The Navhind Co. Opp. Cr. Society Ltd., Belgaum V. Income Tax Officer Ward-1 (2), Belgaum

ITA 393/PAN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8422 (ITAT-PANAJI)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B BARTHAKUR LD
• Assessee Lawyers: BHARAT R PORWAL; CHETAN V CHOUGULE
• Section: 263; 15

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 NOS. 39 3 & 39 4 /PNJ/201 3 : (ASST. YEARS :2009 - 10 & 2010 - 11) THE NAVHIND CO - OPERATIVE CREDIT SOCIETY LTD., YELLUR , DIST : BELGAUM . PAN :AAAA N0255F (APPELLANTS) VS. INCOME TAX OFFICER, WARD 1( 2 ), BELGAUM. (RESPONDENTS) APPELLANT BY : SHRI BHARAT R. PORWAL , C.A & SHRI CHETAN V. CHOUGULE, C.A. RESPONDENT BY : SHRI B. BARTHAKUR , LD. DR. DATE OF HEARING : 1 8 / 11 /2014 DATE OF PRONOUNCEMENT : 18 / 11 /2014 O R D E R PER P.K. BANSAL BOTH THESE APPEALS HA S BEEN FILED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF CIT(A), BELGAUM DTD. 01.10.2013 AND 07.10 .2013 BY TAKING THE FOLLOWING COMMON GROUNDS OF APPEAL EXCEPT CHANGE IN PAGE NOS. & PARA NOS : - ITA NO.393/PNJ/2013 : 1. BECAUSE, T HE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING THE DEDUCTION CLAIM ED U/S 80P(2)(A)(I) OF THE INCOME TAX ACT 1961. 2. BECAUSE, THE FOLLOWING OBSERVATIONS OF THE LEARNED CIT(APPEALS) IN THE ORDER ARE PERVERSE, ARBITRARY, AND MISLEADING : - A) ALL THE ARGUMENTS RAISED BY THE APPELLANT HAVE ALREADY BEEN SUCCESSFULLY MET BY THE A.O IN HIS ORDER, THE RELEVANT PORTION OF WHICH HAS BEEN REPRODUCED ABOVE. THE ONLY NEW POINT PERTAINS TO ACCEPTANCE OF DEPOSITS BY THE APPELLANT FROM THE PUBLIC WHICH HAS BEEN FURTHER CLARIFIED BY A.O VIDE HIS ABOVE MENTIONED REMAN D REPORT (PAGE NO 27 AT THE BEGINNING OF PARA 9). 2 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) B) IN THIS CONNECTION IT MAY BE MENTIONED HERE THAT THE RELEVAN T PROVISIONS OF INCOME TAX ACT DO NOT MANDATE THE APPLICABILITY OF THESE ACTS AS PREREQUISITES FOR A COOPERATIVE SOCIETY TO BE TREATED AS COOPERATIVE BANK. (PARA NO 9 .1 AT THE LAST LINE OF PAGE NO 2 8 ) C)THEREFORE, ALL THE THREE LIMBS OF THE DEFINITION OF BANKING ARE APPLICABLE TO THE APPELLANTS CASE. ON THE FACTS OF THE CASE IT IS ALSO SEEN THAT THE APPELLANT CARRIES ON THE BANKING BUSINESS AND FOR ALL PRACTICAL PURPOSES IT ACTS LIKE A CO - OPERATIVE BANK. (PAGE NO 27 OF PARA NO 9). D) )HENCE, THE APPELLANT ASSESSEE IS A CO - OPERATIVE BANK WITHIN THE MEANING OF PART V OF THE BANKING REGULATION ACT, 1949. THEREFORE, THE PROVISIONS OF SEC.80P(4) ARE APPLICABLE TO IT AND IT IS NOT ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT. (PARA NO 9. 1 OF PAGE 2 8 ). 3. BECAUSE, T HE LEARNED LOWER AUTHOR ITIES HAVE ERRED IN DENYING THE DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(I) OF INCOME TAX ACT, 1961 BY ADJUDICATING THE ASSESSEE AS C O - OPERATIVE BANK INSTEAD OF TRE ATING IT AS CO - OPERATIVE CREDIT S OCIETY. ITA NO.39 4 /PNJ/2013 : 1. BECAUSE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING THE DEDUCTION CLAIMED U/S 80P(2)(A)(I)OF THE INCOME TAX ACT 1961. 2. BECAUSE, THE FOLLOWING OBSERVATIONS OF THE LEARNED CIT(APPEALS) IN THE ORDER ARE PERVERSE, ARBITRARY, AND MISLEADING : - A) ALL THE ARGUMENTS RAISED BY THE APPELLANT HAVE ALREADY BEEN SUCCESSFULLY MET BY THE A.O IN HIS ORDER, THE RELEVANT PORTI ON OF WHICH HAS BEEN REPRODUCED ABOVE. THE ONLY NEW POINT PERTAINS TO ACCEPTANCE OF DEPOSITS BY THE APPELLANT FROM THE PUBLIC WHICH HAS BEEN FURTHER CLARIFIED BY A.O VIDE HIS ABOVE MENTIONED REMAND REPORT (PAGE NO 33 AT THE BEGINNING OF PARA 9). B) IN THIS CONNECTION IT MAY BE MENTIONED HERE THAT THE RELEVANT PROVISIONS OF INCOME TAX ACT DO NOT MANDATE THE APPLICABILITY OF THESE ACTS AS PREREQUISITES FOR A COOPERATIVE SOCIETY TO BE TREATED AS COOPERATIVE BANK. (PARA NO 9 OF PAGE NO 33) C)THEREFORE, ALL THE THREE LIMBS OF THE DEFINITION OF BANKING ARE APPLICABLE TO THE APPELLANTS CASE. ON THE FACTS OF THE CASE IT IS ALSO SEEN THAT THE APPELLANT CARRIES ON THE BANKING BUSINESS AND FOR ALL PRACTICAL PURPOSES IT ACTS LIKE A CO - OPERATIVE BANK. (PAGE NO 34 AT THE END OF PARA NO 9). 3 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) D) )HENCE, THE APPELLANT ASSESSEE IS A CO - OPERATIVE BANK WITHIN THE MEANING OF PART V OF THE BANKING REGULATION ACT,1949. THEREFORE, THE PROVISIONS OF SEC.80P(4) ARE APPLICABLE TO IT AND IT IS NOT ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT. (PARA NO 9.2 OF PAGE 35). 3. BECAUSE, THE LEARNED LOWER AUTHORITIES HAVE ERRED IN DENYING THE DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(I) OF INCOME TAX ACT, 1961 BY ADJ UDICATING THE ASSESSEE AS CO - OPERATIVE BANK INSTEAD OF TREATING IT AS CO - OPERATIVE CREDIT SOCIETY. 2. BOTH THE PARTIES AGREED THAT BOTH THESE APPEALS BE DECIDED ON THE BASIS OF THE FACTS RELATING TO THE ASSESSMENT YEAR 2009 - 10 AS THE ISSUE INVOLVED IN BOTH THE YEARS IS THE SAME. THE BRIEF FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2009 - 10 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. 43,37,800 / - 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 WAS ASSESSED AT RS. 49,31,950 / - . 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 APPLICAB LE IN THE CASE OF THE ASSESSEE. THE ASSESSEE WEN T IN APPEAL BEFORE THE CIT(A). CIT (A) DISMISSED THE APPEAL S 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 THAT ASSESSEE IS NOT A CO - OPERATIVE BANK . THE ASSESSEE IS A CO - OPERATIVE SOCIETY DULY REGISTERED UNDER THE KARNATAKA STATE C O - OPERATIVE SOCIETIES ACT, 1959 . THE PRIMARY OBJECT OF THE ASSESSEE IS TO PROMOTE OVERALL ECONOMIC BETTERMENT OF MEMBERS THROUGH SELF HELP AND MUTUAL AID IN ACCORDANCE WITH CO - OPERATIVE PRINCIPLES SPECIFIED IN THE FIRST SCHEDULE OF ACT . COLLECT THE AMOUNT FOR THE IMPROVEMENT OF THE FINANCE UNDER THE SCHEME AND 4 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) COLLECT THE AMOUNT AS STATED IN THE SUB RULE. FOR THIS, OUR ATTENTION WAS DRAWN TOWARDS THE BYE - LAWS OF THE ASSESS EE FROM ( 5.01 ) TO ( 5.11 ). 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 SOCIET Y BUT WHEN WE QUESTION THAT SECTION 80P DOES NOT TALK OF CO - 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 T HE 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. 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 KA RNATAKA & 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 THE Y 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 TRIBU NAL 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 PROVISIONS OF SEC. 80P(4) ARE APPLICABLE ONLY TO CREDIT CO - OPERATIVE BANKS AND NOT TO CREDIT CO - OPERATIVE SOCI ETY. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE PANAJI BENCH IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012. RELIANCE WAS ALSO PLACED ON THE DECISION OF PANAJI BENCH IN ITA N O. 229 & 230/PNJ/2013 IN THE CASE OF TARARANI MAHILA CO - OPERATIVE CREDIT 5 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 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 L TD, 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 A ND 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. 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 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 BANK ING 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 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 I S 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 R EADY 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 6 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, THE SUMS 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 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. 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. 4 . 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 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 TH E SECTION DEFINES THE 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 - OPERA TIVE 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. 8 0P(4) MANDATES THAT THE PROVISIONS OF SEC. 80P WILL NOT APPLY TO ANY CO - OPERATIVE BANK OTHER THAN A 7 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 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 - OPE RATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS ENTITLED FOR DEDUCTION. AFTER THE INSERTION OF SEC. 80P(4), THE PROVISIONS OF SEC. 80P(2)(A)(I) WERE NOT AMENDED, RATHER THE CO - OPERATIVE SOCIET Y 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 - OPER ATIVE 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 R EAD 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 OPINIO N, 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 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 CRED IT 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 M EMBERS. THIS SECTION 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). 8 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 5 . 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 A ND 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 ONE OR BOTH OF THE ACTIVITIES, IT WILL BE ELIGIBLE FOR DEDUCTION. THESE TWO ACTIVITIES ARE (A) CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR (B) CO - OPERATIVE SOCIETY ENGAGED IN PROVIDING CR EDIT 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 SO CIETY, 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 FA CILITIES TO ITS MEMBERS 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. 6 . NOW, THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS A CO - OPERATIVE BANK OR NOT. CO - O PERATIVE BANK IS DEFINED 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: 9 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 7 . FROM THE DEFINITION OF CO - OPERATIVE BANK IT IS APPA RENT 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 FIN D WHETHER THE ASSESSEE IS A PRIMARY CO - OPERATIVE BANK. 8 . 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 PRIM ARY 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 CAP ITAL OF SUCH CO - OPERATIVE SOCIETY OUT OF FUNDS PROVIDED BY THE STATE GOVERNMENT FOR THE PURPOSE. 9 . FROM THE AFORESAID DEFINITION, IT IS APPARENT THAT IF THE CO - OPERATIVE SOCIETY COMPLIED WITH ALL THE THREE CONDITIONS; FIRSTLY THAT THE PRIMARY OBJECT O R PRINCIPLE BUSINESS TRANSACTED BY IT IS A BANKING 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 L 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 F ACTS AND MATERIALS ON RECORD WHETHER THE ASSESSEE 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 10 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 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 WHI CH THE ASSESSEE DERIVES FROM CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 1 0 . 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 : - 5.01 ) T O PROMOTE OVERALL ECONOMIC BETTERMENT OF MEMBERS THROUGH SELF HELP AND MUTUAL AID IN ACCORDANCE WITH CO - OPERATIVE PRINCIPLES SPECIFIED IN THE FIRST SCHEDULE OF ACT. 5.02 ) ACCEPTS THE DEPOSITS FROM THE PUBLIC AT LARGE AND UTILIZE THE SAME FOR GIVING LOANS TO ITS MEMBERS OR INVESTS AND MAKE PAYMENT, THE DEPOSITED AMOUNT WHICH ARE ACCEPTED BY THE SOCIETY AS AND WHEN DEMANDED OR COMPLETION OF MATURITY PERIOD / SIMILARLY MAKE PAYMENT OF TH E DEPOSIT BY ISSUING CHEQUE, DRAFT OR BY ANY OTHER MEANS. 5.03 ) LOAN BE GIVEN TO ITS MEMBERS WITH MORTGAGE OR WITHOUT MORTGAGE OF THE PROPERTY. 5.04 ) TO CREATE FUNDS BY MEANS OF DEPOSITS AND BORROWINGS HEREAFTER TO LEND TO MEMBERS OF THE SOCIETY AT MODE RATE RATES OF INTEREST. 5.05 ) TO LEND MONEY TO ITS MEMBERS FOR HIRE PURCHASE OF HOUSEHOLD ARTICLES AND VEHICLES. 5.06 ) TO LEND MONEY TO ITS MEMBERS FOR THEIR BUSINESS PURPOSES. 5.07 ) TO LEND MONEY TO ITS MEMBERS FOR THEIR SPECIFIC NEED ON GOLD LOAN OR IMMOVABLE PROPERTIES WITH MORTGAGE. 5.08 ) TO ACQUIRE BUILDINGS, CONSTRUCT AND MAINTAIN OR CONVERT OR TRANSFER THE SAME WITH INTENT TO PROTECT THE INTEREST AND UTILITY OF THE SOCIETY . 5.09 ) TO MAINTAIN, SELL OR DISPOSE THE PROPERTY BY ANY OTHER MEANS . THE PROPERTY WHICH WAS ACQUIRED OR POSSESSED IN LIEU OF THE SOCIETY FULL OR PARTIAL RECOVERY OF SUCH PROPERTY. 5.10 ) TO DO SUCH OTHER THINGS IN FURTHERANCE OF THE ABOVE SUBJECTS . 5.11 ) PROMOTE SAVING HABITS AMONGST ITS MEMBERS . 1 1 . ON THE BASIS OF THES E 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 : - 11 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) ' BANKING' MEANS THE ACC EPTING, 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 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 PURPO SE 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 ASSE SSEE HAS CATEGORICALLY ACCEPTED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE WAS ACCEPTING DEPOSITS OF MONEY FROM THE GENERAL PUBLIC WHO ARE NON - MEMBERS. THIS FACT IS CLEAR AS PER THE REMAND REPORT OF A.O DATED 03 .0 9 .2013 WHICH IS REPRODUCED AS UNDER : - IT IS SUBMITTED THAT THE ASSESSEE SOCIETY ACCEPTS DEPOSITS FROM REGULAR MEMBERS HAVING RIGHTS, ASSOCIATE AND NOMINAL MEMBERS. WHO DO NOT HAVE THE VOTING RIGHTS. THUS, IT IS CLEAR THAT THE ASSESSEE SOCIETY ACCEPTS DEPOSITS FROM OTHER MEMBERS I.E., NON - ME MBERS. 1 2 . THE DEPOSITS SO ACCEPTED ARE USED BY THE ASSESSEE CO - OPERATIVE SOCIETY FOR LENDING OR INVESTMENT. THIS FACT HAS NOT BEEN DENIED BY THE ASSESSEE OR BY HIS COUNSEL IN THE SUBMISSION MADE BEFORE US. EVEN OUT OF THE DEPOSITS SO RECEIVED, THE LOA NS 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 STAND SATISFIED AND IT CAN BE SAID THAT THE ASSESSEE SOCIETY WAS CARRYING ON BANKING BUSINESS. 1 3 . 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 12 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 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. 1 4 . SO FAR AS THE SECOND CONDITION IS CONCERNED, TH ERE 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. 1 5 . SO FAR AS THE THIRD CONDITION IS CONCERNED, WE NOTED THAT SEC. 16 OF THE KARN ATAKA 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 SHALL 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 IN TO 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 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] 13 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) (2) NO CO - OPERATIVE SOCIETY SHALL, WITHOUT SUFFICIENT CAUSE, REFUSE ADMISSION TO MEMBERSH IP TO ANY PERSON 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 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 - S ECTION (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 - O PERATIVE SOCIETY 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). 1 6 . WE HAVE GONE THROUGH THE BYE - LAWS WHICH CONTAINS THE MEMB ERSHIP OF BYE - LAWS NO. 9, 10.A & 10.B . IT STATES AS UNDER : - 9 . MEMBERSHIP : THE FOLLOWING ARE ADMITTED AS A ORDINARY MEMBER OF THE SOCIETY: ORDINARY MEMBER ANY ADULT MEMBERS WHO ARE ELIGIBLE TO MAKE CONTRACT, AND RESIDENT WITHIN THE AREA OF OPERATION OF THE SOCIETY OR DOING BUSINESS OR SERVING FOR GAIN WITHIN THE AREA OF OPERATION OF THE SOCIETY OR DOING BUSINESS OR SERVING FOR GAIN WITHIN THE AREA OF OPERATION OF THE SOCIETY. I) THE CENTRAL GOVERNMENT; II) THE STATE GOVERNMENT; III) THE NA TIONAL CO - OPERATIVE D EVELOPMENT CO - OPERATION ESTABLISHED UNDER THE NCDC ACT, 1962; IV) ANY OTHER CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT; V) A GOVERNMENT COMPANY AS DEFINED IN SEC 617OF THE 14 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) COMPANIES ACT, 1 956; VI) SUCH CLASS OR CLASSES OF PERSONS OR ASSOCIATIONS OF PERSON MAY BE PERMITTED BY THE CENTRAL REGISTRAR HAVING REGARD TO THE NATURE AND ACTIVITIES OF THE SOCIETY B CLASS (I) TO (V) MAY BE ADMITTED AS AN ORDINARY MEMBER OF THE SOCIETY. 10.A. CONDITIONS FOR ORDINARY MEMBERSHIP : A PER SON WILL BE ENROLLED AS ORDINARY MEMBER UPON FULFILLING THE FOLLOWING CONDITION. 10.1 AN INDIVIDUAL, COMPETENT TO C ONTRACT UNDER SEC. 11 OF THE INDIAN CONTRACT ACT , 1872 . 10.2 HE/SHE HAS APPLIED IN WRITING IN THE PRESCRIBED FORM. 10.3 HE/SHE HAS PAID ADMISSION FEE RS.10/ - AND ACQUIRED AT LEAST ONE SHARE OF THE SOCIETY. 10.4 HE/SHE HAS GIVEN A DECLARATION THAT HE IS NOT A MEMBER OF ANY OTHER SIMILAR CO - OPERATIVE SOCIETY. 10.5 HE/SHE HAS F ULFILLED ALL OTHER CONDITIONS LAID DOWN IN THE ACTS, THE RULES AND BYE - LAWS. 10.6 THE BOARD OF DIRECTORS OF THE SOCIETY APPROVES THE APPLICATION TO ADMIT AS A MEMBER. 10.B. NO PERSON SHALL BE ELIGIBLE FOR ADMISSION AS A MEMBER OF THE SOCIETY : I. HAS NOT ATTAINED THE AGE OF 18 YEARS. II. HAS BEEN ADJUDGED BY A COMPETENT COURT TO BE AN INSOLVENT OR AN DISCHARGED INSOLVENT; III HAS BEEN SENTENCED FOR ANY OFFENCE, OTHER THAN OFFENCE OF A POLITICAL CHARACTER OR AN OFFENCE NOT INVOLVED IN MORAL TURPITUDE AND DISHONESTY AND A PERIOD OF FIVE YEARS HAS NOT ELAPSED FROM THE DATE OF EXPIRY OF THE SENTENCE. FROM CLAUSE 9, 10.A & 10.B , IT IS APPARENT THAT THE BYE - LAWS OF THE ASSESSEE DOES NOT PERMIT THE ADMISSION OF ANY OTHER COOPERATIVE SOCIETY. EVEN THE SOCIETY IS ALSO NOT PERMITTED TO BECOME MEMBER. THE CO - OPERATIVE SOCIETY IS DIFFERENT FROM THE SOCIETY. THEY ARE DIFFERENT LEGISLATURE FOR REGISTRATION OF CO - OPERATIVE SOCIETY AND SOCIETY. THE CO - OPERATIVE SOCIETY IS DEFINED U/S 2(19) OF THE INCOME TAX ACT TO MEA N A CO - OPERATIVE SOCIETY REGISTERED UNDER THE CO - OPERATIVE SOCIETIES ACT, 1912 OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE IN ANY STATE FOR THE REGISTRATION OF CO - OPERATIVE SOCIETY. IN KARNATAKA CO - OPERATIVE SOCIETY IS REGISTERED UNDER THE KARNATAK A CO - OPERATIVE SOCIETIES ACT, 1959 WHILE SOCIETY IS REGISTERED UNDER THE KARNATAKA SOCIETIES ACT, 1960. THUS THE THIRD CONDITION FOR BECOMING PRIMARY CO - OPERATIVE BANK IS ALSO COMPLIED WITH. SINCE THE ASSESSEE SOCIETY DOES COMPLY WITH ALL THE THREE CONDITI ONS, THEREFORE, IN OUR OPINION THE ASSESSEE SOCIETY DOES BECOME A PRIMARY CO - 15 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 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). 17 . 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, 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 FACILITIE S 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 O F ACIT, CIRCLE 3(1), BANGALORE VS. M/S. BANGALORE COMMERCIAL TRANSPORT CREDIT CO - OPERATIVE SOCIETY LTD. IN ITA NO. 1069/BANG/2010 HOLDING THAT SEC. 80P(2)(A)(I) IS APPLICABLE ONLY TO CREDIT CO - OPERATIVE SOCIETY A AND NOT TO CO - OPERATIVE BANK. WITH DUE REG ARDS 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. CREDI T 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. STAT E 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 16 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) 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 A CT 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 CO - OPERATIVE SOCIETIES IN QUESTION - ARE REQUIRED TO ADVANCE LOANS TO THEIR MEMBERS, THEY DO NOT CEASE TO BE CO - OPERATIVE SOCIETIES GOVERNED BY THE ACT NOR CAN THEY BE TREATED AS BANKING COMPANIES. IT IS ALSO NOT POSSIBLE TO HOLD THAT THESE ACTIVITIES OF THE PETITIONERS AMOUNT TO BANKING AS CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949, INASMUCH AS THESE CO - OPERATIVE SOCIETIES ARE NOT ESTABLISHED FOR THE PURPOSE OF DOING BANKING AS DEFINED IN SECTION 5(B) OF THE BANKING REGULATION ACT, 1949. 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 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. WH ILE 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 AIMS AND OBJECTS ALLOWS THE ASSESSE E 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 BUSINESS OF THE ASSESSEE IS BANKING B USINESS. 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 17 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) REGULATION ACT, 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE ASSESSEE, THEREFORE, CANNOT BE REGARDED TO BE PRI MARY 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 EXPLANATION THERE UNDER WILL NOT BE APPLI CABLE 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. 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 OPINION 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 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. 1 8 . WE, THEREFORE, IN VIEW OF OUR A FORESAID 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 PRIMARY CO - OPERATIVE BANK AND THE PROVISIONS OF SEC. 80P(4) ARE APPLICABLE IN THE CASE O F THE ASSESSEE AND ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). WE, THEREFORE, CONFIRM 18 ITA NOS. 393 & 394 /PNJ/2013 (ASST. YEARS: 2009 - 10 & 2010 - 11) THE ORDER S OF THE CIT(A) NOT ALLOWING DEDUCTION U/S 80P(2)(A)(I) TO THE ASSESSE E FOR BOTH THE YEARS . 19 . IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE DISMISSED . 2 0 . ORDER PRO NO U NCED IN THE OPEN COURT ON 18 . 11 .2014. SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 18 . 11 .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