WHICH ARE NOT LESS THAN ONE LAKHS OF RUPEES; AND (3) THE BYE-LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS A MEMBER. 6 ITA NO.1213(B)/2015 6.1.3 THE ASSESSING OFFICER HAS CONCLUDED T HAT THE APPELLANT CO-OPERATIVE SOCIETY SATISFIES ALL THE ABOVE MENTIO NED THREE CONDITIONS AND THEREFORE IT IS HELD TO BE A 'PRIMARY CO-OPERATIVE BANK' AND HENCE ITS CLAIM OF DEDUCTION U/S 80P(2)(A)(I) HAS BEEN DENIED U/S 8 0P(4). BEFORE ARRIVING AT THIS CONCLUSION THE ASSESSING OFFICER HAS ALSO R EFERRED TO THE NEWLY INSERTED PROVISIONS OF SEC.2(24)(VIIA), INSERTED BY THE FINANCE ACT,2006 W.E.F. 01-04- 2007 WHICH READS AS UNDER: '(24) 'INCOME' INCLUDES (VIIA) THE PROFITS AND GAINS OF ANY BUS INESS OF BANKING (INCLUDING PROVIDING CREDIT FACILITIES) CARRIED ON BY A CO-OPERATIVE SOCIETY WITH ITS MEMBERS; THE ASSESSING OFFICER HAS CONTENDED THAT THE PURPOSE OF INTRODUCTION OF THESE PROVISIONS WAS TO TAX THE PROFITS AND GAINS O F ANY BUSINESS OF BANKING (INCLUDING PROVIDING CREDIT FACILITIES) CARRIED ON BY A CO-OPERATIVE SOCIETY WITH ITS MEMBERS. THE ASSESSING OFFICER HAS ALSO REFERRE D TO THE DEFINITION OF 'BANKING' AS PROVIDED IN SEC. 5(B) OF THE BANKING R EGULATION ACT,1949 WHICH READS AS UNDER: '(B)AANKING' MEANS THE ACCEPTING FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSIT OF MONEY FROM PUBIC, REPAYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWAL BY CHEQUE, DRAFT, ORDER OR OTHERWISE.' THE A.O HAS COME TO THE CONCLUSION THAT THE APPELLA NT CO-OPERATIVE SOCIETY IS DOING BANKING BUSINESS AS 'PROVIDING CREDIT FACILIT IES TO MEMBERS' IS AKIN TO BANKING BUSINESS AND SINCE THE MEMBERSHIP IS OPEN T O PUBLIC, IT IS ACCEPTING DEPOSITS FROM PUBLIC WHICH CAN BE WITHDRA WN BY ANY ONE OF THE SPECIFIED MEANS WITHIN THE MEANING OF ABOVE MENTION ED DEFINITION OF BANKING. 7 ITA NO.1213(B)/2015 6.1.4. SIMILAR ISSUE IS ALSO INVOLVED IN A NUMB ER OF CASES PERTAINING TO CREDIT CO-OPERATIVE SOCIETIES WHICH ARE ALSO IN APP EAL AND THEY HAVE ALL CONTESTED THE ACTION OF THE AO IS INVOKING THE PROV ISIONS OF SEC. 80P(4) IN THEIR RESPECTIVE CASES ON THE BASIS OF VARIOUS C ONTENTIONS DISCUSSED HEREIN BELOW: 6.2 THE APPELLANTS ON THE OTHER HAND HAS CHALLENGED THE INTERPRETATION OF SECTIONS 801)(2), 80P(4) AND RELE VANT PROVISION OF THE BANKING REGULATION ACT, 1949 AS ADOPTED BY THE A.O IN HIS ASSESSMENT ORDER. THE APPELLANTS HAVE ALSO CONTENDED THAT THE INTENTION OF THE LEGISLATURE AS REVEALED BY THE SPEECH OF THE FINANC E MINISTER WAS NOT TO DENY DEDUCTION TO ALL THE COOPERATIVE SOCIETIES BY INTRODUCTION OF SEC.80P(4). 6.2.1 IT HAS ALSO BEEN A CONTENTION OF THE APPELLAN TS THAT TO FULFILL THE FIRST CONDITION FOR BECOMING A 'PRIMARY CO-OPER ATIVE BANK', THE SOCIETY SHOULD CARRY ON THE BUSINESS OF BANKING AS PER THE DEFINITION OF 'BANKING' IN BANKING REGULATION ACT, 1949. THE APPE LLANTS HAVE ALSO CONTENDED THAT THE RESPECTIVE APPELLANT ASSESSEE SO CIETY REGISTERED UNDER THE KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959 IS CARRY ING ON THE BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS AND IS NOT ALLOWED TO ISSUE CHEQUES, DRAFTS, PAY ORDERS,ETC. AS PER THE BANKIN G REGULATION ACT, PERMISSION OF RESERVE BANK OF INDIA IS REQUIRED TO ISSUE CHEQUES, DRAFTS AND PAY ORDERS, ETC. AND THE RESPECTIVE APPELLANT H AS NOT OBTAINED ANY SUCH LICENSE/PERMISSION FROM THE RESERVE BANK OF INDIA T O CARRY ON THE BUSINESS OF BANKING. 6.2.2 THE APPELLANT COOPERATIVE SOCIETIES HAVE CONT ENDED THAT THE EXPLANATORY NOTE TO THE MEMORANDUM EXPLAINING THE P ROVISIONS IN THE FINANCE BILL, 2006 WHEREIN THE HON'BLE FINANCE MINI STER EXPLAINS THE REASONS 8 ITA NO.1213(B)/2015 FOR WITHDRAWAL OF TAX BENEFITS AVAILABLE TO CERTAIN COOPERATIVE BANKS, THE RELEVANT PORTION OF THE SAID NOTES IS REPRODUCED HE REIN BELOW: 'SECTION 80P, INTER ALIA, PROVIDES FOR A DEDUCTION FROM THE TOTAL INCOME OF THE COOPERATIVE SOCIETIES ENGAGED IN THE BUSINES S OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR BUSI NESS OF COTTAGE INDUSTRY, OR OF MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMB ERS, OR PROCESSING, WITHOUT THE AID OF POWER, OF THE AGRICULTURAL PRODU CE OF ITS MEMBERS, ETC. THE CO-OPERATIVE BANKS ARE FUNCTIONING AT PAR WITH OTHER COMMERCIAL BANKS, WHICH DO NOT ENJOY ANY TAX BENEFITS. IT IS, THEREFORE, PROPOSED TO AMEND SECTION 80P BY INSERTING A NEW SUB-SECTION (4 ) SO AS TO PROVIDE THAT THE PROVISIONS OF THE SAID SECTION SHALL NOT A PPLY IN RELATION TO ANY CO- OPERATIVE BANK OTHER THAN PRIMARY CREDIT SOCIETY OR A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. IT IS ALSO PROPOSED TO DEFINE THE EXPRESSIONS 'CO-OPERATIVE BA NK', 'PRIMARY AGRICULTURAL CREDIT SOCIETY' AND 'PRIMARY CO-OPERAT IVE AGRICULTURAL AND RURAL DEVELOPMENT BANK' IT IS ALSO PROPOSED TO INSERT A NEW SUB-CLAUSE (VII A) IN CLAUSE (24) OF THE SECTION 2 SO AS TO PROVIDE THAT THE PROFITS AND GAI NS OF ANY BUSINESS OF BANKING (INCLUDING PROVIDING CREDIT FACILITIES) CAR RIED ON BY A CO-OPERATIVE SOCIETY WITH ITS MEMBERS SHALL BE INCLUDED IN THE D EFINITION OF 'INCOME' THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2007 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2007-08 AND SUBSEQUENT YEARS.' THE APPELLANTS HAVE THUS CONTENDED THAT IT WAS CLEA R THAT THE INTENTION OF THE FINANCE MINISTER WAS TO TAX 'CO-OPERATIVE BANKS' ON LY. 6.2.3 THE APPELLANTS HAVE RELIED ON THE DECISI ON IN THE CASES OF (I) KARNATAKA HIGH COURT (DHARWAD BENCH )ORDER IN T HE CASE OF CIT VS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAM ITHA . 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 BANK ING BUSINESS AND AS IT DOES NOT POSSESS A LICENCE FROM RESERVE B ANK OF INDIA TO CARRY ON BUSINESS, IT IS NOT A COOPERATIVE BANK. (II) THE KARNATAKA HIGH COURT DECISION IN THE CASE OF THE COMMISSIONER OF INCOME TAX (A), MYSORE & OTHERS VS GENERAL 9 ITA NO.1213(B)/2015 INSURANCE EMPLOYEES COOPERATIVE CREDIT SOCIETY LTD ITA NO 273/2013 DT 27.6.2014. (III) KARNATAKA HIGH COURT DECISION IN THE CASE OF VASAVI MULTIPURPOSE SOUHARDA SAHAKARI NIYAMITA, ITA NO. 505/2013 DATED 27/06/2014. (IV) CIT VS JAFARI MOM IN VIKAS COOP CREDIT SOCIETY LTD ITA 442,143 & 863 OF 2013 OF GUJARAT HIGH COURT. (IV) TARAMANI MAHILA COOP CREDIT SOCIETY VS ITO WAR D 1(2), BELGAUM ITA 229 & 230 /PNJ/2013 DT 28.2.2014 (V) ITAT BANGALORE B BENCH DECISION VIDE ITA NO 106 9/BANG/2010 FOR THE ASST YEAR 2007-08 OF M/S BANGALORE COMMERCIAL T RANSPORT COOP SOCIETY LTD, BANGALORE. (V) ITO VS YESHWANTPUR CREDIT COOP SOCIETY LTD ITA NO 717/BANG/2011 DT 11.4.2012 RENDERED BY ITAT A BENCH , BANGALORE (I) M/S JAYAIAKSHMI MAHILA VIVIDODESHAGALA SOUHARAD A SAHAKARI LTD & ANOTHER IN ITA NO 01 TO 03/PNJ/2012 AND ITA 0 4 TO 06/PNJ/2012. THE APPELLANTS HAVE CLAIMED THAT IN ALL THESE CASES IT WAS HELD THAT INCOME EARNED BY CO-OPERATIVE SOCIETY FROM ITS ACT OF LEND ING MONEY TO MEMBERS SHALL BE ELIGIBLE FOR EXEMPTION UNDER SECTION 80P(2)(A)(I ) OF THE ACT. 7. THE IMPORTANT ASPECTS RELATING TO THE IS SUES IN THIS CASE HAVE BEEN CONSIDERED AND DECIDED BY VARIOUS ITATS ACROSS THE COUNTRY. THE JURISDICTIONAL ITAT OF BANGALORE BENCH IN A NUMBER OF CASES WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEES HAS HELD THAT THE COOPERATIVE SOCIETIES ARE NOT DOING BANKING BUSINESS AND THEREF ORE, THE PROVISIONS OF SECTION 80P(4) ARE NOT APPLICABLE TO THEM. THE J URISDICTIONAL ITAT PANJIM BENCH HAS ALSO IN A NUMBER OF CASES WHERE THE ASSES SEE COOPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO I TS MEMBER.; AND RWT ACCEPTING DEPOSIT FROM PUBLIC AS EVIDENCED FROM THE IR BYE LAWS OR THE 10 ITA NO.1213(B)/2015 COOPERATIVE SOCIETIES ACCEPTING OTHER COOPERATIVE S OCIETIES AS MEMBERS HAVE HELD THAT THOSE COOPERATIVE SOCIETIES ARE ENTITLES TO THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT. 8. NOW, AFTER THE GUJARAT HIGH COURT IN THE CASE OF CIT VS JAFARI MOM IN VIKAS COOP CREDIT SOCIETY LTD ITA 442,443 & 863 OF 2013 DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, THE KARNATAKA HIGH COURT IN THE CASES OF CIT VS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANG HA NIYAMITHA . BAGALKOT ITA 5006/2013 DT 5TH FEB 2014, COMMISSIONE R OF INCOME TAX(A), MYSORE & OTHERS VS GENERAL INSURANCE EMPLOYEES COOP ERATIVE CREDIT SOCIETY LTD ITA NO 273/2013 DT 27.6.2014 AND KARNAT AKA HIGH COURT DECISION IN THE CASE OF VASAVI MULTIPURPOSE SOUHARD A SAHAKARI NIYAMITA, ITA NO. 505/2013 DATED 27/06/2014 HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 8.1 THE HON'BLE HIGH COURT OF KARNATAKA IN TH E CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SAMBA NIVAMITHA, SUPRA WHICH WAS FOLLOWED IN THE CASES OF GENERAL INSURANCE EMPLOYEES COOPERA TIVE CREDIT SOCIETY LTD, AND KARNATAKA HIGH COURT DECISION IN THE CASE OF VASAVI MULTIPURPOSE SOUHARDA SAHAKARI NIVAMITA, ITA NO. 505/2013 DATED 27/06/2014. SUPRA, HAS CLEARLY HELD THAT A CO-OPERATIVE SOCIETY REGISTERED AS COOPERATIVE SOCIETY, PROVIDING CREDIT FACILITIES TO MEMBERS AND NOT REGISTERED WITH THE RBI CAN NOT BE DENIED THE EXEMP TION UNDER SECTION 80P(2)(A)(I) OF THE I.T. ACT. THE OPERATIVE PART OF THE JUDGEMENT READS AS FOLLOWS: 'THEREFORE, THE INTENTION OF THE LEGISLATURE IS CLE AR. IF A CO- OPERATIVE BANK IS EXCLUSIVELY CARRYING ON BANKING B USINESS, THEN THE INCOME DERIVED FROM THE SAID BUSINESS CANN OT BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE. THE SAID INCOME IS LIABLE FOR TAX. A CO-OPERATIVE BANK AS DEFINED UNDER THE BANKING REGULATION ACT INCLUDES T HE PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEFITS TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A. PRIMARY C O- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID 11 ITA NO.1213(B)/2015 NOT WANT TO EXTEND THE SAID BENEFIT TO A CO-OPERATI VE BANK WHICH IS EXCLUSIVELY CARRYING ON BANKING BUSINESS I .E. THE PURPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSESS EE IS NOT A COOPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND AS IT DOES NOT POSSESS A LICENCE FROM RESERVE B ANK OF INDIA TO CARRY ON BUSINESS, IT IS NOT A CO-OPERATIV E BANK. IT IS A CO-OPERATIVE SOCIETY WHICH ALSO CARRIES ON THE BUSI NESS OF LENDING MONEY TO ITS MEMBERS WHICH IS COVERED UNDER SECTION 801 3 (2)(A)(I) I.E. CARRYING ON THE BUSINESS OF BANKING FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE OBJ ECT OF THE AFORESAID AMENDMENT IS NOT TO EXCLUDE THE BENEF IT EXTENDED UNDER SECTION 80P(1) TO SUCH SOCIETY IN T HE INSTANT CASE, WHEN THE STATUS OF THE ASSESSEE IS A CO-OPERA TIVE SOCIETY AND IS NOT A CO-OPERATIVE BANK, THE ORDER P ASSED BY THE ASSESSING AUTHORITY EXTENDING THE BENEFIT OF EX EMPTION FROM PAYMENT OF TAX UNDER SECTION 80P(2)(A)(I) OF T HE ACT IS CORRECT. 8.2 THE FACT THAT THE APPELLANT IS A COOPE RATIVE 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.0 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 RB I AS A BANK. IN ITS AFORESAID SUBMISSIONS DATED 27-04-2015 THE ASSESSEE HAS CLEAR LY STATED WITH THE HELP OF NECESSARY EVIDENCE AND AN AFFIDAVIT DATED 04/05/ 2015 TO THIS EFFECT THAT THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED UN DER THE KARNATAKA CO OPERATIVE SOCIETIES ACT, 1959 ENGAGED IN PROVIDING CREDIT FACILITIES ONLY TO ITS MEMBERS AND IT DOES NOT POSSES ANY BANKING LICENCE FROM THE RBI. IT IS THEREFORE, CLEAR THAT THE ASSESSEE CASE IS SQUARELY COVERED BY THE AFORESAID DECISIONS OF THE JURISDICTIONAL HIGH COURT OF KARNA TAKA IN THE CWSAES OFSRI BILURU GURUBASAV PATTINA SAHAKARI SANGHA NIYAMITHA, SUPRA, WHICH WAS FOLLOWED IN THE CASE OF GENERAL INSURANCE EMPLOYEES CO-OPERATIVE CREDIT SOCIETY LTD AND KARNATAKA HIGH COURT DECISION NI TH E CASE OF VQASAVI MULTIPURPOSE SOUHARDA SAHAKARI NIYAMITHA, ITA NO.50 5/2013 DATED 27- 06/2014 SUPRA. THEREFORE, IN VIEW OF THE FOREGOING DISCUSSION AND RESPECTFULLY 12 ITA NO.1213(B)/2015 FOLLOWING THE AFORESAID DECISIONS OF THE JURISDICTI ONAL HIGH COURT OF KARNATAKA, IT IS HELD THAT THE ASSESSEES CASE IS NOT COVERED BY SEC.80P(4) AS IT IS NOT A CO- OPERATIVE BANK AND THEREFORE, IT IS ENTITLED TO EXE MPTION U/S 80P(2)(A)(I) OF THE IT ACT. 4. AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE US . 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS A CREDIT CO- OPERATIVE SOCIETY CARRYING ON BANKING ACTIVITY ONLY FOR ITS MEMBERS. THIS IS ALSO EVIDENT FROM THE CORRIGENDUM ISSUED BY THE CIT(A) CITED SUPRA. THE HONBLE HIGH COURT O F KARNATAKA IN A NUMBER OF CASES, INCLUDING THE CASE OF M/S VASAVI CREDIT CO-OPERATIVE SOCIETY LTD., CITED SUPR A, HAS HELD THAT IF THE ASSESSEE IS NOT A CO-OPERATIVE BAN K CARRYING EXCLUSIVELY BANKING BUSINESS AND IT DOES N OT POSSESS A LICENSE FROM THE RESERVE BANK OF INDIA TO CARRY ON BANKING BUSINESS, THEN IT IS NOT A CO-OPERATIVE BANK BUT A CO-OPERATIVE SOCIETY WHICH CARRIES ON BUSINESS OF MONEY LENDING TO ITS MEMBERS WHO IS COVERED U/S 80P(2)(A) (I) OF THE ACT AND THEREFORE, IS ELIGIBLE FOR DEDUCTION U/ S 80P(2)(A)(I) OF THE ACT. THE FACTS AND CIRCUMSTANC ES OF THE CASE BEFORE US, BEING SIMILAR, WE HOLD THAT THERE I S NO MERIT IN THE APPEAL OF THE REVENUE. ACCORDINGLY, THE REVE NUES APPEAL IS DISMISSED. 13 ITA NO.1213(B)/2015 5. ON THE OTHER HAND, LEARNED AR HAS SUBMITTED THA T THE ISSUE S SQUARELY COVERED BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SRI BILURU GURUBASAVA PATTINA SAHAKA RI SANGH NIYAMIT, BAGALKOT, IN ITA NO.5006/2013 DATED 05-02-2014, SUP RA AS WELL AS IN OTHER DECISIONS; 8.1. THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANG HA NIYAMITHA, SUPRA WHICH WAS FOLLOWED IN THE CASES OF GENERAL INSURANCE EMPLOYEES CO-OPERATIVE CREDIT SOCIETY LTD. AND KARNATAKA HIGH COURT DECISION IN T HE CASE OF VASAVI MULTIPURPOSE SOUHARDA SAHAKARI NIYAMITHA, ITA NO.505/2013 DATED 27/06/2014, SUPRA, HAS CLEARLY HELD HAT A CO-OPERATIVE SOCIETY REGISTE RED AS CO-OPERATIVE SOCIETY, PROVIDING CREDIT FACILITIES T O MEMBERS AND NOT REGISTERED WITH THE RBI CANNOT BE DENIED THE EXEMPTION UNDER SECTION 80P(1)(I) OF THE IT ACT. THE OPERATIVE PART OF THE JUDGMENT READS AS F OLLOWS; THEREFORE, THE INTENTION OF THE LEGISLATURE IS CL EAR, IF A CO-OPERATIVE BANK IS EXCLUSIVELY CARRYING ON BANK ING BUSINESS, THEN THE INCOME DERIVED FROM THE SAID BUSINESS CANNOT BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE SAID INCOME IS LIABLE FOR TAX. A CO-OPERATIVE BANK AS DEFINED UNDER THE BANKING REGULATION ACT INCLUDES THE PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL 14 ITA NO.1213(B)/2015 DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO D ENY THE SAID BENEFITS TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID NOT WANT TO EXTEND THE SAID BENEFIT TO A CO-OPERATIVE BANK WHICH IS EXCLUSIVELY CARRYING ON BANKING BUSINESS I.E THE PURPOSE OF THI S AMENDMENT. THEREFORE, AS THE ASSESSEE IS NOT A CO - OPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSI NESS AND AS IT DOES NO POSSESS A LICENCE FROM RESERVE B ANK OF INDIA TO CARRY ON BUSINESS, IT IS NOT A CO-OPERA TIVE BANK. IT IS A CO-OPERATIVE SOCIETY WHICH ALSO CAR RIES ON THE BUSINESS 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 AN D IS NOT A CO-OPERATIVE BANK, THE ORDER PASSED BY THE ASSESSING AUTHORITY EXTENDING THE BENEFIT OF EXEMPT ION FROM PAYMENT OF TAX UNDER SECTION 80P(2)(A)(I) OF T HE ACT IS CORRECT. 8.2 THE FACT THAT THE APPELLANT IS A CO-OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA CO-OPERATI VE SOCIETIES ACT, 1959 ENGAGED IN PROVIDING CREDIT FAC ILITIES TO ITS MEMBERS HAS BEEN CLEARLY MENTIO0NED BY THE A O IN 15 ITA NO.1213(B)/2015 PARA-3 OF HIS AFORESAID ASSESSMENT ORDER. IT IS AL SO NOT THE CASE OF THE AO THAT THE ASSESSEE IS REGISTERED WITH THE RBI AS A BANK. IN ITS AFORESAID SUBMISSIONS D ATED 18-11-2014 THE APPELLANT HAS CLEARLY STATED WITH TH E HELP OF NECESSARY EVIDENCE AND AN AFFIDAVIT DATED 0 2-9- 2014 TO THIS EFFECT THAT THE APPELLANT IS A CO-OPER ATIVE SOCIETY REGISTERED UNDER THE KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959 ENGAGED IN PROVIDING CREDIT FAC ILITIES ONLY TO ITS MEMBERS AND IT DOES NOT POSSESSES ANY BANKING LICENCE FROM THE RBI. IT IS THEREFORE, C LEAR THAT THE APPELLANTS CASE IS SQUARELY COVERED BY THE AFO RESAID DECISIONS OF THE JURISDICTIONAL HIGH COURT OF KARNA TAKA IN THE CASES OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, SUPRA WHICH WAS FOLLOWED IN THE CASE OF GENERAL INSURANCE EMPLOYEES CO-OPERATIVE CREDIT SOCIETY LTD, AND KARNATAKA HIGH COURT DECISI ON IN THE CASE OF VASAVI MULTIPURPOSE SOUHARDA SAHAKARI NIYAMITHA ITA NO.505/2013 DATED 7-06-2014, SUPRA. THEREFORE, IN VIEW OF THE FOREGOING DISCUSSION AND RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF T HE JURISDICTIONAL HIGH COURT OF KARNATAKA. IT IS HEL D THAT THE APPELLANT CASE IS NOT COVERED BY SECTION 80P(4) AS IT IS NOT A CO-OPERATIVE BANK AND THEREFORE, IT IS E NTITLED TO THE EXEMPTION U/S 80P(2)(A)(I) OF THE IT ACT. 16 ITA NO.1213(B)/2015 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED SR.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY REGISTERE D UNDER THE KARNATAKA STATE CO-OPERATIVE SOCIETIES ACCT, 1959. THE INCOME EARNED BY THE ASSESSEE DURING THE YEAR IS FROM THE ACTIVITY OF PR OVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, THE CASE OF THE ASSESSE E IS COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGH NIYAMI T, SUPRA. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH DECEMBER, 2015. SD/ - (VIJAYPAL RAO) SD/ - (INTURI RAMARAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE D A T E D : 11-12-2015 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR,ITAT, BANGALORE