Asst. Commissioner of Income Tax, Circle- 1, Panaji V. M/s . The Goa PWD Staff Co-op. Credit Society Ltd., Panaji

ITA 220/PAN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84767 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 27-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Assessee Lawyers: R K PIKALE
• Keywords: Share purchase agreement
• Section: 263; 2

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. 220 /PNJ/2014 : (ASST. YEAR :20 1 0 - 1 1 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PANAJI - GOA . (APPELLANT) VS. M/S THE GOA PWD STAFF CO - OPERATIVE CREDIT SOCIETY LTD., GOA (PWD & IRRIGATION) , PWD BUILDING , ALTINHO, PANAJI - GOA. PAN : AA EFG9154F (RESPONDENT) A PPELLANT BY : SHR I NISHANT K. , LD. D.R. RE SPONDENT BY : SHRI R.K. PIKALE, C.A . DATE OF HEARING : 29 /0 9 /2014 DATE OF PRONOUNCEMENT : 31 / 10 /2014 O R D E R PER P.K. BANSAL THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAIN ST THE ORDER OF CIT(A), PANAJI DTD. 1 3 .0 3 .2 014 FOR THE ASSESSMENT YE AR 2010 - 1 1 BY TAKING THE FOLLOWING GROUNDS OF APPEAL : - 1. THE ORDER OF THE LEARNED CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 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) ON THE GROUNDS THAT THE ASSESSE E IS A CO - OPERATIVE SOCIETY , ACCEPTS DEPOSITS ONLY FROM ITS MEMBERS AND CAN LEND MONEY ONLY TO ITS MEMBERS AND IT CANNOT ISSUE CHEQUE BOOKS, WHEN THE ASSESSEE ACCEPTS DEPOS ITS 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 ASSESSEE IS NOT ELI GIBLE FOR DEDUCTION U/S 80P. 2 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) 3. THE LD CIT(A) HAS ERRED IN STATING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2) WHEN THE ASSESSEE IS A PRIMARY CO - OPERATIVE BANK AS PER SECTION 80P(4) READ WITH SECTION 2(24)(VIIA) OF I.T. ACT, 1961 AND ALSO FULFIL L S ALL THREE REQUIREMENTS AS GIVEN IN SECTION 5(CCV) OF THE BANKING REGULATION ACT, 1949 TO QUALIFY AS PRIMARY CO - OPERATIVE BANK. 2. THE BRIEF FACTS OF THE C ASE FOR THE ASSESSMENT YEAR 2010 - 1 1 ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGIS TERED UNDER THE GOA CO - OPERATIVE SOCIETIES ACT , 2001 . THE ASSESSEE FILED RETURN DECLARING GROSS TOTAL INCOME OF RS. 68,15,914/ - 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 DEDUCTIO N TO THE ASSESSEE U/S 80P(2)(A)(I) AND THE INCOME WAS ASSESSED AT RS. 68 , 15 , 91 0/ - . 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) ALLOW ED THE APPEAL OF THE ASSESSEE. 2.1 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 ENTITL ED 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. 1003/HYD/2011 & 1004/HYD/2011 DT. 2.7.2012. 2.2 THE LD. AR BEFORE US VEHEMENTLY CONTEN DED 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 3 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) ASSESSEE IS A CO - OPERATIVE SOCIETY DULY REGISTERED UNDER THE GOA CO - OPERATIVE SO CIETIES ACT, 2001 . THE PRIMARY OBJECT OF THE ASSESSEE IS TO PROVIDE FOR SOCIAL AND ECONOMICAL BETTERMENTS OF ITS MEMBERS THROUGH SELF - HELP AND MUTUAL AID IN ACCORDANCE WITH THE CO - OPERATI VE PRINCIPLES. ALSO EXPLAINING PROPER UTILIZATION OF FUNDS, MAKI NG SAVINGS, CUTTING UNPRODUCTIVE INVESTMENTS. FOR THIS, OUR ATTENTION WAS DRAWN TOWARDS THE BYE - LAWS OF THE ASSESSEE FROM (1) TO ( 8 ). THE ASSESSEE IS A CREDIT SOCIETY. HE CONTENDED THAT THE WORD CREDIT IS OF OUTMOST IMPORTANT TO DECIDE THE STATUS O F 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 THERETO BUT RELIED ON BANKING REGUL ATION 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. HE ALSO RELIED ON CBDT CIRCULAR NO.133 OF 2007 DATED 9.5.2007 FOR THE PROPOSITION THAT SECTION 80P(4 ) WILL NOT APPLY TO AN ASSESSEE WHICH IS NOT A COOPERATIVE BANK. THE PAID UP CAPITAL OF THE ASSESSEE, NO DOUBT, IS MORE THAN RS. 1 LACS. 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 2013. ATTENTION WAS ALSO DRAWN TOWARDS THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF VYAVASAYA SEVA SAHAKA RA 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 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 BANKING ACTIVITIES AS CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE BANGAL ORE BENCH OF THIS TRIBUNAL IN ITA NO.72/BANG/2013 IN THE CASE OF ITO VS. DIVYAJYOTHI CREDIT CO - OPERATIVE 4 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) SOCIETY LTD. FOR THE A.Y 2009 - 10 IN WHICH IT WAS HELD THAT THE PROVISIONS OF SEC. 80P(4) ARE APPLICABLE ONLY TO CREDIT CO - OPERATIVE BANKS AND NOT TO CR EDIT 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 PRIMARY AGRICULTURE CO - OPERATIVE SOCIETY LTD, 23 TAXMAN.COM 318 (DELHI), ITO VS JANKALYAN NAGRI S AHAKARI 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 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 WITHOUT THE FOUNDATIONAL FACT OF THE ASSESSEE BEING CO - OPERATIVE BANK. 3. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSI DERED 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 BEFORE 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 SECTIONS 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 COM PUTING 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 5 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS M EMBERS, 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 - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CRE DIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. EXPLANATION. FOR THE PURPOSES OF THIS SUB - SECTION, (A) 'CO - OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL CREDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN P ART 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 PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG - TERM CRED IT 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 - OP ERATIVE 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 - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDI T 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 AGRIC ULTURAL 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 FIND THAT THE PROVISIONS OF SEC. 80P(4) MANDATES THAT THE PROVISIONS OF SEC. 80P WILL NOT A PPLY 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 6 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BAN KING 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 T O 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 BANK. THE EMBARGO PUT U/S 80P(4) ARE APPLICABLE ON LY 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 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 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 ENTI TLED 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 ASS ESSEE 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 SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RUR AL 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. THIS SECTION NOWHERE STATES CO - OPERATIVE CREDIT S OCIETY 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. IN OUR OPINION, SEC. 80P(2)(A)(I) PROVIDES TWO TYPES OF ACTIVITIES IN WHICH THE CO - OPERATIVE SOCIETY MUS T BE ENGAGED TO BE ELIGIBLE FOR DEDUCTION 7 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 S UCH 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) CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR (B) CO - OPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES 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 CR EDIT 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. 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 REGUL ATIONS ACT, 1949 AS UNDER : - CO - OPERATIVE BANK MEANS A STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK: 8 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) 5. 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. 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 OBJ ECT 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 M EMBER: 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 GOVERNMENT FOR T HE PURPOSE. 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 SH ARE 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 N OT 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 COMPLIES WITH A LL 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 9 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) APPLICABLE IN THE 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 THE BUSINESS OF BANKING OR PROVIDING CREDIT F ACILITIES 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 OBJECTS OF THE ASSESSEE IN THIS CASE ARE ENUMERATED AS UNDER : - 1) T O PROVIDE FOR SOCIAL AND ECONOMICAL BETTERMENTS OF ITS MEMBERS THROUGH SELF - HELP AND MUTUAL AID IN ACCORDANCE WITH THE CO - OPERATIVE PRINCIPLES. 2) TO PROMOTE ECONOMIC AND SOCIAL DEVELOPMENT OF ITS MEMBERS EITHER BY ITSELF OR IN CO - OPERATION WITH OTHER ORGANIZATIONS. 3) TO ENCOUR AGE THE HABIT OF SAVING AMONG ITS MEMBERS EITHER BY MOBILIZING REGULAR MONTHLY THRIFT / CUMULATIVE DEPOSIT, SAVINGS, RECURRING, FIXED AND OTHER TYPES OF DEPOSITS. 4) TO OFFER RETIREMENT BENEFIT AND DEATH RELIEF SERVICES TO ITS MEMBERS . 5) TO PROVIDE FINANC IAL ASSISTANCE IN THE FORM OF LOAN TO NEEDY MEMBERS FOR ALL REASONABLE PURPOSE ON REASONABLE TERMS AND CONDITIONS . 6) TO ACT AS AGENT FOR JOINT PURCHASE OF THE DOMESTIC AND OTHER REQUIREMENT OF ITS MEMBERS ON CREDIT BASIS . 7) TO PROVIDE EDUCATION TO ITS MEMBERS, OFFICERS AND EMPLOYEES ON THE PRINCIPLES OF CO - OPERATION TO ENSURE HEALTHY GROWTH OF CO - OPERATIVE SOCIETY . 8) TO UNDERTAKE ANY OTHER ACTIVITIES WHICH ARE CONDUCIVE AND NECESSARY TO ATTAIN ITS OBJECTS . 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 ACCEPTING, 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 . 10 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) FROM THE SAID DEFINITION IT IS CLEAR THAT BANKING MEANS ACCEPTING DEPOSIT OF MONEY 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 STATED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE WAS NOT AC CEPTING DEPOSITS OF MONEY FROM NON - MEMBERS. 9. THE DEPOSITS SO ACCEPTED ARE USED BY THE ASSESSEE CO - OPERATIVE SOCIETY FOR LENDING OR INVESTMENT. 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 OPINION, CONDITION NO.1 DOES NOT STAND SATISFIED AND IT CAN NOT BE SAID THAT THE ASSESSEE SOCIETY WAS CARRYING ON BANKING BUSINESS AS IT WAS NOT ACCEPTING DEPOSITS FROM THE PERSONS WHO WERE NOT MEMBERS. 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. IF WE LOOK INTO THE BYE - LAWS WHICH CON SISTS OF FUND OF THE SOCIETY, WE NOTED THAT THE TYPES OF THE DEPOSITS WHICH THE ASSESSEE 11 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) HAS ACCEPTED AS PER BYE - LAWS ARE THE SAME AS ARE BEING ACCEPTED DURING THE COURSE OF THE CARRYING OUT THE BANKING ACTIVITIES. 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. 16 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, A CCEPTS 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 CORP ORATE CONSTITUTED UNDER ANY LAW FOR THE TIME BEING IN FORCE, OR A SOCIETY REGISTERED UNDER THE S OCIETIES 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 SU CH 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 ORGANIZATION FOR THEIR SOCIAL, ECONOMIC, CULTURAL AND EDUCATIONAL IMPROVEMENT.] (3) ADMISSION O F MEMBERS MAY BE MADE ONLY BY AN ELECTED BOARD OF DIRECTORS OR BY THE GENERAL BODY WHERE SUCH A BOARD DOES NOT EXIST: 1 2 [OMITTED ]. 12 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) (4) A PERSON ADMITTED AS A MEMBER MAY EXERCISE THE RIGHTS OF MEMBERSHIP, INCLUDING THE RIGHT TO VOTE, ONLY ON FULFILMEN T 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 ADMISSION TO MEMBERSHIP TO ANY PERSON DULY QUALIFIED THEREFORE UNDER THE PROVISIONS OF THIS ACT AND I TS 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 WITHIN FIFTEEN DAYS OF THE DATE OF THE DECISION, OR WITHIN THREE MONTHS FROM THE DATE OF THE APPL ICATION 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 MONTHS OF THE DATE OF COMMUNICATION OF REFUSAL AND UNDER SUB - SECTION (4) WITHIN TWO MONTHS OF DEE MED 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 AU THORITY WITHIN A PERIOD OF THREE MONTHS FROM THE DATE OF ITS RECEIPT. 22. JOINT MEMBER . (1) SUBJECT TO THE PROVISIONS OF SECTION 21, A SOCIETY MAY ADMIT ANY PERSON 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 NAME STANDS FIRST IN THE SHARE CERTIFICATE CEASES TO BE A MEMBER, THE PERSON ADMITTED AS JOINT ME MBER 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 MEM BER 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 ABSENCE OF THE MEMBERS WHOSE NAME STANDS FIRST IN THE SHARE CERTIFICATE. 13 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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. 2 1 (1) IS SHALL. THIS FACT IS CLARIFIED FURTHER BY SUB - SECTION (2) AS RE - PRODUCED HEREINABOVE THAT NO CO - OPERATIVE SOCIETY S HALL 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 SOC IETY 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 21 (1) BUT ALSO AS PER THE RULES AND BYE - LAWS OF THE CO - OP ERATIVE 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 HA VE NOT USED THE WORDS THIS ACT, RULES AND BYE - LAWS IN SUB - SECTION (2). 13. WE HAVE GONE THROUGH THE BYE - LAWS WHICH CONTAINS THE MEMBERSHIP CLAUSE. B YE - LAWS NO.1 7 STATES AS UNDER : - 1 7 . QUALIFICATION S FOR MEMBERSHIP : 1. T HE MEMBERSHIP OF THE SO CIETY SHALL BE OPEN TO ANY PERSON WHO IS AN EMPLOYEE ON THE ESTABLISHMENT OF THE P.W.D AND WA TER RESOURCE DEPARTMENT IN GOA AND WORKING IN ANY OF ITS INSTITUTIONS SITUATED WITHIN THE AREA OF OPERATION AS SPECIFIED UNDER B YE - LAW NO.4(14) . 2. NO PERSON SH ALL BE ELIGIBLE FOR THE MEMBERSHIP OF THE SOCIETY UNLESS: - A) HE IS THE CITIZEN OF INDIA. B) HE SUBMITS A WRITTEN APPLICATION IN SUCH FORM AS PRESCRIBED BY THE SOCIETY. C) HE PAYS ENTRANCE FEE OF RS.10/ - WHICH IS NON - REFUNDABLE. D) HE PURCHASES AT LEAST ONE SHARE OF THE SOCIETY ON APPLICATION. E) HE GIVES IN WRITING AN IRREVOCABLE AUTHORITY TO DRAWING & DISBURSING OFFICER OF THE DEPARTMENT / ESTABLISHMENT TO RECOVER BY DEDUCTION FROM HIS/HER SALARY, DUES PAYABLE BY HIM TO THE SOCIETY. 14 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) FROM CLAUSE 1 7 , IT IS APPARENT T HAT THE BYE - LAWS OF SOCIETY DOES NOT PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS MEMBER. MEMBERSHIP IS PERMITTED ONLY TO INDIVIDUALS. THUS THE THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK IS COMPLIED WITH. SINCE THE ASSESSEE SOCIET Y DOES COMPLIES 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 ). 14. 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, U NDER 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 GOVERNED BY THE BANKING REGULATIONS ACT. THEREFORE, THE SOCIETY BEING A CO - OPER ATIVE 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 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 NOTED 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 N OT 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 CI T VS. 15 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 V YAVASAYA 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. T HE 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 POSSIBLE TO ACCEPT THIS CONTENTION. THE PETITIONERS ARE NOT THE BANKING INSTITUTI ONS 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 C ONTROL 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 - TH E 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 BANKING 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 BANKING AS DEFINED IN SECTION 5(B) OF THE BANKING REGULATION ACT, 1949. TH IS 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 SOUHARDA SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012 ( SUPRA), FOR WHIC H 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 : - 16 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 CONDITION IS SATISFIED, IT CANNOT BE SAID THAT THE PRIME OBJECT OR PRINCIPAL BU SINESS 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 REGULATION ACT, 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE ASSESSEE, THER EFORE, 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. ACCORDINGLY, IN OUR OPINION THE PROVISIONS OF SECTION 80P (4) READ WITH EXPLAN ATION 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 CONFIRM THE ORDER OF CIT(A) ALLOWING DEDUCTION TO THE ASSESSEE. 15. 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 A SSESSEE. 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 T HEREFORE THE DISTINCTION 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 WHIC H 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 FI LED 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 ASSESSEE BEING CO - OPERATIVE BANK. THEREFORE, THIS DECISION IS NOT APPLICABL E. 17 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) 16. WE, THEREFORE, IN VIEW OF OUR AFORESAID DISCUSSION HOLD THAT THE ASSESSEE HAS NOT TO BE REGARDED TO BE A PRIMARY CO - OPERATIVE BANK AS ALL THE THREE BASIC CONDITIONS ARE NOT COMPLIED WITH, THEREFORE, IT IS NOT A CO - OPERATIVE BANK AND THE PROVISIONS OF SEC. 80P(4) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) ALLOWING DEDUCTION U /S 80P(2)(A)(I) TO THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(I) ON THE INCOME GENERATED FROM THE BANKING OR PROVIDING CREDIT FACILITIES BY THE ASSESSEE TO ITS MEMBERS. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 18. ORDER PRONOUNCED IN THE OP E N COURT ON 31 .10.2014. SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 31 .10 .2014 *A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CON CERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA 18 ITA NO. 220 /PNJ/2014 (ASST. YEAR: 2010 - 1 1 ) CORRIGENDUM 1. THIS APPEAL HAD BEEN DISPOSED OFF VIDE ORDER DT. 31.10.2014. WE FOUND THAT SOME MISTAKES APPARENT ON RECOR D HAS OCCURRED IN 2 ND PART OF PARA 13 ON PG. 14 OF THE SAID ORDER DT. 31.10.2014 DUE TO CORRECTIONS NOT BEING SAVED. THEREFORE, 2 ND PART OF PARA 13 ON PG. 14 OF THE SAID ORDER DT. 31.10.2014 BE SUBSTITUTED WITH THE FOLLOWING PARAGRAPH : FROM CLAUSE 17, IT IS APPARENT THAT THE BYE - LAWS OF SOCIETY DOES NOT PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS MEMBER. MEMBERSHIP IS PERMITTED ONLY TO INDIVIDUALS. THUS THE THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK IS COMPLIED WITH. SINCE THE ASSESSEE SOCIETY DOES NOT COMPLY WITH ALL THE THREE CONDITIONS, THEREFORE, IN OUR OPINION THE ASSESSEE SOCIETY DOES NOT BECOME A PRIMARY CO - OPERATIVE BANK AND IN VIEW OF EXPLANATION (A) OF SECTION 80P(4) IT HAS NOT TO BE REGARDED AS A CO - OPERATIVE BANK AN D IS NOT HIT BY SECTION 80P(4). 2. THE ABOVE PARAGRAPH BE READ INTO THE ORDER IN PLACE OF THE EXISTING PARAGRAPH FROM THE DATE OF PASSING OF THE ORDER I.E. 31.10.2014. SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 28/11/2014 SSL COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER