The Tipu Sultan Sahakari Pattina Sangh Niyamit., Belgaum V. Income Tax Officer Ward-1 (2), Belgaum

ITA 28/PAN/2014

• Counselvise Citation: 2824114 RSA 2014
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 20-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINAY SINGH RAWAT LD
• Assessee Lawyers: SHIVANAND M PADENNAVAR
• Section: 6; 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. 2 8 /PNJ/201 4 : (ASST. YEAR :20 1 0 - 1 1 ) THE TIPU SULTAN SAHAKARI PATTINA SANGH NIYAMIT , BASAVAN GALLI , BAILHONGAL , DIST: BELGAUM - 59 1109 . PAN : AAA A T9977A (APPELLANT) VS. INCOME TAX OFFICER, WARD 1 (2), CIVIL HOSPITAL ROAD, BELGAUM. (RESPONDENT) A PPELLANT BY : SHRI SHIVANAND M. PADENNAVAR , C. A. RE SPONDENT BY : S HRI VINAY SINGH RAWAT , LD. D.R. DATE OF HEARING : 2 4 /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 ASSESSEE AGAINST THE ORDER OF CIT(A), BELGAUM DTD. 18 . 1 1 .2013 FOR THE ASSESSMENT YEAR 20 1 0 - 1 1 BY TAKING THE FOLLOWING GROUNDS OF APPEAL : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS) WHERE AN APPEAL IS FILED BEFORE THE TRIB UNAL AGAINST THE ORDER OF COMMISSIONER (APPEALS) ERRED IN NOT GRANTING DEDUCTION U/S 80P. THE APPELLANT PRAYS THAT THE ADDITION OF RS. 7,49,330/ - MADE TO TOTAL INCOME BY DISALLOWING CLAIM MADE U/S 80P BE DELETED. 1. THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS), HAS ERRED IN NOT GRANTING DEDUCTION U/S 80P(2)(A)(I) AMOUNTING TO RS. 4,53,678/ - FOR INCOME EARNED BY A CO - OPERATIVE CREDIT SOCIETY TO PROVISION FOR CREDIT FACILITIES TO ITS MEMBERS. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HAS ERRED IN NOT GRANTING DEDUCTION U/S 80P(2)(C) AMOUNTING TO RS. 33,584/ - FOR OTHER INCOME EARNED BY A CO - OPERATIVE CREDIT SOCIETY . 2 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HAS ERRED IN NOT GRANTING DEDUCTION U/S 80P(2)(D) AMOUNTING TO RS.2,62,066/ - FOR INC OME EARNED BY A CO - OPERATIVE CREDIT SOCIETY BY WAY OF INTEREST FROM INVESTMENTS WITH ANY OTHER CO - OPERATIVE SOCIETIES. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HAS ERRED IN CONCLUDING THAT THE APPELLANT IS A CO - OPERATIVE BANK AND NOT A CO - OPERA TIVE CREDIT SOCIETY INVOLVED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 2. THE BRIEF FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2010 - 11 ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT , 19 59 . THE ASSESSEE FILED RETURN DECLARING GROSS TOTAL INCOME OF RS.6,64,128/ - AND CLAIMED DEDUCTION U/S 80P(2)(A)(I) AND THEREFORE NET TAXABLE INCOME WAS SHOWN TO BE NIL. THE AO DID NOT ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(I) AND THE INCOME W AS ASSESSED AT RS.7,49,330/ - . 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) DISMISSED THE APPEAL OF THE ASSESSEE. 2.1 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE PROVISIONS OF SEC. 80P(4) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE MAIN CONTENTIONS OF THE ASSESSEE ARE T HAT 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 IS TO ENCOURAGE THRIFT SELF - HELP AND CO - OPERATION AMONGST THE MEM BERS AND DEPOSITORS OF THE SOCIETY. ALSO EXPLAINING PROPER UTILIZATION OF FUNDS, MAKING SAVINGS, CUTTING UNPRODUCTIVE INVESTMENTS. FOR THIS, OUR ATTENTION WAS DRAWN TOWARDS THE BYE - LAWS OF THE ASSESSEE FROM (5.1) TO (5.21). 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 3 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) DOES NOT TALK OF C O - OPERATIVE CREDIT SOCIETY, HE COULD NOT REPLY 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. THE PAID UP CAPIT AL 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 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 - OPERATIVE SOCIETY GOVERNED BY THE CO - OPERATIVE SOCIETIES ACT NOR CAN THEY BE TREATED AS BANKING COMPANIES. THE ACTIVITIES CARRIED OUT BY THE SOCIETY CANNOT BE REGARDED TO BE BANKING ACTIVITIES AS CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE BANGALORE BENCH OF THIS TRIBUNAL IN ITA NO. 72/BANG/2013 IN THE CASE OF ITO VS. DIVYAJY OTHI CREDIT CO - OPERATIVE 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 CREDIT CO - OPERATIVE SOCIETY. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE PANA JI 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 - OP ERATIVE 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 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 4 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) AGAINST THE ORDER PASSED U/S 263 AND THE QUESTION INVOLVED WAS WHETHER THE REVISIONAL AUTHOR ITY 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 - OPE RATIVE BANK GIVEN UNDER EXPLANATION TO SEC. 80P(4) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING. SEC. 80P(4) PUTS AN EMBARGO W.E.F. 1.4.2007 THAT IF A CO - OPERATIVE SOCIETY IS CARRYING ON BANKING BUSINESS, THE ASSESSEE WILL NOT BE ENTITLED FOR THE EX EMPTION. 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 CONSID ERED 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 (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. 5 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 80P(4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL 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 CRE DIT 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 - OPE RATIVE 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 CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE PROVISIONS OF SEC. 80P(4) WAS INTRODUCED IN THE STATUTE BY THE FINANCE ACT, 2006 W.E.F. 1.4.2007. THE EXPLANATION TO THE SECTION DEFINES THE CO - OPERATIVE BANK AND PRIMARY AGRICU LTURAL 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 AP PLY TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK BUT AS PER THE PROVISIONS OF SEC. 80P(2)(A)(I), A CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANK ING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS ENTITLED FOR DEDUCTION. AFTER THE INSERTION OF SEC. 6 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 80P(4), THE PROVISIONS OF SEC. 80P(2)(A)(I) WERE NOT AMENDED, RATHER THE CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS CONTINUED TO BE ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). THIS PRE - SUPPOSES THAT EVERY CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING CANNOT BE REGARDED TO BE A CO - OPERATIVE BANK. THE EMBARGO PUT U/S 80P(4) ARE APPLICABLE ONL Y 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 S OCIETY 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 ENTIT LED 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 ASSE SSEE 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 RURA L 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 SO CIETY 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 SECTION ALLOWS DEDUCTION TO THE CO - OPERATIVE SOCIETY ON THE WHOLE OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUC H ACTIVITIES. THIS PRE - 7 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 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 B E 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 CRED IT 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 80 P 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 REGULATI ONS ACT, 1949 AS UNDER : - CO - OPERATIVE BANK MEANS A STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK: 5. FROM THE DEFINITION OF CO - OPERATIVE BANK IT IS APPARENT THAT CO - OPERATIVE BANK MEANS STATE CO - 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. 8 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 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 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 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 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 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 . 9 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 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 : - 5.1 T O ENCOURAGE THRIFT SELF HELP AND CO - OPERATION AMONGST THE MEMBERS AND DEPOSITORS OF THE SOCIETY. 5 . 2 MARKETING BUSINESS: TO ADVANCE LOANS FOR INDUSTRIES, SMALL SCALE INDUSTRIES, FOR CONSTRUCTION OF MARKETING COMPLEX, HOUSE BUILDING, TRANSPORT VEHICLES, DAIRY DEVELOP MENT, EDUCATION AND PROFESSION, HOUSEHOLD ARTICLES, CONSUMABLES, FAMILY NEEDS AND SUCH PURPOSES . 5.3 COLLECT THE FUNDS OR AVAIL LOANS. 5.4 TO IMPROVE THE FINANCIAL CONDITIONS OF THE MEMBERS AND THE PEOPLE IN THE SOCIETY WHO ARE FINANCIALLY WEAK AND BACKWAR D BY PROVIDING FINANCIAL ASSISTANCE. 5. 5 TO ADVANCE LOANS FOR PURCHASE OF MOTOR AND OTHER VEHICLES ON INSTALMENT BASIS ON THE SECURITY OF VEHICLE AND ALSO TO PURCHASE THE MACHINERIES TO THE MEMBERS. 5.6 FOR THE BUSINESS OF THE SOCIETY IF NECESSARY AND ADV ANTAGES TO ACQUIRE BUILDINGS, CONSTRUCT THE BUILDINGS, RENOVATE THE BUILDING AND TO TAKE UP OTHER NECESSARY WORKS. 5.7 TO OPEN BRANCHES IN THE AREA OF OPERATION OF THE SOCIETY WITH THE PERMISSION OF THE REGISTRAR . 5.8 TO INVEST THE SURPLUS FUNDS OF THE SO CIETY IN THE GOVT. PROMISSORY NOTES, LOAN BONDS, SHARES AND GOVT. SECURITIES AND ALSO TO INVEST FUNDS IN OTHER INSTITUTIONS AS PROVIDED IN THE ACT AND RULES . 5.9 TO ESTABLISH FUNDS FOR ENCOURAGEMENT OF CO - OPERATIVE EDUCATION. 5.10 TO ESTABLISH FUNDS ON T HE BASIS OF RULES FRAMED BY THE BOARD OF DIRECTORS OUT OF THE NET PROFIT OF THE SOCIETY FOR THE WELFARE OF MEMBERS EMPLOYEES, DEPENDANTS OF THE EMPLOYEES AND TO EXTEND HELP TO THEM FROM OUT OF THE SAID FUND . 5.11 TO ESTABLISH FUNDS FOR THE HELP OF EDUCATI ON OF THE CHILDREN OF THE MEMBERS AS PER THE RULES FRAMED BY THE BOARD OF DIRECTORS . 5.12 TO ASSIST FINANCIALLY AND TECHNICALLY TO THE UN - EMPLOYED GRADUATES FOR ESTABLISHMENT OF THEIR OWN INDUSTRIES / BUSINESS . 5.13 TO MAKE ARRANGEMENT FOR ADVANCING LOANS . 5.14 TO EXTEND TECHNICAL ASSISTANCE TO SMALL SCALE INDUSTRIES, VEHICLE SUPPLIERS INDUSTRIES, SELF EMPLOYED INDUSTRIALISTS OR COMMERCIAL BUSINESSES FOR COMMENCEMENT OF THEIR BUSINESS . 5.15 TO ENTER INTO AGREEMENTS WITH BANKS AND FINANCING AGENCIES FOR EXTE NDING LOAN FACILITIES TO THE MEMBERS. 5.16 TO ACCEPT DEPOSITS FROM MEMBERS. 5.17 TO EXTEND LOCKER AND CONNECTED FACILITIES. 5.18 FOR PARTIAL OR FULL RECOVERY ACQUIRE IMMOVABLE PROPERTIES AND DISPOSE OFF THE SAME. 5.19 TO COLLECT THE FUNDS FOR HELP AFTER DE ATH, TO THE ADVANTAGE OF MEMBERS AND TO EXTEND FINANCIAL HELP TO THE FAMILIES OF THE DECEASED MEMBERS. 5.20 TO COLLECT FUNDS OR SECURITIES ON BEHALF OF THE MEMBERS AND FORWARD THEM. 5.21 TO EXECUTE WORK FOR THE FINANCIAL BENEFIT AND DEVELOPMENT OF THE MEM BERS AND PUBLIC. 10 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 5.22 TO ENCOURAGE THE MEMBERS TO UNDERTAKE COMMERCIAL AND INDUSTRIAL ACTIVITIES AND TO ACHIEVE THE OBJECT AND GOALS FOR THE DEVELOPMENT OF SOCIETY PROVIDE HELP AND GIVE ENCOURAGEMENT. 5.23 TO INCREASE AND STRENGTHEN THE BUSINESS OF THE SO CIETY, TO TAKE ALL THE NECESSARY STEPS AND WORK ACCORDINGLY. 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 OTHERWIS E . 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 P URPOSE 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 NOTE D THAT AS PER THE REMAND REPORT OF A.O DATED 03.10.2013 BEFORE THE CIT(A), THE ASSESSE HAS ACCEPTED DEPOSITS FROM NON - MEMBERS. NO EVIDENCE WERE FILED BEFORE US BY LD. AR TO CONTRADICT THE FINDING GIVEN BY CIT(A). EVEN THOUGH HE CONTENDED THAT NONE OF THE OBJECTS PERMITS THE ASSESSE E TO ACCEPT DEPOSITS FROM THE PUBLIC. ON THE BASIS OF THE OBJECTS WE CANNOT HOLD THAT THE ASSESSE E DID NOT ACCEPT THE DEPOSIT FROM PUBLIC DURING THE YEAR. THE ASSESSE SINCE NOT DISCHARGED THE ONUS, WE HAVE TO ACCEPT THE FINDING GIVEN BY CIT(A). 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 ENUMERAT ED ABOVE. THUS, IN OUR OPINION, CONDITION NO.1 DOES STAND SATISFIED AND IT CAN BE SAID THAT THE ASSESSEE SOCIETY WAS CARRYING ON BANKING 11 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) BUSINESS AS IT WAS ACCEPTING DEPOSITS FROM THE PERSONS WHO WERE NOT MEMBERS DURING THE IMPUGNED YEAR. 10. THE AUTHORI SED 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 BUSIN ESS. 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 W HETHER 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 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 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 KARNATAK A STATE CO - OPERATIVE SOCIETIES ACT, 1959 PERMITS ADMISSION OF ANY OTHER CO - OPERATIVE 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 SHAL L BE ADMITTED AS A MEMBER OF A CO - OPERATIVE SOCIETY EXCEPT THE FOLLOWING, NAMELY: -- [(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; 12 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) (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 COMPANY 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 AGRICULTURAL 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 PANCHAYAT 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 P ERSON DULY QUALIFIED THEREFORE UNDER THE PROVISIONS OF THIS [ACT, RULES AND 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 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 AC T, 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 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 SO CIETY AS A MEMBER OF THE CO - OPERATIVE SOCIETY. HAD THAT BEEN THE INTENTION 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 CLAU SE. BYE - LAWS NO.1 7 STATES AS UNDER : - 17 . MEMBERSHIP ADMISSION : 13 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 17.1 AN INDIVIDUAL WHO IS COMPETENT TO ENTER INTO CONTRACT AS PER SECTION 11 OF THE INDIAN CONTRACT ACT 1872 MAY BE ELIGIBLE TO BECOME MEMBER. 17. 2QUALIFICATION FOR ADMIS SION ANY PERSONS HAVING FOLLOWING QUALIFICATIONS MAY BE ADMITTED AS THE MEMBER OF THE SOCIETY. A) A N INDIVIDUAL WHO HAS ATTAINED 18 YEARS OF AGE AND WHO IS COMPETENT TO EXECUTE A CONTRACT AS PER INDIAN CONTRACT ACT. B) HE MUST BE RESIDING IN THE A REA OF OPERATION OF THE SOCIETY INVOLVED IN ANY BUSINESS IN THE AREA OF OPERATION OF THE SOCIETY. HOWEVER HE SHOULD NOT BE MEMBER OF ANY OTHER NON - AGRICULTURAL CREDIT SOCIETIES . C) HE SHALL NOT HAVE BEEN DISQUALIFIED AS PER KCS ACT 1959 SECTION 17. FROM CLAUSE 1 7 , IT IS APPARENT THAT THE BYE - LAWS OF SOCIETY DOES NOT SPECIFICALLY PERMIT THE ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS MEMBER. THUS THE THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK IS COMPLIED WITH. SINCE THE ASSESSEE SOCIETY DOES COMPLY 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, UNDE R 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 - OPERATI VE 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 TH ROUGH 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 DEC ISION OF THE TRIBUNAL IN THE CASE OF ACIT, CIRCLE 3(1), 14 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 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 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 V S. 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 VYAV ASAYA 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. 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 CONT ROL OVER THEM TO THE EXTENT THE ACT PERMITS. MAJOR ACTIVITIES OF THE PETITIONERS ARE TO FINANCE ITS MEMBERS. FOR THE PURPOSE OF FINANCING ITS MEMBERS, THEY BORROW MONEY FROM THE FINANCING AGENCIES AND REPAY THE SAME. MERELY BECAUSE THE PETITIONERS - THE C O - 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. THIS DECISION, IN OUR OPINION, IS NOT APPLICABLE TO THE CASE BEFORE US BECAUSE THE PROVISIONS OF SEC. 80P(2)(A)(I), AS WE HAVE ALREADY HELD IN THE PRECEDING PARAGRAPHS, ARE APPLICABLE TO A CO - OPERATIVE SOCIETY WHICH IS ENGAGED IN CARRYING ON BANKING BUSINESS FA CILITIES TO ITS MEMBERS IF IT IS NOT A CO - 15 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 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 T HE UNDERSIGNED IS THE AUTHOR. WHILE DISCUSSING THIS ISSUE, AFTER ANALYSING THE AIMS AND OBJECTS OF THE CO - OPERATIVE SOCIETY UNDER PARA 12 OF ITS ORDER, THIS TRIBUNAL HAS HELD AS UNDER : - 12. FROM THE AFORESAID OBJECTS, IT IS APPARENT THAT NONE OF THE AIM S 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 BUSIN ESS 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, THEREFO RE, 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 EXPLANATI ON 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 ALS O 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 ASSES SEE. 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 THERE FORE 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 TH E UNDERSIGNED IS THE AUTHOR SIMILAR FINDING AS HAS BEEN GIVEN IN THIS ARE GIVEN IN THAT CASE ALSO. THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS SRI BILURU GURUBASAVA PATTANA SAHAKARI SANGH NIYAMITHA DATED 5.2.2014, RELATES TO AN APPEAL FILED AGAINST THE 16 ITA NO. 2 8 /PNJ/201 4 (ASST. YEAR: 20 1 0 - 1 1 ) 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. 16. WE, THEREFORE, IN VIEW OF OUR AFORESAID DISCUSSION HOLD THAT THE ASSESSEE HAS TO BE REGARDED TO BE A PRIMARY CO - OPERATIVE BANK AS ALL THE THREE BASIC CONDITIONS ARE COMPLIED WITH, THEREFORE, IT IS A CO - OPERATIVE BANK AND THE PROVISIONS OF SEC. 80P(4) ARE APPLICABLE IN THE CASE OF THE ASSESSEE AND ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) NOT ALLOWING DEDUCTION U/S 80P(2)(A)(I) TO THE ASSESSEE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS DISMISSED. 18. ORDER PRONOU NCED IN THE OPEN 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 TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA