Mahatma Gandhi Co.op. credit Society Ltd., Belgaum V. Income Tax Officer, Ward- 1, Belgaum

ITA 231/PAN/2013

• Counselvise Citation: 23124114 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NATARAJ S LD
• Assessee Lawyers: P DINESH
• Keywords: Charitable institution
• 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. 231 /PNJ/201 3 : (ASST. YEAR :20 1 0 - 1 1 ) MAHATMA GANDHI CO - OPERATIVE CREDIT SOCIETY L T D . , MANJARIWADI , T AL CHIKODI AND DIST : BELGAUM . PAN : AA A A M2240H. (APPELLANT) VS. INCOME TAX OFFICER. WARD 1 , NIPANI . (RESPONDENT) A PPELLANT BY : SHRI P. DINESH, A DV . RE SPONDENT BY : SHRI NATARAJ S. , LD. D.R. DATE OF HEARING : 0 4 / 03 /201 5 DATE OF PRONOUNCEMENT : 20 / 03 /201 5 O R D E R PER P.K. BANSAL THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), BELGAUM DTD. 20 . 05 . 201 3 FOR THE ASSESSMENT YEAR 20 10 - 1 1 BY TAKING THE FOLLOWING GROUNDS OF APPEAL : - 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS, B ELGAUM OUGHT TO HAVE ACCEPTED THE EXPLANATION AND EVIDENCE FURNISHED AND HELD THAT THE APPELLANT WAS ENTITLED TO THE DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT, 1961 OF RS.8,60,890.00. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), BELGAUM OUGH T TO HAVE APPRECIATED THAT THE APPELLANT WAS A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND ACCORDINGLY THE APPELLANT WAS ENTITLED FOR THE DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS), BELGAUM ERRED IN UPHOLDING THE FINDINGS OF THE ASSESSING OFFICER THAT THE APPELLANT IS A CO - OPERATIVE SOCIETY CARRYING ON BUSINESS OF BANKING TO ROPE - IN THE PROVISIONS OF SECTION 80P(4) OF THE I.T. ACT, 1961 TO DENY THE DEDUCTION. 2 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS, BELGAUM OUGHT TO HAVE APPRECIATED THAT THE APPELLANT IS NOT A CO - OPERATIVE BANK, NOT GOVERNED BY BANKING REGULATIONS ACT OR RBI ACT AND CONSEQUENTLY THE PROVISIONS OF SECTION 80P(4) OF THE I.T. ACT, 1961. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OR NOT. THE BRIEF FACTS OF THE CASE FOR THE ASSESSMENT YEAR 20 0 9 - 1 0 ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT , 1959 . THE ASSESSEE FILED RETURN DECLARING GROSS TOTAL INCOME OF RS. 8,24,155 / - AND CLAIMED DEDUCTION U/S 80P(2)(A)(I) AND THEREFORE NET TAXABLE INCOME WAS SHOWN TO BE NIL. THE AO DID NOT ALLOW THE DEDUCTION TO THE ASSESS EE U/S 80P(2)(A)(I) AND THE INCOME WAS ASSESSED AT RS. 8,60,890 / - . 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 TH E CASE OF THE ASSESSEE. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 2.1 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE PROVISIONS OF SEC. 80P(4) ARE NOT APPLICABL E IN THE CASE OF THE ASSESSEE. THE MAI N CONTENTIONS OF THE ASSESSEE ARE THAT ASSESSEE IS NOT A CO - OPERATIVE BANK. THE ASSESSEE IS A CO - OPERATIVE SOCIETY DULY REGISTERED UNDER THE KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT, 1959.THE PRIMARY OBJECT OF THE ASSESSEE SHALL BE TO ENCOURAGE THRIFT, SELF HELP AND CO - OPERATION AMONG THE MEMBERS AND DEPOSITORS OF THE SOCIETY . FOR THIS, OUR ATTENTION WAS DRAWN TOWARDS THE BYE - LAWS OF THE ASSESSEE FROM ( 1 ) TO ( 24 ). THE ASSESSEE IS A CREDIT SOCIETY. HE CONTENDED THAT THE WORD CREDIT IS OF OUTMOST 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 REPLY THERETO BUT RELIED ON BANKING 3 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) REGULATION ACT FORGETTING THAT THE SECTION 80P ONLY USES THE WORD CO - OPERATIVE SOCIETY ENGAGED IN - . THE ACTIVITIES OF THE ASSESSEE ARE LIMITED TO ITS MEMBERS. THE PAID UP CAPITAL OF THE ASSESSEE, NO DOUBT, IS MORE THAN RS. 1 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. ATTE NTION WAS ALSO DRAWN TOWARDS THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF VYAVASAYA SEVA SAHAKARA SANGHA VS. STATE OF KARNATAKA & ORS. FOR THE PROPOSITION OF LAW BY REFERRING TO PARA 12 THAT MERELY BECAUSE THE CO - OPERATIVE SOCIETY IS REQ UIRED 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 ACTIVI TIES AS CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE BANGALORE BENCH OF THIS TRIBUNAL IN ITA NO. 72/BANG/2013 IN THE CASE OF ITO VS. DIVYAJYOTHI CREDIT CO - OPERATIVE SOCIETY LTD. FOR THE A.Y 2009 - 10 I N WHICH IT WAS HELD THAT THE PROVISIONS OF SEC. 80P(4) ARE APPLICABLE ONLY TO CREDIT CO - OPERATIVE BANKS AND NOT TO CREDIT CO - OPERATIVE SOCIETY. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE PANAJI BENCH IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDOD ESHAGALA 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 I N ACIT VS PALHAWAS PRIMARY AGRICULTURE CO - OPERATIVE SOCIETY LTD, 23 TAXMAN.COM 318 (DELHI), ITO VS JANKALYAN NAGRI SAHAKARI PAT SANSTHA LTD, 24 TAXMAN.COM 127 (PUNE). RELIANCE WAS ALSO PLACED ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE 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 4 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER U/S 263 WITHOUT THE FOUNDATIONAL FACT OF THE ASSESSEE BEING CO - OPERATIVE BANK. 2.2 THE LD. DR, ON THE OTHER HAND VEHEMENTLY CONTENDED THAT THE ASSESSEE IS A CO - OPERATIVE BANK IN VIEW OF THE DEFINITION OF THE CO - OPERATIVE BANK GIVEN UNDER EXPLANATION TO SEC. 80P(4) THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF BANKING. SEC. 80P(4) PUTS AN EMBARGO W.E.F. 1.4.2007 THAT IF A CO - OPERATIVE SOCIETY IS CARRYING ON BANKING BUSINESS, THE ASSESSEE WILL NOT BE ENTITLED FOR THE EXEMPTION. RELIANCE WAS PLACED ON THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY VS. ADDL. CIT IN ITA NOS. 1003/HYD/2011 & 1004/HYD/2011 DT. 2.7.2012. 3. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BE LOW 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 COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERR ED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING, NAMELY : (A) IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR THE WHOLE OF THE AMOUNT OF PROFITS AND GAI NS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. 5 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) 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 MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); (B) 'PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUKA AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG - TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 3.1 FROM THE PLAIN READING OF SEC. 80P(2)(A)(I) IT IS APPARENT THAT IF THE CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING OF BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE CO - OPERATIVE SOCIETY IS ENTITLED FOR DEDUCTION ON WHOLE OF THE INC OME RELATING TO ANY ONE OR MORE OF SUCH BUSINESS. FROM THE READING OF SEC. 80P(4) IT IS APPARENT THAT THIS SECTION DENIES DEDUCTION TO A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVE LOPMENT BANK. THE PROVISIONS OF SEC. 80P(4) WAS INTRODUCED IN THE STATUTE BY THE FINANCE ACT, 2006 W.E.F. 1.4.2007. THE EXPLANATION TO THE SECTION DEFINES THE CO - OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY TO HAVE THE SAME MEANING AS ASSIGNED T O 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 AGR ICULTURAL 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 AGRICULTUR AL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK BUT AS PER THE PROVISIONS OF SEC. 80P(2)(A)(I), A CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS ENTITLE D FOR DEDUCTION. AFTER THE INSERTION OF SEC. 80P(4), THE PROVISIONS OF SEC. 80P(2)(A)(I) WERE NOT AMENDED, RATHER THE CO - 6 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS CONTINUED TO BE ENTITLED FOR DEDUCTION U/S 80P( 2)(A)(I). THIS PRE - SUPPOSES THAT EVERY CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING CANNOT BE REGAR DED TO BE A CO - OPERATIVE BANK. THE EMBARGO PUT U/S 80P(4) ARE APPLICABLE ONLY TO A CO - OPERATIVE BANK. IN OUR OPINION, IT CANNOT BE SAID THAT A CO - OPERATIVE SOCIETY CANNOT CARRY ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS EVEN IF IT IS 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 IT S MEMBERS IS REGARDED TO BE A CO - OPERATIVE BAN K, 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 BANK. IN CASE IT IS FOUND THAT THE ASSESSEE IS A CO - OPERATIVE BANK, THE ASSESSEE WILL NOT BE ENTITLE D 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 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 SECTION NOWHERE STATES CO - OPERATIVE CREDIT SOCIETY EXCEPT MENTIONED UNDER PROVISO 2 TO SECTION 80P WHICH I S 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 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 - 7 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) 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 - O PERATIVE 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 CREDIT FACILITIES TO ITS MEMBERS OR TO THE PUBLIC, THE INCOME WH ICH 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 R ESPECT OF THESE FACILITIES PROVIDED TO ITS MEMBERS. 4.1 NOW, THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS A CO - OPERATIVE BANK OR NOT. CO - OPERATIVE BANK IS DEFINED IN PART V OF THE BANKING REGULATIONS ACT, 1949 AS UNDER : - CO - OPERATIVE BANK MEA NS A STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK: 5. FROM THE DEFINITION OF CO - OPERATIVE BANK IT IS APPARENT THAT CO - OPERATIVE BANK MEANS STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OP ERATIVE BANK. IT IS NOT THE CASE OF THE REVENUE THAT THE 8 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) ASSESSEE IS A STATE CO - OPERATIVE BANK OR CENTRAL CO - OPERATIVE BANK. WE HAVE THEREFORE TO FIND WHETHER THE ASSESSEE IS A PRIMARY CO - OPERATIVE BANK. 6. THE PRIMARY CO - OPERATIVE BANK IS DEFINED UNDER SECTION 5 CLAUSE (CCV) OF BANKING REGULATION ACT 1949 AS UNDER: - (CCV) PRIMARY CO - OPERATIVE BANK MEANS A CO - OPERATIVE SOCIETY, OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY - (1) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS TRANSACTION OF BANKING BUSINESS: (2) THE PAID - UP SHARE CAPITAL AND RESERVES OF WHICH ARE NOT LESS THAN ONE LAKH OF RUPEES: AND (3) THE BYE - LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER: PROVIDED THAT THIS SUB - CLAUSE SHALL NOT APPLY TO THE ADMISSION OF A CO - OPERATIVE BANK AS A MEMBER BY REASON OF SUCH CO - OPERATIVE BANK SUBSCRIBING TO THE SHARE CAPITAL OF SUCH CO - OPERATIVE SOCIETY OUT OF FUNDS PROVIDED BY THE STATE 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 BANKING BUSINESS, SECONDLY, THE PAID UP SHARE CAPITAL AND RESERVE OF WHICH ARE 1 LAKH OR MORE A ND 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 L ANY OF THE CONDITIONS, IT CANNOT BE REGARD ED 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 ALL THE THREE CONDITIONS. IN CASE, IT DOES NOT COMPL Y 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 GET DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF WHOLE OF THE INCOME WHICH THE 9 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) ASSESSEE DERIVES FROM CARRYING ON THE BUSINESS 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 : - 1 ) TO ENCOURAGE THRIFT, SELF HELP AND CO - OPERATION AMONG THE MEMBERS AND DEPOS ITORS OF THE SOCIETY. 2 ) AS PER BYE - LAW, EXTEND FINANCIAL ASSISTANCE TO NEEDY MEMBERS FOR GENUINE PURPOSES BY COLLECTING FUNDS. 3 ) TO ARRANGE PROGRAMMES TO GIVE FINANCIAL ASSISTANCE FOR SOCIAL AND EDUCATIONAL DEVELOPMENT OF MEMBERS AND WELFARE OF THEM. 4 ) TO LEND MONEY TO ITS MEMBERS TO PURPOSE ON HIRE - PURCHASE / HYPOTHECATION OF MACHINERIES, EQUIPMENTS AND MOTOR VEHICLES AS DEFINED IN THE MOTOR VEHICLES ACT. 5 ) TO POSSESS, ACQUIRE , ALTER OR CONSTRUCT SITE/BUILDINGS ETC., FOR THE USE AND CONVENIENCE OF BUSINESS OF THE SOCIETY. 6) CONDUCTING PROGRAMMES FOR IMPROVEMENT OF ECONOMIC CONDITIONS OF SC/ST AND WOMEN MEMBERS. 7) TO LEND LOANS FOR ITS MEMBERS ON DEPOSIT OF GOLD AND SILVER ORNAMENTS. 8) TO SANCTIONS LOANS TO ITS MEMBERS AGAINST THE SECURITY OF INDU STRIAL AND COMMERCIAL PRODUCES. 9) TO GIVE FINANCIAL AND TECHNICAL ASSISTANCE TO SMALL SCALE / COTTAGE INDUSTRIES, TRANSPORTATION AND SELF EMPLOYED PROFESSIONALS TO PROMOTE THEIR BUSINESS. 10) TO ENTER INTO AGREEMENT WITH BANKS AND OTHER ANY FINANCIAL INST ITUTIONS TO RECEIVE LOANS AND ADVANCES FROM THEM. 11) TO PROVIDE SAFE LOCKER FACILITY AND OTHER CONCERNED SERVICES TO ITS MEMBERS. 12) AS PER KARNATAKA CO - OPERATIVE SOCIETIES ACT AND RULES TO INVEST SURPLUS FUND IN DEPOSITS WITH OTHER INSTITUTIONS. 13) TO ENCOURAGE THE MEMBERS TO ESTABLISH TRADE AND AGRICULTURE BASE INDUSTRY OR PROVIDING PROBABLE ASSISTANCE TO ACHIEVE THE GOAL AND PROMOTE THE BUSINESS WITH THE SOCIETY. 14) TO CREATE OR TO SUPPORT OR TO AID IN ESTABLISHMENT OF FUNDS OUT OF NET PROFIT FOR THE WELFARE OF MEMBERS/EMPLOYEES AND THEIR DEPENDENTS SUBJECTS TO RULES FRAMED BY THE BOARD. 15) ACCORDING TO THE RULES AND REGULATION FRAMED BY THE BOARD OF DIRECTORS AND APPROVED BY THE REGISTRAR, TO PROVIDE ALL GRANTS AND INCENTIVES TO EMPLOYEES OF THE SOC IETY AND LOANS FOR GENUINE PURPOSE AT REASONABLE RATE OF INTEREST. 16) WITH PRIOR PERMISSION OF THE REGISTRAR TO DO ALL OTHER ACTIVITIES WHICH ARE REQUIRED TO ACHIEVE THE PURPOSE MENTIONED IN BYE - LAWS. 10 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) 17) PROVIDING LOANS TO SELF - HELP GROUPS. 18) PROVIDIN G FINANCIAL ASSISTANCE TO MEMBERS FOR HIGHER EDUCATION OF THEIR CHILDREN AND FAMILY MEMBERS. 19) TO OPEN BRANCHES, SUB - BRANCHES, PAY - OFFICES ETC., BY WHATEVER NAMED CALLED WITHIN THE AREA OF OPERATION OF THE SOCIETY WITH THE PRIOR PERMISSION OF CONCERN DEP ARTMENT. 20) TO EXTEND FINANCIAL AND TECHNICAL ASSISTANCE TO THE UNEMPLOYED TO START THEIR OWN INDUSTRY / PROFESSION. 21) TO RECEIVE DEPOSITS FROM CHARITABLE INSTITUTION / TRUSTS AND OTHER PUBLIC INSTITUTIONS. 22) TO UNDERTAKE ACTIVITIES FOR THE PROMOTION OF ECONOMIC WELFARE OF THE MEMBERS AND INCIDENTALLY OF THE GENERAL PUBLIC. 23) TO ESTABLISH DEATH RELIEF FUND FOR THE BENEFIT OF MEMBERS AND EXTEND RELIEF TO THE FAMILY OF THE DECEASED MEMBERS. 24) TO CREATE FUNDS AND AID FOR THE WELFARE OF THE MEMBERS AND THE EMPLOYEES, FOR THE EDUCATION OF THEIR CHILDRENS. SAHAKAR EDUCATION FUND SHOULD BE CREATED. 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? BANKI NG 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 WITHDRAWABL E BY CHEQUE, DRAFT, ORDER OR OTHERWISE . 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. DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE CIT(A), THE CIT(A) SPECIFICALLY ASKED TH E ASSESSING OFFICER TO CLARIFY WHETHER ASSESSEE ACCEPTS DEPOSITS FROM PUBLIC. IN THE REMAND REPORT DATED 27 . 02 .2013, THE ASSESSING OFFICER CONFIRMS THAT ASSESSEE ACCEPTS DEPOSITS FROM GENERAL PUBLIC WHO ARE NOT MEMBERS BY STATING AS UNDER : - 11 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) WE HAVE ACCEPTED DEPOSITS FROM ALL TYPES MEMBERS, MEMBERS INCLUDE REGULAR MEMBERS, ASSOCIATE MEMBERS AND EVEN FROM NON - MEMBERS AND GENERAL PUBLIC ALSO. 9. ON THIS BASIS IT WAS CONTENDED THAT THE SOCIETY IS NOT CARRYING ON THE BUSINESS OF BANKING OR PROVIDING C REDIT FACILITIES TO ITS MEMBERS. HE DID NOT DENY THAT THE CO - OPERATIVE SOCIETY IS ACCEPTING THE DEPOSITS UNDER THE VARIOUS SCHEMES AS ARE BEING ACCEPTED BY THE BANKERS. THUS, WE NOTED THAT THE ASSESSEE WAS ACCEPTING DEPOSITS FROM THE PUBLIC.THIS FACT IS AP PARENT FROM OBJECT NO.21 AS STIPULATED HEREIN ABOVE. THUS, WE ARE OF THE VIEW THAT CONDITION NO.1 FOR BECOMING PRIMARY CO - OPERATIVE BANK STANDS COMPLIED WITH . 10. THE AUTHORISED REPRESENTATIVE TOOK THE PLEA THAT THE ASSESSEE HAS NOT OBTAINED BANKING LI CENCE. 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 TH E 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. TH E INCOME HAS TO BE ASSESSED U/S 14 OF THE INCOME TAX ACT UNDER THE SAME HEAD EVEN IF THE NATURE OF THE BUSINESS IS ILLEGAL. IF WE LOOK INTO THE BYE - LAWS WHICH CONSISTS OF FUND OF THE SOCIETY, WE NOTED THAT THE TYPES OF THE DEPOSITS WHICH THE ASSESSEE HAS A CCEPTED 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 A SSESSEE IS MORE THAN RS. 1 LAC. THEREFORE, THE ASSESSEE SATISFIES THE SECOND CONDITION. 12 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) 12. SO FAR AS THE THIRD CONDITION IS CONCERNED, WE NOTED THAT SEC. 16 OF THE KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT, 1959 PERMITS ADMISSION OF ANY OTHER CO - OPE RATIVE SOCIETY AS A MEMBER. THE PROVISIONS OF SEC. 16 ARE LAID DOWN AS UNDER : - 16. PERSONS WHO MAY BECOME MEMBERS - [(1) SUBJECT TO THE PROVISIONS OF SECTION 17, NO PERSON SHALL BE ADMITTED AS A MEMBER OF A CO - OPERATIVE SOCIETY EXCEPT THE FOLLOWING, NA MELY: -- [(A) AN INDIVIDUAL WHO NEEDS THE SERVICES OF SUCH CO - OPERATIVE SOCIETY [AND IS RESIDING IN THE AREA OF THE OPERATION OF THE SOCIETY] AND IS COMPETENT TO ENTER INTO CONTRACT UNDER THE CONTRACT ACT, 1872 (CENTRAL ACT IX OF 1872);] [(A - 1) A DEPOSITOR; ] (B) ANY OTHER CO - OPERATIVE SOCIETY; (C) THE STATE GOVERNMENT OR THE CENTRAL GOVERNMENT; (D) THE LIFE INSURANCE CORPORATION OF INDIA, STATE WAREHOUSING CORPORATION AND SUCH OTHER INSTITUTIONS AS MAY BE APPROVED BY THE STATE GOVERNMENT; (E) A FIRM, A COMPA NY OR ANY OTHER BODY CORPORATE CONSTITUTED UNDER ANY LAW FOR THE TIME BEING IN FORCE INCLUDING A SOCIETY REGISTERED UNDER THE KARNATAKA SOCIETIES REGISTRATION ACT, 1960 (KARNATAKA ACT 17 OF 1960); (F) A MARKET COMMITTEE ESTABLISHED UNDER THE KARNATAKA AGRI CULTURAL PRODUCE MARKETING (REGULATION) ACT, 1966 (KARNATAKA ACT 27 OF 1966); (G) A LOCAL AUTHORITY. EXPLANATION. - FOR THE PURPOSE OF THIS CLAUSE, LOCAL AUTHORITY MEANS, A MUNICIPAL CORPORATION, MUNICIPAL COUNCIL, TOWN PANCHAYAT, ZILLA PANCHAYAT, TALUK A PAN CHAYAT OR GRAMA PANCHAYAT CONSTITUTED UNDER ANY LAW FOR THE TIME BEING IN FORCE] (2) NO CO - OPERATIVE SOCIETY SHALL, WITHOUT SUFFICIENT CAUSE, REFUSE ADMISSION TO MEMBERSHIP TO ANY PERSON DULY QUALIFIED THEREFORE UNDER THE PROVISIONS OF THIS [ACT, RULES AN D BYE - LAWS] THE AFORESAID PROVISION OF SEC.16 MANDATES ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER OF THE CO - OPERATIVE SOCIETY. THE WORD USED IN SEC. 16(1) IS SHALL. THIS FACT IS CLARIFIED FURTHER BY SUB - SECTION (2) AS RE - PRODUCED HEREINA BOVE 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 13 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) MEMBER OF THE CO - OPERATIVE SOCIETY. THE PERSON, AS PER SUB - SECTION (2), MUST BE QUALIFIED FOR BECOMING MEMBER NOT ONLY U/S 16(1) BUT ALSO AS PER THE RULES AND BYE - LAWS OF THE CO - OPERATIVE SOCIETY. WE CANNOT READ SUB - SECTION (2) IN THE MANNER THAT THE RULES AND BYE - LAWS CANNOT PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER OF THE CO - OPERATIVE SOCIETY. HAD THAT BEEN THE INTENTIO N OF THE LEGISLATURE, THEY WOULD HAVE 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 6 STATES AS UNDER : - 1 6 . ADMISSION FOR MEMBERSHIP : THE FOLLOWING ARE ELIGIBLE FOR ADMISSION AS MEMBER OF THE SOCIETY ; A. ANY INDIVIDUAL COMPETENT TO CONTRACT UNDER SEC. 11(CENTRAL ACT 9) OF THE INDIAN CONTRACT ACT 1872 SHOULD NOT DISQUALIFIED U/S.17 OF KARNATAKA CO - OPERATIVE SOCIETIES ACT 1959 BY RULES F ORMED. B. QUALIFICATION FOR ADMISSION : 1. AN INDIVIDUAL WHO IS ABOVE 18 YEAR OF AGE AND CAN ENTER INTO A LEGAL CONTRACT. 2. A PERSON WHO RESIDES IN THE AREA OF OPERATION OF THE SOCIETY OR CARRIES ON BUSINESS OR INDUSTRIALIST OR RUNNING A INDUSTRY AND ENGAGED I N THE ALLIED ACTIVITIES. 3. A DEPOSIT HOLDER, ANY CO - OPERATIVE SOCIETY, SELF - HELP GROUPS. 4. A FIRM, A COMPANY OR ANY OTHER BODY CORPORATE CONSTITUTED UNDER ANY LAW FOR THE BEING INFORCE INCLUDING A SOCIETY REGISTERED UNDER KARNATAKA SOCIETIES REGISTRATION ACT 1960(7). 5. A PERSON RESIGNED FROM THE MEMBERSHIP AND IN ACCEPTED BY THE BOARD. HE CANNOT APPLY FOR THE MEMBERSHIP WITHIN THE YEAR FROM THE DATE OF RESIGNATION. 6. THE STATE GOVERNMENT OR CENTRAL GOVERNMENT. C. PERSON WHO DESIRE TO BECOME A MEMBER SHALL APPLY I N THE WRITING TOGETHER WITH PAYMENT OF THE VALUE OF ATLEAST ONE SHARE ALONG WITH SHARE FEE OF 20/ - AND ADMISSION FEE OF 10/ - . NO PERSON CAN EXERCISE THE RIGHTS OF THE MEMBERSHIP UNLESS HE HAS MADE SUCH PAYMENTS TO THE SOCIETY IN RESPECT OF MEMBERSHIP OR HA S ACQUIRED SUCH INTEREST IN THE SOCIETY AS MAY BE SPECIFIED IN THE BYE - LAWS. FROM CLAUSE 1 6 , IT IS APPARENT THAT THE BYE - LAWS OF SOCIETY DOES PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS MEMBER SPECIFICALLY . THUS THE THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK IS NOT COMPLIED WITH. W E FIND THAT THE ASSESSEE HAS COMPLIED WITH ALL THE OTHER TWO CONDITIONS FOR BECOMING PRIMARY CO - OPERATIVE BANK. SINCE THE ASSESSEE DID NOT COMPLY 14 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) WITH ALL THE THREE CONDITIONS FOR BECOMING PRIMARY CO - OPERATIVE BANK, WE HOLD THAT THE ASSESSEE CANNOT BE REGARDED TO BE A PRIMARY CO - OPERATIVE BANK. 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 NOT ED THAT THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US. IN THIS DECISION, UNDER PARA 23 THE TRIBUNAL HAS GIVEN A FINDING THAT THE ASSESSEE IS CARRYING ON BANKING BUSINESS AND FOR ALL PRACTICAL PURPOSES IT ACTS LIKE A CO - OPERATIVE BANK. THE SOCIETY IS GOVERNED BY THE BANKING REGULATIONS ACT. THEREFORE, THE SOCIETY BEING A CO - OPERATIVE BANK PROVIDING BANKING FACILITIES TO MEMBERS IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80P(2)(A)(I) AFTER THE INTRODUCTION OF SUB - SECTION (4) TO SECTION 80P. IN VIEW OF THIS FINDING, THE ASSESSEE WAS DENIED DEDUCTION U/S 80P(2)(A)(I). WE HAVE ALSO GONE THROUGH THE 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/BA NG/2010 HOLDING THAT SEC. 80P(2)(A)(I) IS APPLICABLE ONLY TO CREDIT CO - OPERATIVE SOCIETY A AND NOT TO CO - OPERATIVE BANK. WITH DUE REGARDS TO THE BENCH, WE ARE UNABLE TO FIND ANY TERM CREDIT CO - OPERATIVE SOCIETY U/S 80P(2)(A)(I) OR U/S 80P(4), THEREFORE, THIS DECISION CANNOT ASSIST US. WE NOTED THAT THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD. IN TAX APPEALS NO. 442 OF 2013, 443 OF 2013 AND 863 OF 2013 ( SUPRA ) VIDE ORDER DT. 15.1.2014 TOOK THE VIEW THAT SEC. 80P(4) WILL NOT APPLY TO A SOCIETY WHICH IS NOT A CO - OPERATIVE BANK. IN THE CASE OF VYAVASAYA SEVA SAHAKARA SANGHA VS. STATE OF KARNATAKA & ORS. ( SUPRA) WE NOTED THAT THE ISSUE BEFORE THE HON'BLE HIGH COURT IN THE WRIT PETITION FILED BY THE PETI TIONER RELATED TO THE LEGISLATIVE COMPETENCE OF THE STATE 15 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) 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 BANKING REGULATION ACT. THEY ARE THE CO - OPERATIVE SOCIETIES REGISTERED UNDER THE ACT, AND AS SUCH THEY ARE GOVERNED BY THE PROVISIONS OF THE ACT PASSED BY THE STATE LEGISLATURE. CONSEQUENTLY, THE STATE GOVERNMENT HAS CONTROL OVER THEM TO THE EXTENT THE ACT PERMITS. MAJOR ACTIVITIES OF THE PETITIONERS ARE TO FINANCE ITS MEMBERS. FOR THE PURPOSE OF FINANCING ITS MEMBERS, THE Y 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 CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949, INASMUCH AS THESE CO - OPERATIVE SOCIETIES ARE NOT ESTABLISHED FOR TH E PURPOSE OF DOING BANKING AS DEFINED IN SECTION 5(B) OF THE BANKING REGULATION ACT, 1949. THIS DECISION, IN OUR OPINION, IS NOT APPLICABLE TO THE CASE BEFORE US BECAUSE THE PROVISIONS OF SEC. 80P(2)(A)(I), AS WE HAVE ALREADY HELD IN THE PRECEDING PARA GRAPHS, 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 V IVIDODESHAGALA SOUHARDA SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012 ( SUPRA), FOR WHICH THE UNDERSIGNED IS THE AUTHOR. WHILE DISCUSSING THIS ISSUE, AFTER ANALYSING THE AIMS AND OBJECTS OF THE CO - OPERATIVE SOCIETY UNDER PARA 12 OF ITS ORDER, THI S TRIBUNAL HAS HELD AS UNDER : - 12. FROM THE AFORESAID OBJECTS, IT IS APPARENT THAT NONE OF THE AIMS AND OBJECTS ALLOWS THE ASSESSEE COOPERATIVE SOCIETY TO ACCEPT DEPOSITS OF MONEY FROM PUBLIC FOR THE PURPOSE OF LENDING OR INVESTMENT. IN OUR OPINION UNT IL AND UNLESS THAT CONDITION IS SATISFIED, IT CANNOT BE SAID THAT THE PRIME OBJECT OR PRINCIPAL BUSINESS OF THE ASSESSEE IS BANKING BUSINESS. THEREFORE, THE ASSESSEE WILL NOT COMPLY WITH THE FIRST CONDITION AS LAID DOWN IN THE DEFINITION AS GIVEN U/S. 5(CC V) OF THE BANKING 16 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) REGULATION ACT, 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE ASSESSEE, THEREFORE, CANNOT BE REGARDED TO BE PRIMARY COOPERATIVE BANK AND IN CONSEQUENCE THEREOF, IT CANNOT BE A CO - OPERATIVE BANK AS DEFINED UNDER PART V OF THE BANKING R EGULATION 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 VS PALHAWAS PRIMARY AGRICULTURE CO - OPERATIVE SOCIETY LTD, 23 TAXMAN.COM 318 (DELHI). SECTION 80P(4) CLEARLY EXCLUDES PRIMARY AGRICULTURE CREDIT SOCIETY FROM ITS DOMAIN. THEREFORE THIS DECISION WILL NOT ASSIST THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE DECISION OF PUNE BENCH IN THE CASE OF ITO VS JANKALYAN NAGRI SAHAKARI PAD SANSTHA LTD, 24 TAXMAN.COM 127 PUNE. THIS WE HAVE ALREADY STATED THAT SECTION 80P(2)(A)(I) NOWHERE TALKS OF CO - OPERATIVE CREDIT SOCIETY AND THEREFORE THE DISTINCTION MADE UNDER THE BANKING REGULATION ACT CANNOT BE IMPORTED U/S 80P(2)(A)(I). THIS DECISION IN OUR OPINIO N WILL NOT ASSIST THE ASSESSEE . WE HAVE ALSO GONE THROUGH THE DECISION OF TARARANI MAHILA CO - OPERATIVE CREDIT SOCIETY LTD TO WHICH THE UNDERSIGNED IS THE AUTHOR SIMILAR FINDING AS HAS BEEN GIVEN IN THIS ARE GIVEN IN THAT CASE ALSO. THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CI T 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 F OUNDATIONAL FACT OF THE ASSESSEE BEING CO - OPERATIVE BANK. THEREFORE, THIS DECISION IS NOT APPLICABLE. 16. WE THEREFORE, IN VIEW OF OUR AFORESAID DISCUSSION SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 17 ITA NO. 2 3 1 /PNJ/201 3 (ASST. YEAR: 2 0 10 - 1 1 ) 80P(2)(A)(I) TO THE ASSESSEE ON THE INCOME EARNED FROM ITS MEMBERS BY RENDERING BANKING AS WELL AS CREDIT FACILITIES TO THEM . 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOW ED. 18. ORDER PRO NOUN CED IN THE OPEN COURT ON 20 . 03 .201 5 . SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 20 . 0 3 .201 5 *A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA