ITO, Ward 1(1), Aurangabad V. Vardhaman Nagari Sahakari Pat Sanstha Maryadit, Aurangabad

ITA 40/PUN/2013

• Counselvise Citation: 4024514 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Bad and doubtful debts
• Section: 6; 56; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.40/PN/2013 (ASSESSMENT YEAR 2009-10) ITO, WARD-1(1), AURANGABAD .. APPELLANT VS. VARDHAMAN NAGARI SAHAKARI PAT SANSTHA MARYADIT, J-28/8, MAIN ROAD, MUKUNDWADI, AURANGABAD .. RESPONDENT PAN NO.AAATW1052E ASSESSEE BY : NONE REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 04-02-2014 DATE OF PRONOUNCEMENT : 17-02-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 29-10-2012 OF THE CIT(A) AURANGABAD RELATING TO ASSESSMENT YEAR 2009-10. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE, THEREFORE, THE APPEAL IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL RE PRESENTATIVE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BANKING ACTIVITY NAMELY, ACC EPTANCE OF DEPOSITS AND ADVANCING LOANS TO THE TRADERS INCLUDING NEEDY PERSONS. IT FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR O N 08-09-2009 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF RS .25,21,306 2 U/S.80P(2)(A)(I) OF THE I.T. ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE MAIN SOURCE OF I NCOME OF THE SOCIETY IS RECEIPT OF INTEREST ON ACCOUNT OF TERM LOAN, GOL D LOAN, VEHICLE LOAN ETC. GIVEN TO THE BORROWERS. FURTHER, THE ASSESSEE HAS ALSO ACCEPTED FIXED DEPOSITS AND PIGMY DEPOSITS FROM THE CUSTOMERS. AS PER THE BYE-LAWS OF THE SOCIETY, THE NOMINAL MEMBERS ARE NOT HAVING ANY RIGHT TO VOTE. THE ASSESSEE USED TO GIVE LOAN TO THE MEMBERS WHO ARE A DMITTED IN THE SOCIETY NOMINALLY FOR THE SPECIFIC PURPOSE AND AS S OON AS THE PURPOSE IS SERVED THE MEMBERSHIP OF THE MEMBER AUTOMATICALLY G ETS CANCELLED. 3.1 THE AO ANALYSED THE PROVISIONS OF CLAUSE (VIIA) IN SECTION 2(24) AND SECTION 80P OF THE INCOME TAX ACT, 1961, VARIOU S PROVISIONS OF THE BANKING REGULATION ACT, 1949 AND THE GUIDELINES ISS UED BY RBI FROM TIME TO TIME AND HELD THAT THE ASSESSEE CREDIT COOP ERATIVE SOCIETY IS NOT ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) FOR THE FOLL OWING REASONS (AS SUMMARISED BY LD.CIT(A) AT PARA 5 OF HIS ORDER) : (1) THE APPELLANT CREDIT CO-OPERATIVE IS A PRIMARY CO-OPERATIVE BANK AS PER EXPLANATION BELOW SUB-SECTION 4 OF SECTION 80P A ND HENCE NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT. (2) THE CLAUSE (VIIA) INSERTED IN SECTION 2(24) BY TH E FINANCE ACT, 2006 TO PROVIDE THAT THE PROFITS AND GAINS OF BUSINESS OF BANKING INCLUDES INCOME OF CREDIT CO-OPERATIVE SOCIETIES FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. (3) THE AMENDMENT TO SECTION 80(4) BY FINANCE ACT, 2006 PROVIDES THAT THE PROVISIONS OF SECTION SOP SHALL NOT APPLY IN R ELATION TO CO- OPERATIVE BANK OTHER THAN PRIMARY AGRICULTURAL CRED IT SOCIETY AND PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK. (4) THE EXPLANATION TO SECTION 80P(4) LAID DOWN TH AT A 'COOPERATIVE BANK' SHALL HAVE THE MEANING ASSIGNED TO IT IN PART-V OF THE BANKING REGULATION ACT, 1949. 3 (5) AS PER CLARIFICATION ISSUED BY CBDT IN F.NO.133/ 06/2007-TPL VIDE LETTER DATED 09/05/2008, CO-OPERATIVE BANK SHAL L HAVE THE MEANING ASSIGNED TO IT IN PART-V OF THE BANKING REGULATION AC T, 1949. AS PER PART- V OF THE BANKING REGULATION ACT, 'CO-OPERATIVE BANK S' MEANS A STATE CO- OPERATIVE BANK, A CENTRAL CO-OPERATIVE BANK AND PRI MARY CO-OPERATIVE BANK. (6) CLAUSE (CCI) OF SECTION-5 DEFINES A CO-OPERATIVE BANK TO INCLUDE A PRIMARY CO-OPERATIVE BANK AND CLAUSE (CCII) DEFINES A COOPERATIVE CREDIT SOCIETY TO MEAN CO-OPERATIVE SOCIETY THE PRIMARY OBJE CT OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS. CLAU SE (CCV) DEFINES A PRIMARY CO-OPERATIVE BANK IS A COOPERATIVE SOCIETY WH OSE PRIMARY OBJECTIVE OR PRINCIPAL BUSINESS IS TRANSACTING IN BANKIN G BUSINESS WHOSE PAID-UP CAPITAL AND RESERVE IS MORE THAN RS.1,00,000/ - ETC. (7) THE REPORT OF MADHAVARAO COMMITTEE 1999 FORMED BY RBI SUPPORTS THE VIEW THAT PRIMARY CREDIT CO-OPERATIVE SO CIETIES AUTOMATICALLY BECOMES A PRIMARY CO-OPERATIVE BANK AN D HENCE IT HAS TO APPLY TO RBI FOR A LICENCE TO CARRY ON BANKING BUSIN ESS BUT IT CAN CARRY ON BANKING BUSINESS UNTIL IT IS GRANTED A LICENCE OR NOTI FIED THAT A LICENCE CANNOT BE GRANTED TO IT. (8) THE APPELLANT IS CARRYING ON THE BANKING ACTIVI TY AS DEFINED IN SECTION- 5 OF THE BANKING REGULATION ACT AS PER WHICH 'BANKING MEANS THE ACCEPTING FOR THE PURPOSE OF LENDING OR INVESTMEN T OF DEPOSITS OF MONEY FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERW ISE AND WITHDRAWAL BY CHEQUE, DRAFT ORDER OR OTHERWISE.' HOW EVER, THE TERM TRANSACTION IN BANKING BUSINESS WILL INCLUDE NOT ONLY T HE BUSINESS ENUMERATED IN SECTION 5B OF BANKING REGULATION ACT, 1949 BUT ALSO THOSE ACTIVITIES. THIS VIEW IS SUPPORTED BY THE DECISIONS IN TH E CASE OF CIT VS. AHMEDNAGAR DISTRICT CENTRAL COOPERATIVE BANK LTD. (2 003) 264 ITR 38, CIT VS. BARODA PEOPLES CO-OPERATIVE BANK LTD. 280 ITR 282 (GUJ.) (9) THE INTEREST RECEIVED AMOUNTING TO RS.6,77,258/- ON INVESTMENTS WITH VARIOUS COOPERATIVE BANKS IS TO BE ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND NOT UNDER THE HEAD BUSINESS AND THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. IN SUPPORT OF THIS CONTENTION, THE APPELLANT HAS RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF TOTAGARS' CO-OP.SOCIETY LTD. VS. ITO 322 I TR 283 (SC). THE A.O. CLAIMED THAT AS THE BANK INTEREST EARNED BY THE SOCIETY IS NOT ON ACCOUNT OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE INTEREST RECEIVED FROM VARIOUS COOPERATIVE BANKS IS INCOME FROM OTHER SO URCES. THE A.O. HAS NOT MADE SEPARATE ADDITION OF RS.6,77,288/- AS THE SAME IS INCLUDED IN THE ADDITION OF RS.25,21,306/-. THE AO ACCORDINGLY MADE ADDITION OF RS.25,21,306/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN APPEAL THE LD.CIT(A) RELYING ON VARIOUS DECIS IONS INCLUDING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. 4 JANKALYAN NAGARI SAHAKARI PAT SANSTHA LTD. VIDE ITA NO.598/PN/2011 ORDER DATED 26-06-2012 AND VARIOUS OTHER DECISIONS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UNDER : 7. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER OF THE A.O. AND SUBMISSIONS OF THE APPELLANT. THE ISSUE TO BE DECIDED IS WHETHER THE CREDIT CO-OPERATIVE SOCIETIES ARE COOPERATIVE BANK S AS THE DEDUCTION U/S.80P(2)(A)(I) IS AVAILABLE TO CREDIT CO-OPERATIVE SOCIETIES PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE CO-OPERATIVE BA NKS ARE NOT ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) IN VIEW OF AMENDMENT T O SECTION 80P(4) BY FINANCE ACT, 2006 W.E.F.01/04/2007. THE RELEVANT P ORTION OF AMENDED SECTION 80P(4) READS AS UNDER : '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 DEVELOP MENT BANK. EXPLANATION-FOR THE PURPOSES OF THIS SUB-SECTION,- (A) 'CO-OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL C REDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO TH EM IN PART V OF THE BANKING REGULATION ACT, 1949 (30 OF 1949) (B) ....' 7.1 IN VIEW OF THE ABOVE EXPLANATION, THE CO-OPERATIVE BANK SHAL L HAVE THE MEANING STATED IN PART V OF THE BANKING REGULATI ON ACT, 1949. ACCORDING TO SECTION 56 OF THE BANKING REGULATION AC T, - 'CO-OPERATIVE BANK' MEANS A STATE CO-OPERATIVE BANK, A CENTRAL CO- OPERATIVE AND A PRIMARY CO-OPERATIVE BANK. 7.2 IN VIEW OF THE ABOVE PROVISION IN PART-V OF THE BANKING REGULATION ACT, 1949 IT IS CLEAR THAT CO-OPERATIVE SOCIETY IS NOT REGARDED AS 'CO- OPERATIVE BANK'. FURTHER, IT HAS ALSO BEEN LAID DOWN SECTION 56(CCII) IN PART-5 OF BANKING REGULATION ACT, THAT 'CO-OPERATIV E CREDIT SOCIETY' MEANS A CO-OPERATIVE SOCIETY, THE PRIMARY OBJECT OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS AND INCLUDES A CO-OPERATIVE LAND MORTGAGE BANK. IN VIEW OF THIS PROVISION, IT IS C LEAR THAT THE MEANING OF CO-OPERATIVE CREDIT SOCIETY IS SEPARATELY GIVEN AND IT DOES NOT INCLUDE CO-OPERATIVE BANK OTHER THAN CO-OPERATIVE LAND MORT GAGE BANK. 7.3 FURTHER, CBDT CIRCULAR BEARING NO.3/2008 DATED 12/03/2008 ALSO MAKES IT CLEAR THAT THE AMENDMENT TO SECTION 80P(4) H AS WITHDRAWN THE DEDUCTION U/S.80P IN RESPECT OF CO-OPERATIVE BANKS. F URTHER, THE AMENDMENT TO SECTION 36(1)(VIIA) BY FINANCE ACT, 200 7 W.E.F. 01/04/2007 ALSO PROVIDES THAT THE DEDUCTION IN RESPECT OF BAD DEBTS SHALL BE ALLOWABLE ALSO TO CO-OPERATIVE BANKS. THIS AME NDMENT ALSO SUGGEST THAT THE DEDUCTION U/S SOP HAS BEEN WITHDRAWN B Y FINANCE ACT, 2006 W.E.F. 01/04/2007 IN RESPECT OF CO-OPERATIVE BA NKS ONLY. 7.4 IT IS ALSO TO BE NOTED HERE THAT THE CENTRAL BOA RD OF DIRECT TAXES VIDE CLARIFICATION BEARING F.NO.133/06/2007-TPL VID E LETTER DATED 09/05/2008 HAS CLARIFIED THAT THE DELHI CO-OPERATIVE URBAN THRIFT & CREDIT SOCIETY LTD., DOES NOT FALL WITHIN THE MEANIN G OF CO-OPERATIVE 5 BANKS AS DEFINED IN PART-V OF THE BANKING REGULATION ACT, 1949. SUB- SECTION-4 OF SECTION SOP WILL NOT APPLY IN ITS CASE. TH E CBDT HAS ALSO CLARIFIED THAT IN PART-V OF THE BANKING REGULATION ACT, 1949 'CO-OPERATIVE BANKS' MEANS A STATE CO-OPERATIVE BANK, A CENTRAL COO PERATIVE BANK AND PRIMARY CO-OPERATIVE BANK. FROM THE CLARIFICATION, IT IS EVIDENT THAT CREDIT CO-OPERATIVE SOCIETIES ARE NOT COVERED BY THE MEANING OF CO- OPERATIVE BANKS AS DEFINED IN PART-V OF THE BANKING R EGULATION ACT, 1949 AND ARE ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF TH E ACT. 7.5 THE CONTENTIONS RAISED BY THE A.O. ARE NOT IN ACC ORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT AND CIRCULAR AND CLA RIFICATION ISSUED BY THE CASE OF THE APPELLANT. 7.6 THE SIMILAR ISSUE HAS BEEN DECIDED ON IDENTICAL FAC TS IN FAVOUR OF THE APPELLANT IN THE CASE OF JANKALYAN NAGARI SAHAKA RI PAT SANSTHA LTD., PARBHANI VIDE ORDER DATED 25/02/2011 FOR A.Y.2007-0 8 BY CIT(APPEALS), AURANGABAD. THE HON'BLE ITAT, 'B' BENCH, PUNE HAS CO NFIRMED THE DECISION OF CIT(APPEALS), AURANGABAD IN THE CASE OF IT O WARD-L(4), PARBHANI VS. JANKALYAN NAGARI SAHAKARI PAT SANSTHA LT D., PARBHANI IN ITA NO.598/PN/2011 FOR A.Y.2007-08 VIDE ORDER DATED 26/ 06/2012. 7.7 IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSID ERED VIEW THAT THE CO-OPERATIVE SOCIETY IS NOT A CO-OPERATIVE BANK A ND THEREFORE, THE APPELLANT CREDIT CO-OPERATIVE SOCIETY IS ENTITLED TO DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. THE A.O. IS NOT JUSTIFIED I N DISALLOWING THE DEDUCTION OF RS.25,21,306/- CLAIMED BY THE APPELLANT SOCIETY AND HENCE DIRECTED TO ALLOW THE SAME. GROUND NOS. 1 &2 ARE, THE REFORE, ALLOWED. 7.8 THE OTHER CONTENTION OF THE A.O. IS THAT INTEREST INCOME FROM VARIOUS COOPERATIVE BANKS AMOUNTING TO RS.6,77,258/- I S TO BE TAXED AS 'INCOME FROM OTHER SOURCES AND NOT 'INCOME FROM BUSINE SS' OF THE SOCIETY. THE A.O. HAS HELD THAT THE BUSINESS OF THE SOCIE TY IS PROVIDING CREDIT FACILITY TO ITS MEMBERS AND THE ABOVE INCOME I S NOT RELATED TO THE SAID ACTIVITY OF THE SOCIETY AND HENCE THE SAME IS INCO ME FROM OTHER SOURCES NOT ELIGIBLE FOR DEDUCTIONS U/S. 80P(2)(A)(I) O F THE ACT. IN SUPPORT OF THIS PROPOSITION, THE A.O. HAS RELIED ON THE DECISION IN THE CASE OF TOTAGARS' CO-OP. SOCIETY LTD. VS. ITO 322 ITR 283 (SC). THE A.O. HAS NOT MADE SEPARATE ADDITION OF RS.6,77,258/- ON THE AB OVE COUNT AS THIS ADDITION IS COVERED IN THE SEPARATE ADDITION OF RS.25, 21,306/-. 8.1 ON THE OTHER HAND, THE APPELLANT HAS POINTED OU T THAT THE FACTS OF THE CASE OF THE APPELLANT ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE RELIED ON BY THE A.O. THE APPELLANT HAS POINTED OUT THAT THE ACTIVITY CARRIED OUT BY THE APPELLANT SOCIETY IS COVERED BY AC TIVITY OF BUSINESS OF BANKING. IN SUPPORT OF THIS PROPOSITION THE APPELLANT HAS RELIED ON THE RATIO LAID DOWN IN THE CASES OF MAHAVIR NAGARI SAHAKA RI PATSANSTHA LTD. VS. DCIT (2002) 74 TTJ 793(PUNE) AND ELECTRO URBAN C O-OP. CREDIT SOCIETY LTD. VS. ITO (2001), 70 TTJ 441 (CAL-TM). IN THESE CASES THE ASSESSEES WERE CREDIT CO-OPERATIVE SOCIETIES I.E. PATSANSTHA , AS IS THE CASE OF THE APPELLANT. IN THESE CASES THE HON'BLE TRIBUNAL S HAVE LAID DOWN THAT THE SAID SOCIETIES PROVIDING CREDIT FACILITIES TO ITS M EMBERS ARE CARRYING ON ACTIVITY WHICH IS COVERED BY ACTIVITY OF BUSINESS OF BANKING AND HENCE THEY ARE ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(VI). IN THE CASE DECIDED BY HON'BLE ITAT, KOLKATA, IT HAS BEEN HELD THAT EVEN I NCOME FROM UTI INVESTMENT AND INTEREST ON BANK DEPOSITS INVESTED OUT OF AMOUNTS COLLECTED FROM MEMBERS AS DEPOSITS IS ELIGIBLE FOR DEDUC TION U/S. 6 80P(2)(A)(I). IN THE CASE DECIDED BY HON'BLE APEX CO URT RELIED ON BY THE A.O. THE AMOUNT INVESTED IN SHORT TERM DEPOSITS AND SECU RITIES WAS NOT OUT OF INTEREST BEARING DEPOSITS COLLECTED FROM MEMBER S BUT OUT OF SALE PROCEEDS OF AGRICULTURAL PRODUCE OF FARMER MEMBERS MA RKETED BY THE SOCIETY. THE APPELLANT HAS THEREFORE CORRECTLY POINTE D OUT THAT THE FACTS OF THE CASE RELIED ON BY THE A.O. ARE DISTINGUISHABLE. IN THE SAID CASE RELIED ON BY THE A.O. THE SOCIETY HAS NOT CARRIED OUT THE ACTIVITY OF COLLECTING INTEREST BEARING DEPOSITS FROM MEMBERS AND L ENDING THE SAME TO MEMBERS AND INVESTING THE FUNDS IN BANK DEPOSITS WITH COOPERATIVE BANK FOR EARNING INTEREST INCOME ETC. THE HON'BLE AP EX COURT HAS THEREFORE CONSIDERED ONLY THE LATER PART OF SECTION 8 0P(2)(A)(I) I.E. INCOME OF A CO-OP, SOCIETY ENGAGED IN PROVIDING CRED IT FACILITIES TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION AND HAS NOT CONSIDERE D THE EARLIER PART OF SECTION 80P(2)(A)(I) I.E. INCOME OF A CO-OP. SOCI ETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING IS ELIGIBLE FOR DEDUCTION. I N VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT T HE APPELLANT SOCIETY IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) IN RESPECT OF INTEREST ON DEPOSITS IN VARIOUS COOPERATIVE BANKS. THE A.O. IS NOT J USTIFIED IN HOLDING THAT THE APPELLANT IS NOT ELIGIBLE TO CLAIM DEDUCTIO N U/S. 80P(2)(A)(I) IN RESPECT OF THE INCOME TO THE EXTENT OF RS.6,77,258/-. THE CONTENTION RAISED BY THE A.O. IS, THEREFORE, REJECTED. 8.1 AS REGARDS, THE OTHER CONTENTIONS OF THE APPELLANT THAT IN RESPECT OF INTEREST FROM COOPERATIVE BANKS THE DEDUCTION IS AL SO ALLOWABLE U/S. 80P(2)(D), THE PROVISIONS OF SAID SECTION ARE RELEVANT AND HENCE THE SAME ARE REPRODUCED BELOW - '80P(2) THE SUM REFERRED TO IN SUBSECTION (1 ) (I.E. DEDUCTIONS ALLOWABLE IN RESPECT OF INCOME OF CO-OPERATIVE SOCIET Y) SHALL BE FOLLOWING NAMELY :- (A) ....... (D) IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MENTS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOM E.' FROM THE ABOVE SECTION 80P(2)(D), IT IS EVIDENT THAT THE INTEREST DERIVED BY THE APPELLANT SOCIETY FROM ITS INVESTMENT WITH ANY OTHER CO-OPERATIVE SOCIETY IS DEDUCTIBLE. THE APPELLANT HAS INVESTED FUNDS WITH VARIOUS COOPERATIVE BANKS. THE SAID BANK IS UNDISPUTEDLY A CO-O PERATIVE SOCIETY REGISTERED UNDER MAHARASHTRA CO-OPERATIVE SOCIETIES AC T. THE PROVISIONS OF SECTION 80P(2)(D) ARE INTRODUCED IN ORDER TO ENCO URAGE CO-OPERATIVE MOVEMENT IN THE COUNTRY. IT IS NOWHERE PROVIDED IN SE CTION 80P(2) THAT A CO-OPERATIVE BANK IS NOT A CO-OPERATIVE SOCIETY. THE REFORE, THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(D) IN RESPECT O F INTEREST FROM VARIOUS COOPERATIVE BANKS ACCORDINGLY TO RS.6,77,258/-. IN VI EW OF THE ABOVE FACTS AND DISCUSSION, THE CONTENTION OF THE A.O. THAT T HE APPELLANT SOCIETY IS NOT ELIGIBLE FOR DEDUCTION U/S 80P ON INTEREST INCO ME OF RS.6,77,258/- IS REJECTED. IN THE RESULT, THE APPEAL IS ALLOWED. 7 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT A CO-OPERATI VE SOCIETY IS NOT REGARDED AS A CO-OPERATIVE BANK, IN ACCORDANCE WIT H THE PROVISIONS OF SECTION 56(CCII) OF THE BANKING REGULATION ACT, 1949 , THEREBY DELETING THE DISALLOWANCE OF RS.25,21,306/- MADE U/S.80P(2)(A)(I) O F THE I.T. ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT THE EFFECT OF THE BOARDS CIRCULAR NO. 03/2008 DATED 12-03-2008 IS THAT IN THE CASE OF C O-OPERATIVE BANKS ONLY THE DEDUCTION U/S.80P(2)(A)(I) STANDS WITHDRAWN. 3. THE ORDER OF THE CIT(A) BE VACATED AND THAT OF T HE A.O. BE RESTORED. 6. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND AN IDENTICAL ISSUE HAD COME UP B EFORE THE TRIBUNAL IN THE CASE OF JANKALYAN NAGARI SAHAKARI PAT SANSTHA LTD. (SUPRA) AND THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E AND DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDING AS UNDER : 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES A ND PERUSED THE RECORDS. IN THIS CASE, AS PER THE FACTS ON RECORD, THE ASSESSEE IS A CO- OPERATIVE CREDIT SOCIETY. SECTION 80P HAS UNDERGONE AN AMENDMENT W.E.F. 1.4.2007 BY INSERTION OF SUB-SEC. (4) WHICH R EADS AS UNDER : (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 DEVELOP MENT BANK. EXPLANATION FOR THE PURPOSE OF THIS SUB-SECTION,- (A) CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDI T SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); 8 (B) PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELO PMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFIN ED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LON G-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 5. IT IS TO BE MENTION HERE THAT UP TO A.Y. 2006-07, ANY CO-OPERATIVE SOCIETY WHICH WAS ENGAGED IN THE BUSINESS OF CARRYING O N BANKING WAS ELIGIBLE FOR DEDUCTION IN RESPECT OF THE WHOLE OF TH E AMOUNT OF PROFIT ATTRIBUTABLE TO ITS BANKING ACTIVITIES. FOR THE BENE FIT OF DECIDING THE PRESENT ISSUE, IT IS NECESSARY TO CONSIDER THE LEGAL POSITI ON AS APPLICABLE UP-TO THE A.Y. 2006-07, MORE PARTICULARLY IN VIEW O F SUB-SECTION (2) OF SEC. 80-P. SECTION 80 P (2) READS AS UNDER :- 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEI NG 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 SUB JECT TO THE PROVISIONS OF THIS 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 CR EDIT FACILITIES TO ITS MEMBERS, OR (II) A COTTAGE INDUSTRY, OR (III) THE MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS, OR (IV) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LI VESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE O F SUPPLYING THEM TO ITS MEMBERS, OR (V) .. (VI) .. 6. SUB-SECTION (4) WAS INTRODUCED FOR WITHDRAWIN G THE DEDUCTION TO THE CO-OPERATIVE BANK OTHER THAN PRIMARY AGRICULTU RE CREDIT SOCIETY OR PRIMARY CO-OPERATIVE AGRICULTURE AND RURAL DEVELOPM ENT BANK. IN VIEW OF EXPLANATION BELOW SUB-SEC.(4) OF SEC. 80P, THE D EFINITION OF THE CO- OPERATIVE BANK AS ASSIGNED IN PARA 5 OF THE BANKING RE GULATION ACT IS TO BE CONSIDERED. IN THE OPINION OF THE A.O, AS THE NAT URE OF THE ACTIVITIES OF THE ASSESSEE CREDIT SOCIETY ARE ANALOGOUS TO THE BANKING ACTIVITIES, WHICH ARE MORE SPECIFICALLY DESCRIBE IN THE BANKING REGULA TION ACT AND HENCE, ASSESSEE PARTAKES THE CHARACTER OF PRIMARY CO-OPERATIV E BANK AS DEFINED IN CLAUSE (CCII ) OF THE BANKING REGULATION ACT 1949. CLAUSE (CCI) OF SEC 5 OF BR ACT DEFINES THE CO-OPERATIVE BANK MEA NS STATE CO- OPERATIVE BANK, CENTRAL CO-OPERATIVE BANK AND PRIM ARY CO-OPERATIVE BANK. 7. THE PRIMARY CO-OPERATIVE BANK IS TREATED AS C O-OPERATIVE BANK IN VIEW OF CL. (CCI) OF SEC 5 OF THE B. R. ACT, 1949. D EFINITION OF PRIMARY CO- OPERATIVE BANK IS GIVEN IN CL. (CCV) OF SEC. 5 OF B. R. ACT, 1949, WHICH READS AS UNDER; PRIMARY CO-OPERATIVE BANK MEANS A CO-OPERATIVE SOCI ETY OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY (I) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WH ICH IS THE TRANSACTIONS OF BANKING BUSINESS; 9 (II) THE PAID-UP SHARE CAPITAL AND RESERVES OF WHI CH ARE NOT LESS THAN ONE LACK OF RUPEES; AND (III) THE BY-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 TH E ADMISSION OF CO- OPERATIVE BANK AS A MEMBER BY REASON OF SUCH CO-OPE RATIVE BANK SUBSCRIBING TO SHARE CAPITAL OF SUCH CO-OPERATIVE S OCIETY OUT OF FUNDS PROVIDED BY STATE GOVERNMENT FOR THE PURPOSE. ON CAREFUL PERUSAL OF ABOVE DEFINITION IT IS SEEN THAT BASIC MANDATE ANY CO-OPERATIVE SOCIETY TO COVER IN DEFINITION OF PRI MARY CO-OPERATIVE BANK IS THAT ITS PRIMARY OBJECT OR PRINCIPAL BUSINESS SHOULD BE TRANSACTIONS OF BANKING BUSINESS. THE TERM BANKING IS DEFINED IN B. R. ACT AND AS PER SAID DEFINITION THERE IS NO RESTRICTION THAT DEPOSITOR SHOULD BE MEMBER OF SAID SOCIETY BUT IT IS PUBLIC AT LARGE WI TH WHOM BUSINESS TRANSACTIONS CAN BE CARRIED OUT. OTHER TWO CONDITIONS AS MENTIONED IN CLS.(II) &(III) ARE ON FULFILLING FIRST CONDITION GIV EN IN CL.(I). IN PRESENT CASE NOTHING IS ON RECORD TO SUGGEST THAT ALL THREE CONDITI ONS ARE FULFILLED TO HOLD THAT ASSESSEE WHICH IS A CO-OPERATIVE SOCIETY IS A PRIMARY CO- OPERATIVE BANK 8. IT IS PERTINENT TO NOTE HERE THAT THE DEFIN ITION OF THE CO-OPERATIVE CREDIT SOCIETY IS GIVEN IN CLAUSE (CCII) OF SEC. 5 WH ICH READS AS UNDER : CO-OPERATIVE CREDIT SOCIETY MEANS A CO-OPERATIVE SO CIETY, THE PRIMARY OBJECT OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATIO N TO ITS MEMBERS AND INCLUDES A CO-OPERATIVE LAND MORTGAGE BANK; 9. THE BANKING REGULATION ACT, 1949 DEFINES OF CO-OPERATIVE BANK IN CL.(CCI) OF SEC. 5 (AS INSERTED BY SEC. 56 OF THE SAID ACT) AND CO-OPERATIVE CREDIT SOCIETY IS NOT INCLUDED BUT ITS IDENTITY IS KEP T SEPARATE BY WAY OF INDEPENDENT DEFINITION IN VIEW OF CLAUSE (CCII) OF S EC. 5 OF THE BANKING REGULATION ACT WHICH DEFINES WHAT IS MEANING OF CRED IT CO-OPERATIVE SOCIETY. ON PLAIN READING OF THE BANKING REGULATIO N ACT, 1949, NOWHERE IT IS SUGGESTED THAT THE TERM CO-OPERATIVE BANK ALSO INCLUDES CO- OPERATIVE CREDIT SOCIETY ALSO. MEANING OF ANY TERM OR EXPRESSION IS TO BE ASCERTAINED IN THE CONTEXT OF PROVISIONS OF REFERRED A CT. AS PER SUB-SEC. (4) OF SEC. 80P OF THE I. T. ACT, CO-OPERATIVE BANK MEANS STATE CO- OPERATIVE BANK, A CENTRAL CO-OPERATIVE BANK AND A P RIMARY CO-OPERATIVE BANK. IT IS SEEN THAT CO-OPERATIVE BANK IS DEPRIVED OF THE BENEFIT OF THE DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. AS PER THE I NTERPRETATION GIVEN BY THE AO, ASSESSEE CO-OPERATIVE CREDIT SOCIETY PARTAKES T HE CHARACTER OF THE PRIMARY CO-OPERATIVE BANK AND AS THE PRIMARY CO- OPERATIVE BANK IS INCLUDED IN THE DEFINITION OF THE CO-OPERATIVE BANK AND HENCE, IS NOT ENTITLED TO THE BENEFITS OF SEC. 80P(2)(A)(I) OF I. T. ACT. IN OUR OPINION, THIS IS NOT THE CORRECT INTERPRETATION. IT IS WELL SET TLED PRINCIPLE IN THE INTERPRETATION OF THE TAXING PROVISIONS THAT THE SAM E ARE TO BE STRICTLY CONSTRUED AND THERE IS N ROOM FOR ANY INTENDMENT. THE RE IS NO PRESUMPTION AS TO TAX.NOTHING IS TO BE READ OR NOTHIN G IS TO BE IMPLIED. ONE HAS TO FAIRLY LOOK INTO LANGUAGE USED BY THE PARL IAMENT. THE PARLIAMENT HAS ADOPTED THE DEFINITION OF THE CO-OP ERATIVE BANK BY REFERING THE SAME AS GIVEN IN THE BANKING REGULATION ACT, 1949. IT IS CALLED LEGISLATION BY REFERENCE AND WE HAVE TO GIVE THE STRICT INTERPRETATION WHILE INTERPRETING THE EFFECT OF SU B-SEC. (4) TO SEC. 80 P. 10 IN OUR OPINION, CO-OPERATIVE CREDIT SOCIETY IS DISTI NCT AND SEPARATE FROM THE CO-OPERATIVE BANK NOR IT CAN BE SAID AS A PRIMARY CO-OPERATIVE BANK WITHIN THE MEANING OF BANKING REGULATION ACT, 1949 . HENCE, THE ASSESSEEEE BEING A CO-OPERATIVE CREDIT SOCIETY IS ENTIT LED FOR DEDUCTION U/S. 80 P(2)(A)(I) OF THE ACT. WE ACCORDINGLY UPHOL D THE ORDER OF THE LD CIT(A). 10. IN RESULT, REVENUES APPEAL IS DISMISSED. 6.1 SINCE THE ORDER OF THE LD.CIT(A) IS IN CONSONAN CE WITH THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL CI TED (SUPRA), THEREFORE, RESPECTFULLY FOLLOWING THE SAME AND IN A BSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LD. DEPARTMEN TAL REPRESENTATIVE AGAINST THE ORDER OF THE TRIBUNAL, WE FIND NO INFIR MITY IN THE ORDER OF THE CIT(A). GROUNDS RAISED BY THE REVENUE ARE ACCORDIN GLY DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17-02-2014. SD/- SD/- (R.S.PADVEKAR ) ( R. K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 17 TH FEBRUARY 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE