Asst. Commissioner of Income Tax, Circle- 1(1), Panaji V. M/s . The Goa State Co-op. Housing Finance & Federatin Ltd., Panaji

ITA 222/PAN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84759 (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: 29-10-2014
• 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: Gift; Revision of order; Share purchase agreement
• Section: 263

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. 22 2 /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 STATE CO - OPERATIVE HOUSING FINANCE & FEDERATION LTD., 3 RD FLOOR , GOMES BUILDING, OPP. HOTEL DELMON , PANAJI - GOA. PAN : AA AAG0330L . (RESPONDENT) A PPELLANT BY : SHRI NISHANT K. , LD. D.R. RE SPONDENT BY : SHRI R.K. PIKALE, C.A . DATE OF HEARING : 29 /10 /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 4 .0 3 .2014 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 D EDUCTION 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 A CCEPTS 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 E IS NOT ELIGIBLE FOR DEDUCTION U/S 80P. 2 ITA NO. 22 2 /P NJ/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, 19 61 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 S OCIETY REGISTERED UNDER THE GOA CO - OPERATIVE SOCIETIES ACT , 2001 . THE ASSESSEE FILED RETURN DECLARING GROSS TOTAL INCOME OF RS. 1 ,15, 20,045 / - AND CLAIMED DEDUCTION U/S 80P(2)(A)(I) AND THEREFORE NET TAXABLE INCOME WAS SHOWN TO BE NIL. THE AO DID NOT ALLO W THE DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(I) AND THE INCOME WAS ASSESSED AT RS. 1 , 15 , 2 0 ,050 / - . 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 WI LL 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. 1003/HYD/2011 & 1004/HYD/2011 DT. 2.7.2012. 2.2 THE LD. AR BEFORE US V EHEMENTLY CONTENDED THAT THE PROVISIONS OF SEC. 80P(4) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE MAIN CONTENTIONS OF THE ASSESSEE ARE THAT ASSESSEE IS NOT A CO - OPERATIVE BANK. THE ASSESSEE IS A CO - OPERATIVE SOCIETY DULY REGISTERED UNDER THE GOA CO - OPERATIVE 3 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) SOCIETIES ACT, 2001 . THE PRIMARY OBJECT OF THE ASSESSEE IS TO GRANT LOANS AND ADVANCES TO ITS MEMBERS ON SUCH TERMS AND CONDITIONS AND ON THE SECURITY OF IMMOVABLE PROPERTY AND/OR SUCH OTHER SECURITY AS MAY BE PRESCRIBED BY THE BOARD . ALSO EX PLAINING PROPER UTILIZATION OF FUNDS , MAKING SAVINGS , CUTTING UNPRODUCTIVE INVESTMENTS. FOR THIS , OUR ATTENTION WAS DRAWN TOWARDS THE BYE - LAWS OF THE ASSESSEE FROM ( 3. 1) TO ( 3.32 ). THE ASSESSEE IS A CREDIT SOCIETY. HE CONTENDED THAT THE WORD CREDIT IS OF O UTMOST IMPORTANT TO DECIDE THE STATUS OF THE ASSESSEE UNDER THE BANKING REGULATION ACT, 1949. ACCORDING TO HIM THE ASSESSEE IS A CO - OPERATIVE CREDIT SOCIETY BUT WHEN WE QUESTION THAT SECTION 80P DOES NOT TALK OF CO - OPERATIVE CREDIT SOCIETY, HE COULD NOT RE PLY THERETO BUT RELIED ON BANKING REGULATION ACT FORGETTING THAT THE SECTION 80P ONLY USES THE WORD CO - OPERATIVE SOCIETY ENGAGED IN - . THE ACTIVITIES OF THE ASSESSEE ARE LIMITED TO ITS MEMBERS. 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 T HE 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 COU RT 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 ITS MEMBERS, IT DOES NOT CEASE TO BE A CO - OPERATIV E 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 AL SO 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 THE 4 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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. RELI ANCE 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.CO M 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 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 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 BEFORE US IS WHETHER THE ASSESSEE IS ENTITLED FOR DEDU CTION 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 U NDER : - 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 SUM S SPECIFIED IN SUB - SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING, NAMELY : (A) IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING O R PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR 5 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. EXPLANATION. FOR THE PURPOSES OF THIS SUB - SECTION, (A) 'CO - OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL CREDIT SOCIETY' SHALL HAVE THE MEANI NGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); (B) 'PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUKA AND THE 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 CREDI T FACILITIES TO ITS MEMBERS, THE CO - OPERATIVE SOCIETY IS ENTITLED FOR DEDUCTION ON WHOLE OF THE INCOME RELATING TO ANY ONE OR MORE OF SUCH BUSINESS. FROM THE READING OF SEC. 80P(4) IT IS APPARENT THAT THIS SECTION DENIES DEDUCTION TO A CO - OPERATIVE BANK O THER 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 T HE 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 A ND 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 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 ENGA GED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT 6 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 CARRYI NG ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS CONTINUED TO BE ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). THIS PRE - SUPPOSES THAT EVERY CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING CANNOT BE REGARDED TO BE A CO - OPERATIVE BANK. THE EM BARGO PUT U/S 80P(4) ARE APPLICABLE ONLY TO A CO - OPERATIVE BANK. IN OUR OPINION, IT CANNOT BE SAID THAT A CO - OPERATIVE SOCIETY CANNOT CARRY ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS EVEN IF IT IS NOT A CO - OPERATIVE BANK. IF WE READ THE 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 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 B ANK. IN CASE IT IS FOUND THAT THE ASSESSEE IS A CO - OPERATIVE BANK, THE ASSESSEE WILL NOT BE ENTITLED FOR DEDUCTION AS STIPULATED U/S 80P(2)(A)(I) BUT IN CASE THE ASSESSEE IS NOT A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRI MARY 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 PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THIS SECTIO N 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. IN OUR OPINION, SEC. 80P(2)(A)(I) PROVIDES TWO TYPES OF ACTIVITIES IN WHICH THE CO - OPERATIVE SOCIETY MUST BE ENGAGED TO BE ELIGIBLE FOR DEDUCTION UNDER SUB - CLAUSE (I). THESE TWO ACTIVITIES ARE NOT ALTERNATE ONES BECAUSE THE 7 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 O NE 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 I TS 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 OPINIO N, 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 MEMB ERS AND TO THE PUBLIC OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR TO THE PUBLIC, THE INCOME WHICH RELATES TO THE BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS WILL ONLY BE ELIGIBLE FOR DEDUCTION U/S 80P(2) (A)(I). THERE IS NO PROHIBITION U/S 80P NOT TO ALLOW DEDUCTION TO SUCH CO - OPERATIVE SOCIETIES IN RESPECT OF BUSINESS RELATING TO ITS MEMBERS. 4.1 NOW, THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS A CO - OPERATIVE BANK OR NOT. CO - OPERATIVE BANK IS D EFINED 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 - OPE RATIVE BANK MEANS STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK 8 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 AS SESSEE 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 AGRICULTURA L 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 P ROVIDED BY THE STATE GOVERNMENT FOR THE 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 BANK ING 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 ASSESSE E CO - OPERATIVE SOCIETY COMPLIES WITH ALL THE THREE CONDITIONS. IN CASE, IT DOES NOT COMPLY WITH ALL THE THREE CONDITIONS, IT CANNOT BE REGARDED TO BE A CO - OPERATIVE BANK AND THE PROVISIONS OF SEC. 80P(4), IN OUR OPINION, WILL NOT BE APPLICABLE IN 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 9 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) GET DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF WHOLE OF THE INCOME WHICH THE ASSESSEE DERIVES FROM CARRYING ON THE BUS INESS OF BANKING OR PROVIDING 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 OBJECTS OF THE ASSESSEE IN THIS CASE ARE ENUMERATED AS UNDER : - 3.1 T O GRANT LOANS AND ADVANCES TO ITS MEMBERS ON SUCH TERMS AND CONDITIONS AND ON THE SECURITY OF IMMOVABLE PROPERTY AND/OR SUCH OTHER SECURITY AS MAY BE PRESCRIBED BY THE BOARD . 3.2 TO DEVELOP RESIDENTIAL PLOTS OUT OF LARGE AREA PURCHASED FOR DEVELOPMENT AND TO CONSTRUCT RESIDENTIAL AND COMMERCIAL UNIT TO BE ALLOTTED TO MEMBERS OF THE CO - OPERATIVE HOUSING SOCIETIES. 3.3 TO PARTICIPATE AS A PARTNER IN A JOINT VENTURE CO - OPERATIVE COMPANY OR A COMPANY OF THE GOVERNMENT OF GOA OR THE CENTRAL G OVERNMENT FOR THE PROMOTION OF HOUSING ACTIVITY, DEVELOPMENT OF INFRASTRUCTURE, CONSTRUCTION ACTIVITY, INFORMATION TECHNOLOGY ALONG WITH OTHER ALLIED ACTIVITIES TO HOUSING THROUGH SHARE CAPITAL PARTICIPATION AND ALSO PARTICIPATE IN THE MANAGEMENT OF SUCH JOINT VENTURE THROUGH NOMINATED DIRECTOR(S) IN RELATION TO THE SUBSCRIBED AND PAID - UP SHARE CAPITAL IN THE CO - OPERATIVE COMPANY, JOINT VENTURE COMPANY, WITH A RIGHT TO WITHDRAW FROM SUCH COMPANY. 3.4 TO GRANT LOANS AND ADVANCES TO SOCIETIES REGISTERED UND ER THE SOCIETIES REGISTRATION ACT, 1860 OR TRUSTS REGISTERED UNDER THE INDIAN TRUSTS ACT, 1882 WHICH ARE ENGAGED IN SOCIAL SECTORS NAMELY; HEALTH, EDUCATION AND WELFARE ACTIVITIES, FOR CONSTRUCTION OF THEIR OWN BUILDING TO BE USED FOR ADVANCEMENT OF THEI R OBJECTIVES ONLY; PROVIDED THAT SUCH A SOCIETY OR TRUST POSSESSES LAND FREE FROM ALL ENCUMBRANCES, CHARGE, LIEN, MORTGAGES, ATTACHMENT, GIFT ETC. WHICH CAN BE MORTGAGED AS A SECURITY OF LOAN, ON SUCH TERMS AND CONDITIONS AS MAY BE DETERMINED BY THE BOARD FROM TIME TO TIME . 3.5 TO GRANT LOAN S AND ADVANCES FOR DEVELOPMENT OF INFRASTRUCTURE WITHIN A HOUSING COMPLEX BY A CO - OPERATIVE HOUSING SOCIETY AS ALSO ELSEWHERE, AGAINST THE SECURITY OF IMMOVABLE PROPERTY AND / OR SUCH OTHER SECURITIES AND SUCH TERMS AND CONDITIONS AS MAY BE DETERMINED BY THE BOARD FROM TIME TO TIME. 3.6 WITH THE PREVIOUS SANCTION OF THE REGISTRAR TO ACQUIRE AND DEVELOP LANDS AND TO CONSTRUCT BUILDING FOR THE BENEFIT OF HOUSING PROGRAMMES AND TO UNDERTAKE OTHER ALLIED ACTIVITIES FOR PRO MOTING STATES AND NATIONAL HOUSING POLICY . 3.7 TO OBTAIN FUNDS BY WAY OF DEPOSITS, LOANS AND GRANTS FROM MEMBERS AND SUCH OTHER SOURCES AS MAY BE DEEMED NECESSARY ON SUCH TERMS AND CONDITIONS AS MAY BE PRESCRIBED BY THE BOARD. 10 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 3.8 TO BORROW OR RAISE OR SE CURE THE PAYMENT OF MONEY BY THE ISSUE OF DEBENTURES, DEBENTURE STOCK AND BONDS AND TO CHARGE OR SECURE THE SAME BY TRUST DEED ON THE UNDERTAKING OF FEDERATION OR UPON ANY SPECIFIC PROPERTY AND RIGHTS OF THE FEDERATION. 3.9 GENERALLY TO PURCHASE, TAKE ON LEASE OR IN EXCHANGE, HIRE OR OTHERWISE ACQUIRE ANY IMMOVABLE PROPERTY AND ANY RIGHTS OR PRIVILEGES WHICH THE FEDERATION MAY THINK NECESSARY OR CONVENIENT WITH REFERENCE TO ANY OF THE OBJECTS FOR WHICH THE FEDERATION IS ESTABLISHED OR ACQUISITION OF WHIC H MAY SEEM CALCULATED TO FACILITATE THE REALIZATION OF ANY SECURITIES HELD BY THE FEDERATION OR TO PREVENT OR DIMINISH ANY APPREHENDED LOSS OR LIABILITY. 3.10 TO MANAGE SELL AND REALIZE ALL PROPERTY, MOVABLE AND IMMOVABLE WHICH MAY COME INTO POSSESSION OF THE FEDERATION IN SATISFACTION OR PART SATISFACTION OF ANY OF ITS CLAIM. 3.11 TO ACQUIRE AND HOLD AND GENERALLY DEAL WITH ANY PROPERTY AND NAY RIGHT TITLE OR INTEREST IN ANY PROPERTY MOVABLE OR IMMOVABLE WHICH MAY FORM PART OF THE SECURITY FOR ANY LOANS A DVANCES OF WHICH MAY BE CONNECTED WITH ANY SUCH SECURITY. 3.12 TO ACQUIRE, PURCHASE, CONSTRUCT, MAINTAIN AND LATER ANY PROPERTIES, LAND, BUILDINGS OR WORKS NECESSARY OR CONVENIENT FOR THE PURPOSE OF FEDERATION. 3.13 TO SELL, IMPROVE, MANAGE, DEVELOP, EXCH ANGE, LEASE, MORTGAGE, DISPOSE OFF, TURN TO ACCOUNT OR OTHERWISE DEAL ALL OR ANY PART OF THE PROPERTIES AND RIGHTS OF THE FEDERATION. 3.14 TO EMPLOY EXPERTS TO INVESTIGATE, EXAMINE INTO THE TITLE, CONDITIONS, PROSPECTS, VALUE, CHARACTER AND CIRCUMSTANCES OF ANY ASSETS, PROPERTY OF RIGHTS. 3.15 TO INSPECT THE SECURITY OFFERED BY THE MEMBERS OF THE FEDERATION THROUGH SUCH PERSONS AS MAY BE DEPUTED FOR THE PURPOSE FROM TIME TO TIME. 3.16 TO ESTABLISH AND SUPPORT OR AID IN THE ESTABLISHMENT AND SUPPORT OF FU NDS, CALCULATED TO BENEFIT EMPLOYEES OR EX - EMPLOYEES OF THE FEDERATION OR THEIR DEPENDANTS OR CONNECTIONS OF SUCH PERSONS AND TO GRANT PENSION ALLOWANCE, GRATUITIES AND BONUS AND TO MAKE PAYMENTS TOWARDS INSURANCE AND TO SUBSCRIBE MONEY FOR CHARITABLE OR BENEVOLENT OBJECTS. 3.17 TO INVEST OR DEPOSIT FUNDS OF THE FEDERATION NOT IMMEDIATELY REQUIRED IN THE MANNER SPECIFIED IN SECTION 55 OF THE ACT. 3.18 TO OPEN BRANCHES IN THE STATE OF GOA WITH PREVIOUS SANCTION OF THE REGISTRAR. 3.19 TO NEGOTIATE AND/OR EN TER INTO ANY SCHEME OR SCHEMES PERTAINING TO FINANCING MEMBERS OF THE SOCIETY WITH GOVERNMENT OR ANY OTHER AUTHORITY OR INSTITUTION AND TO WORK OUT AND ADMINISTER SUCH SCHEME OR SCHEMES WITH THE CONDITION THAT THE UNDERTAKING OF SUCH SCHEME SHOULD HAVE PRI OR PERMISSION OF THE REGISTRAR. 3.20 TO REMUNERATE ANY PERSON, COMPANY OR SOCIETY FOR SERVICES RENDERED IN PLACING OR ASSISTING IN PLACING ANY OF THE SHARES IN THE FEDERATIONS CAPITAL OR ANY DEBENTURES OR DEBENTURE - STOCK OF THE FEDERATION IN OR ABOUT THE FORMATION OR PROMOTION OF THE FEDERATION. 11 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 3.21 TO ADVISE, GUIDE ASSIST AND INSPECT MEMBER SOCIETIES AND ARRANGE FOR EFFICIENT AND REGULAR SUPERVISION IN THEIR INTEREST. 3.22 TO GUIDE, ASSIST, TRAIN AND IMPART KNOWLEDGE RELATING TO MANAGEMENT OF CO - OPERATIV ES AND MAINTENANCE OF STATUTORY RECORDS, MAINTENANCE OF BOOKS OF ACCOUNTS, HOLDING OF MEETINGS AND ITS MINUTES TO THE EMPLOYEES OF THE MANAGEMENT OF CO - OPERATIVE HOUSING SOCIETIES AND TO GENERALLY CARRY ON THE FEDERAL ACTIVITIES RELATING TO HOUSING SOCIE TIES. 3.23 TO ACT AS ARBITRATOR, RE - CONCILIATOR AND THE MEMBER OF THE HOUSING TRIBUNAL, TO DECIDE THE DISPUTE BETWEEN THE MEMBERS AND SOCIETIES AS MAY BE REFERRED TO THE FEDERATION UNDER THE ACT. 3.24 TO CARRY ON CO - OPERATIVE PROPAGANDA AND FOR THE SAID PU RPOSE PUBLISH BOOKS, MAGAZINES AND PERIODICALS. 3.25 TO ORGANIZE FRESH SOCIETIES ON SOUND LINES WITHIN THE AREA OF OPERATION OF THE FEDERATION. 3.26 TO CONVENE PERIODICAL MEETINGS AND CONFERENCES OF MEMBER SOCIETIES AND INDIVIDUAL MEMBERS OF THE PRIMARY HO USING SOCIETIES FOR THE DISCUSSION TO MEANS AND MEASURES FOR THE PROMOTION OF THE PRIMARY OBJECTS OF THE SOCIETY. 3.27 TO CREATE AND MAINTAIN THE CADRE OF MANAGERS AND/OR ACCOUNTANTS FOR THE BENEFIT OF MEMBER SOCIETIES. 3.28 TO RAISE FUNDS REQUIRED TO MAIN TAIN THE CADRE REFERRED TO ABOVE BY COLLECTING CONTRIBUTION FROM THE MEMBERS AT SUCH RATES AS ARE DECIDED BY THE BOARD OF DIRECTORS. 3.29 TO FRAME RULES GOVERNING SERVICE CONDITIONS, INCLUDING RECRUITMENT, PROMOTION, TRANSFER, PUNISHMENT, PROVIDENT FUND, G RATUITY ETC. 3.30 TO ACT AS AN ADMINISTRATOR AND LIQUIDATOR UNDER THE ORDERS PASSED BY THE REGISTRAR OF COOP. SOCIETIES. 3.31 TO DEAL IN THE CONSTRUCTION AND BUILDING MATERIALS LIKE CEMENT, IRON, MARBLE AND BRICKS ETC. AND INFRASTRUCTURE DEVELOPMENT. 3.32 TO DO SUCH OTHER THINGS AS ARE INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF ALL OR ANY OF THE ABOVE OBJECTS AND ANY OTHER ACTIVITIES AS DIRECTED OR ENTRUSTED BY THE GOVERNMENT, INCLUDING THE PRINTING AND SALE OF STATIONERY NEEDED BY HOUSING CO - OPERATIVES . 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 : - 12 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) ' 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 . FROM THE SAID DEFINITION IT IS CLEAR THAT BANK ING 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 ACCEPTING DEPOSITS OF MONEY FROM NON - MEMBERS. THIS FACT HAS NOT BEEN DENIED BY THE REVENUE. 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 SOCIET Y 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 BUSINES S CARRYING ON BY THE ASSESSEE IS A BANKING BUSINESS OR NOT. THE INCOME TAX IN OUR OPINION IS NOT CONCERNED WHETHER THE 13 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 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 SAM E HEAD EVEN IF THE NATURE OF THE BUSINESS IS ILLEGAL. IF WE LOOK INTO THE BYE - LAWS WHICH CONSISTS OF FUND OF THE SOCIETY, WE NOTED THAT THE TYPES OF THE DEPOSITS WHICH THE ASSESSEE HAS ACCEPTED AS PER BYE - LAWS ARE THE SAME AS ARE BEING ACCEPTED DURING TH E 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 T HE 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, 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) N O 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 ORAT E 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 P UBLIC 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 14 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) ORGANIZ ATION 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: 1 2 [OMITTED ]. (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 ADMISSION 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 WITHIN 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 - O PERATIVE 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 D ECISION 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 MONTH S 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 U NDER 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. 22. JOINT MEMBER . (1) SUBJECT TO THE PROVISIONS OF SECTION 21, A SOCIETY MAY ADMIT ANY PERS ON 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 MEMBER SHALL AUTOMATICALLY BE THE FIRST MEMBER. IN THE EVENT OF THE CESSATION OF MEMBERSHIP OF THE FIRST MEMBER BY DEATH, 15 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) THE JOINT MEMBER SHALL BE THE FIRST MEMBER A ND 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 ABSENCE OF THE MEMBERS WHOSE NAME STANDS FIRST IN THE SHARE CERTIFICATE. 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 CL ARIFIED FURTHER BY SUB - SECTION (2) AS RE - PRODUCED HEREINABOVE THAT NO CO - OPERATIVE SOCIETY SHALL REFUSE ADMISSION TO THE MEMBERSHIP, WITHOUT SUFFICIENT REASON, TO ANY PERSON WHO IS QUALIFIED TO BECOME MEMBER UNDER THE PROVISIONS OF THIS ACT, RULES AND BYE - LAWS. THIS CLEARLY PROVES THAT IN CASE THE RULES AND BYE - LAWS OF THE OTHER CO - OPERATIVE SOCIETY 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 QUALIFIE D FOR BECOMING MEMBER NOT ONLY U/S 21 (1) BUT ALSO AS PER THE RULES AND BYE - LAWS OF THE CO - OPERATIVE SOCIETY. WE CANNOT READ SUB - SECTION (2) IN THE MANNER THAT THE RULES AND BYE - LAWS CANNOT PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER OF THE CO - OPERATIVE SOCIETY. 13. WE HAVE GONE THROUGH THE BYE - LAWS WHICH CONTAINS THE MEMBERSHIP CLAUSE. B YE - LAWS NO. 9 STATES AS UNDER : - M EMBERSHIP : 9. T HE MEMBERSHIP OF THE FEDERATION SHALL COMPRISE : - 9.1 ANY CO - OPERATIVE HOUSING SOCIETY REGISTERED IN THE STATE OF GOA. 9.2 GOVERNMENT OF GOA 9.3 INDIVIDUAL 9.4 ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1960. 9.5 ANY TRUST REGISTERED UNDER THE INDIAN TRUSTS ACT, 1882. 16 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) FROM CLAUSE 9 , IT IS APPARENT TH AT THE BYE - LAWS O F SOCIETY DOES PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS MEMBER. THUS THE THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK IS ALSO NOT COMPLIED WITH. SINCE THE ASSESSEE SOCIETY DOES NOT COMPLY WITH ALL THE THREE CONDITIONS, THEREF ORE, 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 AND IS NOT HIT BY SECTION 80P(4). 14. WE HAVE GONE THROUGH THE DECISIO N OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF THE CITIZEN COOPERATIVE SOCIETY VS. ADDL. CIT ( SUPRA ). WE NOTED THAT THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US. IN THIS DECISION, UNDER PARA 23 THE TRIBUNAL HAS GIVEN A FIN DING 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 T O 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 BE NCH 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 A CIT, CIRCLE 3(1), BANGALORE VS. M/S. BANGALORE COMMERCIAL TRANSPORT CREDIT CO - OPERATIVE SOCIETY LTD. IN ITA NO. 1069/BANG/2010 HOLDING THAT SEC. 80P(2)(A)(I) IS APPLICABLE ONLY TO CREDIT CO - OPERATIVE SOCIETY A AND NOT TO CO - OPERATIVE BANK. WITH DUE REGARD S 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. 17 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) JAFARI MOMIN VIKAS CO - OP. CREDIT S OCIETY LTD. IN TAX APPEALS NO. 442 OF 2013, 443 OF 2013 AND 863 OF 2013 ( SUPRA ) VIDE ORDER DT. 15.1.2014 TOOK THE VIEW THAT SEC. 80P(4) WILL NOT APPLY TO A SOCIETY WHICH IS NOT A CO - OPERATIVE BANK. IN THE CASE OF VYAVASAYA SEVA SAHAKARA SANGHA VS. STATE O F KARNATAKA & ORS. ( SUPRA) WE NOTED THAT THE ISSUE BEFORE THE HON'BLE HIGH COURT IN THE WRIT PETITION FILED BY THE PETITIONER RELATED TO THE LEGISLATIVE COMPETENCE OF THE STATE LEGISLATURE FOR ISSUING A CIRCULAR. THE ISSUE DOES NOT RELATE TO THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I). WHILE DEALING WITH THIS ISSUE, THE HON'BLE HIGH COURT UNDER PARA 12 OBSERVED AS UNDER : - 12. IT IS NOT POSSIBLE TO ACCEPT THIS CONTENTION. THE PETITIONERS ARE NOT THE BANKING INSTITUTIONS COMING UNDER THE PURVIEW OF THE BANKI NG 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 PE RMITS. 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 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 CO NTEMPLATED 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 APPLI CABLE 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 WHICH THE UNDERSIGNED IS THE AUTHOR. WHILE D ISCUSSING 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 : - 18 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 12. FROM THE AFORESAID OBJECTS, IT IS APPARENT THAT NONE OF THE AIMS AND OBJECTS ALLOWS THE ASSESSEE COOP ERATIVE 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 ASSESSEE IS BANKING BUSINES S. 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 REGARDED TO BE PRIMARY C OOPERATIVE 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 EXPLANATION THERE UNDER WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE, THEREFORE, IN OUR OPINION WILL BE ENTITLED FOR THE DEDUCTION U/S 80P(2)(A)(I). WE ACCORDINGLY CONFIRM THE ORDER OF CIT(A) ALLOWING DEDUCTION TO THE ASSESSEE. 15. WE HAVE ALSO GONE THROUGH THE DECISION OF ACIT V S PALHAWAS PRIMARY AGRICULTURE CO - OPERATIVE SOCIETY LTD, 23 TAXMAN.COM 318 (DELHI). SECTION 80P(4) CLEARLY EXCLUDES PRIMARY AGRICULTURE CREDIT SOCIETY FROM ITS DOMAIN. THEREFORE THIS DECISION WILL NOT ASSIST THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE D ECISION OF PUNE BENCH IN THE CASE OF ITO VS JANKALYAN NAGRI SAHAKARI PAD SANSTHA LTD, 24 TAXMAN.COM 127 PUNE. THIS WE HAVE ALREADY STATED THAT SECTION 80P(2)(A)(I) NOWHERE TALKS OF CO - OPERATIVE CREDIT SOCIETY AND THEREFORE THE DISTINCTION MADE UNDER THE B ANKING 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 F INDING 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 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 APPLICABLE. 19 ITA NO. 22 2 /P NJ/2014 (ASST. YEAR: 2010 - 1 1 ) 16. WE, THEREFORE, IN VIEW OF OUR AF ORESAID 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 8 0P(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 OPE 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 CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRU E COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA