Income Tax Officer Ward-1, Bagalkot V. Shri Bapooji Pattin Souhard Sahakari Niyamit , Bagalkot

ITA 827/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7409 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH JT BENGALURU
• Keywords: Search and seizure
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO.827/BANG/2017 ASSESSMENT YEAR : 2013-14 THE INCOME TAX OFFICER, WARD 1, BAGALKOT. VS. SHRI BAPOOJI PATTIN SOUHARD SAHAKARI NIYAMIT, BAGALKOT DIST., BAGALKOT. PAN: AAAAB 6930F APPELLANT RESPONDENT APPELLANT BY : SHRI B.R. RAMESH, JT. CIT(DR)(ITAT) BENGALURU RESPONDENT BY : SHRI MADHUKAR G. HEGDE, CA DATE OF HEARING : 12.10.2017 DATE OF PRONOUNCEMENT : 31.10.2017 O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(APPEALS), BELAGAVI DATED 30.01.2017 FOR THE ASSESSMENT YEAR 2013-14. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - (1) THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEE IS A CO-OPE RATIVE SOCIETY WHICH FULFILLS ALL THE THREE CONDITIONS OF BEING A PRIMARY CO- IT(TP)A NO.309/BANG/2014 PAGE 2 OF 12 OPERATIVE BANK AS PROVIDED IN SECTION 5(CCV) OF THE BANKING REGULATION ACT, 1949. (2) THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON F ACTS IN NOT APPRECIATING THE DEFINITION OF A CO-OPERATIVE BANK WHICH AS PER EXPLANATION BELOW SECTION 80P(4) NAMELY 'THE COOPER ATIVE BANK' SHALL HAVE THE MEANING ASSIGNED TO IT IN PART- V OF THE BANKING REGULATION ACT, 1949. (3) THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON F ACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEE SOCIETY BEI NG A CREDIT CO- OPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS IS A PRIMARY CO- OPERATIVE BANK WITHIN THE DEFINITION OF SECTION 5(C CV) OF THE BANKING REGULATION ACT, 1949 AND AS SUCH, IS NOT EL IGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE 1. T. A CT, 1961. (4) THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDER ING THE FACT THAT THE SPECIAL LEAVE PETITION FILED BY THE DEPART MENT BEFORE THE HON'BLE SUPREME COURT, VIDE SLP NO. 18221 OF 2015 H AS BEEN CONVERTED TO CIVIL APPEAL NO. 5103/2015 WHICH IS PE NDING FOR A FINAL DECISION ON THE SAME ISSUE, IN THE CASE OF CI T VS. SHRI BILURU GURBASAVA PATTIN SAHAKARI SANGH NIYAMIT. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE RESPO NDENT-ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING CREDIT FACILITIES. R ETURN OF INCOME FOR THE AY 2013-14 WAS FILED ON 23.09.2013 DECLARING NIL INCOM E AFTER CLAIMING EXEMPTION U/S. 80P OF THE ACT OF RS.87,10,540. AGAINST THE SAID RETURN OF INCOME, ASSESSMENT WAS COMPLETED BY THE ITO, WARD-1 , BAGALKOT BY ORDER DATED 31.12.2015 PASSED U/S. 143(3) OF THE ACT BY D ENYING THE EXEMPTION U/S. 80P OF THE ACT AND DISALLOWING PIGMI COMMISSIO N ON THE GROUND THAT NO TDS WAS MADE OF RS.1,70,46,946. THE AO DENIED THE EXEMPTION U/S. 80P ON THE GROUND THAT THE RESPONDENT-ASSESSEE SOCIETY IS A BANK AND IS HIT BY THE PROVISIONS OF SUB-SECTION (4) OF SECTION 80P OF THE ACT. IT(TP)A NO.309/BANG/2014 PAGE 3 OF 12 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE CIT(APPEALS). THE LD. CIT(APPEALS) FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND THE ITAT IN THE CASES OF CIT V. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA IN ITA NO.5006/13 , ITO V. VENUGRAM MULTIPURPOSE CO-OPERATIVE CREDIT SOCIETY LTD. IN IT A NO.100042 OF 2014 AND CIT V. ZAFARI MOMIM VIKAS CO-OP. CREDIT SOCIETY LTD . HAS ALLOWED THE APPEAL HOLDING THAT THE RESPONDENT-ASSESSEE IS NOT A CO-OPERATIVE BANK, THEREFORE, IS NOT HIT BY PROVISIONS OF SUB-SECTION (4) OF SECTION 80P OF THE ACT. THE LD. CIT(APPEALS) ALSO GRANTED RELIEF IN R ESPECT OF ADDITION OF PIGMI COMMISSION PAID ON THE GROUND THAT TDS PROVISIONS A RE NOT APPLICABLE. 5. THE REVENUE IS IN APPEAL BEFORE US CONTESTING ON LY AGAINST THE FINDING OF THE CIT(APPEALS) ALLOWING THE BENEFIT U/ S. 80P OF THE I.T. ACT. THE LD. SR.DR VEHEMENTLY CONTENDED THAT THE RESPOND ENT-ASSESSEE CO- OPERATIVE SOCIETY IS NOT ELIGIBLE FOR DEDUCTION FOR THE BENEFIT OF SECTION 80P AS IT IS ENGAGED IN THE BUSINESS OF PROVIDING CREDI T FACILITIES TO THE THIRD PARTIES. 6. ON THE OTHER HAND, THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AND THE ITAT IN T HE CASES OF CIT V. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA IN ITA NO.5006/13, ITO V. VENUGRAM MULTIPURPOSE CO-OPERATIVE CREDIT SO CIETY LTD. IN ITA NO.100042 OF 2014 AND CIT V. ZAFARI MOMIM VIKAS CO-OP. CREDIT SOCIETY LTD. IT(TP)A NO.309/BANG/2014 PAGE 4 OF 12 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL IS WH ETHER THE RESPONDENT- ASSESSEE CO-OPERATIVE SOCIETY IS ENTITLED FOR DEDUC TION U/S. 80P OF THE ACT. THE RESPONDENT-ASSESSEE IS REGISTERED UNDER THE KAR NATAKA CO-OPERATIVE SOCIETIES ACT. ACCORDING TO THE RESPONDENT-ASSESSE E, THE PRIMARY ACTIVITY OF THE ASSESSEE IS ONLY TO PROVIDE CREDIT FACILITIE S TO ITS MEMBERS AND THEREFORE IT IS NOT A CO-OPERATIVE BANK. HENCE THE PROVISIONS OF SUB-SECTION (4) OF SECTION 80P OF THE ACT ARE NOT APPLICABLE. FOR THE SAKE OF BETTER APPRECIATION OF FACTS, THE PROVISIONS OF SECTION 80 P ARE REPRODUCED BELOW:- 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-O PERATIVE 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 PRO VISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTA L INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E 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 ( II ) A COTTAGE INDUSTRY, OR ( III ) THE MARKETING OF AGRICULTURAL PRODUCE GROWN BY IT S MEMBERS, OR ( IV ) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, L IVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE O F SUPPLYING THEM TO ITS MEMBERS, OR ( V ) THE PROCESSING, WITHOUT THE AID OF POWER, OF THE AGRICULTURAL PRODUCE OF ITS MEMBERS, OR ( VI ) THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMB ERS, OR ( VII ) FISHING OR ALLIED ACTIVITIES, THAT IS TO SAY, THE CATCHING, CURING, PROCESSING, PRESERVING, STORING OR MARKETING OF FIS H OR THE PURCHASE OF MATERIALS AND EQUIPMENT IN CONNECTION THEREWITH FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS, THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES : IT(TP)A NO.309/BANG/2014 PAGE 5 OF 12 PROVIDED THAT IN THE CASE OF A CO-OPERATIVE SOCIETY FALLING UNDER SUB-CLAUSE ( VI ), OR SUB-CLAUSE ( VII ), THE RULES AND BYE-LAWS OF THE SOCIETY RESTRICT T HE VOTING RIGHTS TO THE FOLLOWING CLASSES OF ITS MEMBE RS, NAMELY: ( 1 ) THE INDIVIDUALS WHO CONTRIBUTE THEIR LABOUR OR, A S THE CASE MAY BE, CARRY ON THE FISHING OR ALLIED ACTIVITIES; ( 2 ) THE CO-OPERATIVE CREDIT SOCIETIES WHICH PROVIDE F INANCIAL ASSISTANCE TO THE SOCIETY; ( 3 ) THE STATE GOVERNMENT; ( B ) IN THE CASE OF A CO-OPERATIVE SOCIETY, BEING A PR IMARY SOCIETY ENGAGED IN SUPPLYING MILK, OILSEEDS, FRUITS OR VEGETABLES RAIS ED OR GROWN BY ITS MEMBERS TO ( I ) A FEDERAL CO-OPERATIVE SOCIETY, BEING A SOCIETY E NGAGED IN THE BUSINESS OF SUPPLYING MILK, OILSEEDS, FRUITS, OR VEGETABLES, AS THE CASE MAY BE; OR ( II ) THE GOVERNMENT OR A LOCAL AUTHORITY; OR ( III ) A GOVERNMENT COMPANY AS DEFINED IN SECTION 617 OF THE COMPANIES ACT, 1956 (1 OF 1956), OR A CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT (BEING A COMPANY O R CORPORATION ENGAGED IN SUPPLYING MILK, OILSEEDS, FRUITS OR VEGE TABLES, AS THE CASE MAY BE, TO THE PUBLIC), THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF SUC H BUSINESS; ( C ) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN ACTIVITIES OTHER THAN THOSE SPECIFIED IN CLAUSE ( A ) OR CLAUSE ( B ) (EITHER INDEPENDENTLY OF, OR IN ADDITION TO, ALL OR ANY OF THE ACTIVITIES SO SPECIFIED), SO MUCH OF ITS PROFITS AND GAINS ATTRIBUTABLE TO SUCH ACTIVITIES AS DOES NOT EXCEED, ( I ) WHERE SUCH CO-OPERATIVE SOCIETY IS A CONSUMERS' C O-OPERATIVE SOCIETY, ONE HUNDRED THOUSAND RUPEES; AND ( II ) IN ANY OTHER CASE, FIFTY THOUSAND RUPEES. EXPLANATION. IN THIS CLAUSE, 'CONSUMERS' CO-OPERATIVE SOCIETY' MEANS A SOCIETY FOR THE BENEFIT OF THE CONSUMERS; ( D ) IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DI VIDENDS DERIVED BY THE CO- OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTH ER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME; ( E ) IN RESPECT OF ANY INCOME DERIVED BY THE CO-OPERAT IVE SOCIETY FROM THE LETTING OF GODOWNS OR WAREHOUSES FOR STORAGE, PROCESSING OR FACILITATING THE MARKETING OF COMMODITIES, THE WHOLE OF SUCH INCOME; ( F ) IN THE CASE OF A CO-OPERATIVE SOCIETY, NOT BEING A HOUSING SOCIETY OR AN URBAN CONSUMERS' SOCIETY OR A SOCIETY CARRYING ON TRANSPO RT BUSINESS OR A SOCIETY ENGAGED IN THE PERFORMANCE OF ANY MANUFACTURING OPE RATIONS WITH THE AID OF POWER, WHERE THE GROSS TOTAL INCOME DOES NOT EXCEED TWENTY THOUSAND RUPEES, THE AMOUNT OF ANY INCOME BY WAY OF INTEREST ON SECURITIES OR ANY INCOME FROM HOUSE PROPERTY CHARGEABLE UNDER SECTION 22 . IT(TP)A NO.309/BANG/2014 PAGE 6 OF 12 EXPLANATION. FOR THE PURPOSES OF THIS SECTION, AN 'URBAN CONSUM ERS' CO-OPERATIVE SOCIETY' MEANS A SOCIETY FOR THE BENEFIT OF THE CON SUMERS WITHIN THE LIMITS OF A MUNICIPAL CORPORATION, MUNICIPALITY, MUNICIPAL COMM ITTEE, NOTIFIED AREA COMMITTEE, TOWN AREA OR CANTONMENT. (3) IN A CASE WHERE THE ASSESSEE IS ENTITLED ALSO T O THE DEDUCTION UNDER SECTION 80HH OR SECTION 80HHA OR SECTION 80HHB OR SECTION 80HHC OR SECTION 80HHD OR SECTION 80-I OR SECTION 80-IA OR SECTION 80J , THE DEDUCTION UNDER SUB- SECTION (1) OF THIS SECTION, IN RELATION TO THE SUM S SPECIFIED IN CLAUSE ( A ) OR CLAUSE ( B ) OR CLAUSE ( C ) OF SUB-SECTION (2), SHALL BE ALLOWED WITH REFEREN CE TO THE INCOME, IF ANY, AS REFERRED TO IN THOSE CLAUSES INCLUDED IN THE GROSS TOTAL INCOME AS REDUCED BY THE DEDUCTIONS UNDER SECTION 80HH , SECTION 80HHA , SECTION 80HHB , SECTION 80HHC , SECTION 80HHD , SECTION 80-I , SECTION 80-IA , SECTION 80J AND SECTION 80JJ . (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIE TY 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 CRE DIT 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 DEVE LOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 8. THE AO HAD DENIED THE BENEFIT OF SECTION 80P ON THE GROUND THAT IT IS A CO-OPERATIVE BANK AND HIT BY THE PROVISIONS OF SU B-SECTION (4) OF SECTION 80P OF THE ACT. RECENTLY IDENTICAL ISSUE HAD COME UP BEFORE THE HONBLE SUPREME COURT IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. V. ACIT [2017] 397 ITR 1 (SC) WHEREIN IT WAS HELD THAT THOUGH BUSINESS OF THE SOCIETY DOES NOT AMOUNT TO THAT OF CO-OPERATIVE BAN K SO AS TO COME WITHIN THE MISCHIEF OF SUB-SECTION (4) OF SECTION 80P, SIN CE THE ASSESSEE WAS CATERING TO THE NEEDS OF NON-MEMBERS ALSO, THE PRIN CIPLE OF MUTUALITY IS TAINTED AND THEREFORE THE BENEFIT OF SECTION 80P WA S DENIED. THE RELEVANT IT(TP)A NO.309/BANG/2014 PAGE 7 OF 12 PORTION OF THE JUDGMENT OF THE HONBLE APEX COURT I N THE SAID DECISION IS AS UNDER:- 18) WE MAY MENTION AT THE OUTSET THAT THERE CANNO T BE ANY DISPUTE TO THE PROPOSITION THAT SECTION 80P OF THE ACT IS A BENEVOLENT PROVISION WHICH IS ENACTED BY THE PARLIA MENT IN ORDER TO ENCOURAGE AND PROMOTE GROWTH OF CO-OPERATIVE SEC TOR IN THE ECONOMIC LIFE OF THE COUNTRY. IT WAS DONE PURSUANT TO DECLARED POLICY OF THE GOVERNMENT. THEREFORE, SUCH A PROVISI ON HAS TO BE READ LIBERALLY, REASONABLY AND IN FAVOUR OF THE ASS ESSEE (SEE BAJAJ TEMPO LIMITED, BOMBAY V. COMMISSIONER OF INCO ME TAX, BOMBAY CITY-III, BOMBAY (1992) 3 SCC 78; 196 ITR 18 8 (SC) = 2002-TIOL-763-SC-IT . IT IS ALSO TRITE THAT SUCH A PROVISION HAS TO BE CONSTRUED AS TO EFFECTUATE THE OBJECT OF THE LEGISLATURE AND NOT TO DEFEAT IT (SEE COMMISSIONER OF INCOME TAX, BOMBAY & ORS. V. MAHINDRA AND MAHINDRA LIMITED & ORS. (1983) 4 SCC 392; [1983] 144 ITR 225 (SC) = 2002-TIOL-988- SC-IT . THEREFORE, IT HARDLY NEEDS TO BE EMPHASISED THAT A LL THOSE CO-OPERATIVE SOCIETIES WHICH FALL WITHIN THE PURVIE W OF SECTION 80P OF THE ACT ARE ENTITLED TO DEDUCTION IN RESPECT OF ANY INCOME REFERRED TO IN SUB-SECTION (2) THEREOF. CLAUSE (A) OF SUB-SECTION (2) GIVES EXEMPTION OF WHOLE OF THE AMOUNT OF PROFITS A ND GAINS OF BUSINESS ATTRIBUTABLE TO ANYONE OR MORE OF SUCH ACT IVITIES WHICH ARE MENTIONED IN SUB-SECTION (2). 19) SINCE WE ARE CONCERNED HERE WITH SUB-SECTION ( I) OF CLAUSE (A) OF SUB-SECTION (2), IT RECOGNISES TWO KINDS OF CO-OPERATIVE SOCIETIES, NAMELY: (I) THOSE CARRYING ON THE BUSINE SS OF BANKING AND; (II) THOSE PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 20) IN THE CASE OF KERALA STATE COOPERATIVE MARKETING FEDERATION LIMITED & ORS. V. COMMISSIONER OF INCOME TAX (1998) 5 SCC 48 , THIS COURT, WHILE DEALING WITH CLASSES OF SOCIETIES COVERED BY SECTION 80P OF THE ACT, HELD A S FOLLOWS: 6. THE CLASSES OF SOCIETIES COVERED BY SECTION 80- P OF THE ACT ARE AS FOLLOWS: (A) ENGAGED IN BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS; XX XX XX IT(TP)A NO.309/BANG/2014 PAGE 8 OF 12 WE MAY NOTICE THAT THE PROVISION IS INTRODUCED WITH A VIEW TO ENCOURAGING AND PROMOTING GROWTH OF COOPERA TIVE SECTOR IN THE ECONOMIC LIFE OF THE COUNTRY AND IN PURSUANCE OF THE DECLARED POLICY OF THE GOVERNMENT. THE CORRECT WAY OF READING THE DIFFERENT HEADS OF EXEMP TION ENUMERATED IN THE SECTION WOULD BE TO TREAT EACH AS A SEPARATE AND DISTINCT HEAD OF EXEMPTION. WHENEVER A QUESTION ARISES AS TO WHETHER ANY PARTICULAR CATEGO RY OF AN INCOME OF A COOPERATIVE SOCIETY IS EXEMPT FROM TAX WHAT HAS TO BE SEEN IS WHETHER INCOME FELL WITHIN ANY OF THE SEVERAL HEADS OF EXEMPTION. IF IT FELL WITHIN ANY O NE HEAD OF EXEMPTION, IT WOULD BE FREE FROM TAX NOTWITHSTAN DING THAT THE CONDITIONS OF ANOTHER HEAD OF EXEMPTION AR E NOT SATISFIED AND SUCH INCOME IS NOT FREE FROM TAX UNDE R THAT HEAD OF EXEMPTION... 21) IN THE CASE OF COMMISSIONER OF INCOME TAX V. P UNJAB STATE CO-OPERATIVE BANK LTD. (2008) 300 ITR 24 (PUN JAB & HARYANA) = 2008-TIOL-337-HC-P-H-IT WHILE DEALING WI TH AN IDENTICAL ISSUE, THE HIGH COURT OF PUNJAB AND HARYA NA HELD AS FOLLOWS: THE PROVISIONS OF SECTION 80P WERE INTRODUCED W ITH A VIEW TO ENCOURAGING AND PROMOTING THE GROWTH OF THE CO- OPERATIVE SECTOR IN THE ECONOMIC LIFE OF THE COUNTR Y AND IN PURSUANCE OF THE DECLARED POLICY OF THE GOVERNMENT. THE DIFFERENT HEADS OF EXEMPTION ENUMERATED IN THE SECT ION ARE SEPARATE AND DISTINCT HEADS OF EXEMPTION AND AR E TO BE TREATED AS SUCH. WHENEVER A QUESTION ARISES AS TO W HETHER ANY PARTICULAR CATEGORY OF AN INCOME OF A CO-OPERAT IVE SOCIETY IS EXEMPT FROM TAX, THEN IT HAS TO BE SEEN WHETHER SUCH INCOME FELL WITHIN ANY OF THE SEVERAL HEADS OF EXEMPTION. IF IT FELL WITHIN ANY ONE HEAD OF EXEMPT ION,.... IT MEANS THAT A CO-OPERATIVE SOCIETY ENGAGED IN CAR RYING ON THE BUSINESS OF BANKING AND A CO-OPERATIVE SOCIE TY PROVIDING CREDIT FACILITIES TO ITS MEMBERS WILL BE ENTITLED FOR EXEMPTION UNDER THIS SUB-CLAUSE. THE CARRYING O N THE BUSINESS OF BANKING BY A COOPERATIVE SOCIETY OR PRO VIDING CREDIT FACILITIES TO ITS MEMBERS ARE TWO DIFFERENT TYPES OF ACTIVITIES WHICH ARE COVERED UNDER THIS SUB-CLAUSE . SO, IN OUR VIEW, IF THE INCOME OF A SOCIETY IS FA LLING WITHIN ANY ONE HEAD OF EXEMPTION, IT HAS TO BE EXEM PTED FROM TAX NOTWITHSTANDING THAT THE CONDITION OF OTHE R HEADS OF EXEMPTION ARE NOT SATISFIED. A READING OF T HE IT(TP)A NO.309/BANG/2014 PAGE 9 OF 12 PROVISIONS OF SECTION 80P OF THE ACT WOULD INDICATE THE MANNER IN WHICH THE EXEMPTION UNDER THE SAID PROVIS IONS IS SOUGHT TO BE EXTENDED. WHENEVER THE LEGISLATURE WANTED TO RESTRICT THE EXEMPTION TO A PRIMARY CO-OP ERATIVE SOCIETY, IT WAS SO MADE CLEAR AS IS EVIDENT FROM CL AUSE (F) WITH REFERENCE TO A MILK CO-OPERATIVE SOCIETY THAT A PRIMARY SOCIETY ENGAGED IN SUPPLYING MILK IS ENTITL ED TO SUCH EXEMPTION WHILE DENYING THE SAME TO A FEDERAL MILK CO-OPERATIVE SOCIETY. 22) THE AFORESAID JUDGMENT OF THE HIGH COURT CORRE CTLY ANALYSES THE PROVISIONS OF SECTION 80P OF THE ACT A ND IT IS IN TUNE WITH THE JUDGMENT OF THIS COURT IN KERALA STATE COO PERATIVE MARKETING FEDERATION LIMITED (SUPRA). 23) WITH THE INSERTION OF SUB-SECTION (4) BY THE F INANCE ACT, 2006, WHICH IS IN THE NATURE OF A PROVISO TO THE AF ORESAID PROVISION, IT IS MADE CLEAR THAT SUCH A DEDUCTION S HALL NOT BE ADMISSIBLE TO A CO-OPERATIVE BANK. HOWEVER, IF IT I S A PRIMARY AGRICULTURE CREDIT SOCIETY OR A PRIMARY CO-OPERATIV E AGRICULTURE AND RURAL DEVELOPMENT BANK, THE DEDUCTION WOULD STI LL BE PROVIDED. THUS, CO-OPERATIVE BANKS ARE NOW SPECIFIC ALLY EXCLUDED FROM THE AMBIT OF SECTION 80P OF THE ACT. 24) UNDOUBTEDLY, IF ONE HAS TO GO BY THE AFORESAID DEFINITION OF CO-OPERATIVE BANK, THE APPELLANT DOES NOT GET COVERED THEREBY. IT IS ALSO A MATTER OF COMMON KNOWLEDGE TH AT IN ORDER TO DO THE BUSINESS OF A CO-OPERATIVE BANK, IT IS IMPER ATIVE TO HAVE A LICENCE FROM THE RESERVE BANK OF INDIA, WHICH THE A PPELLANT DOES NOT POSSESS. NOT ONLY THIS, AS NOTICED ABOVE, THE R ESERVE BANK OF INDIA HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE APPELLANT DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. THE APPELLAN T, THEREFORE, WOULD NOT COME WITHIN THE MISCHIEF OF SUB-SECTION ( 4) OF SECTION 80P. 25) SO FAR SO GOOD. HOWEVER, IT IS SIGNIFICANT TO POINT OUT THAT THE MAIN REASON FOR DISENTITLING THE APPELLANT FROM GETTING THE DEDUCTION PROVIDED UNDER SECTION 80P OF THE ACT IS NOT SUB- SECTION (4) THEREOF. WHAT HAS BEEN NOTICED BY THE A SSESSING OFFICER, AFTER DISCUSSING IN DETAIL THE ACTIVITIES OF THE APPELLANT, IS THAT THE ACTIVITIES OF THE APPELLANT ARE IN VIOLATI ONS OF THE PROVISIONS OF THE MACSA UNDER WHICH IT IS FORMED. I T IS POINTED OUT BY THE ASSESSING OFFICER THAT THE ASSESSEE IS C ATERING TO TWO DISTINCT CATEGORIES OF PEOPLE. THE FIRST CATEGORY I S THAT OF RESIDENT IT(TP)A NO.309/BANG/2014 PAGE 10 OF 12 MEMBERS OR ORDINARY MEMBERS. THERE MAY NOT BE ANY D IFFICULTY AS FAR AS THIS CATEGORY IS CONCERNED. HOWEVER, THE ASSESSEE HAD CARVED OUT ANOTHER CATEGORY OF NOMINAL MEMBERS. T HESE ARE THOSE MEMBERS WHO ARE MAKING DEPOSITS WITH THE ASSE SSEE FOR THE PURPOSE OF OBTAINING LOANS, ETC. AND, IN FACT, THEY ARE NOT MEMBERS IN REAL SENSE. MOST OF THE BUSINESS OF THE APPELLAN T WAS WITH THIS SECOND CATEGORY OF PERSONS WHO HAVE BEEN GIVING DEP OSITS WHICH ARE KEPT IN FIXED DEPOSITS WITH A MOTIVE TO EARN MA XIMUM RETURNS. A PORTION OF THESE DEPOSITS IS UTILISED TO ADVANCE GOLD LOANS, ETC. TO THE MEMBERS OF THE FIRST CATEGORY. I T IS FOUND, AS A MATTER OF FACT, THAT THE DEPOSITORS AND BORROWERS A RE QUIET DISTINCT. IN REALITY, SUCH ACTIVITY OF THE APPELLANT IS THAT OF FINANCE BUSINESS AND CANNOT BE TERMED AS CO-OPERATIVE SOCIETY. IT IS ALSO FOUND THAT THE APPELLANT IS ENGAGED IN THE ACTIVITY OF GRANTIN G LOANS TO GENERAL PUBLIC AS WELL. ALL THIS IS DONE WITHOUT AN Y APPROVAL FROM THE REGISTRAR OF THE SOCIETIES. WITH INDULGENCE IN SUCH KIND OF ACTIVITY BY THE APPELLANT, IT IS REMARKED BY THE AS SESSING OFFICER THAT THE ACTIVITY OF THE APPELLANT IS IN VIOLATION OF THE CO- OPERATIVE SOCIETIES ACT. MOREOVER, IT IS A CO-OPERA TIVE CREDIT SOCIETY WHICH IS NOT ENTITLED TO DEDUCTION UNDER SE CTION 80P(2)(A)(I) OF THE ACT. 26) IT IS IN THIS BACKGROUND, A SPECIFIC FINDING I S ALSO RENDERED THAT THE PRINCIPLE OF MUTUALITY IS MISSING IN THE I NSTANT CASE. THOUGH THERE IS A DETAILED DISCUSSION IN THIS BEHAL F IN THE ORDER OF THE ASSESSING OFFICER, OUR PURPOSE WOULD BE SERVED BY TAKING NOTE OF THE FOLLOWING PORTION OF THE DISCUSSION: AS VARIOUS COURTS HAVE OBSERVED THAT THE FOLLOWING THREE CONDITIONS MUST EXIST BEFORE AN ACTIVITY COULD BE B ROUGHT UNDER THE CONCEPT OF MUTUALITY; THAT NO PERSON CAN EARN FROM HIM; THAT THERE A PROFIT MOTIVATION; AND THAT THERE IS NO SHARING OF PROFIT. IT IS NOTICED THAT THE FUND INVESTED WITH BANK WH ICH ARE NOT MEMBER OF ASSOCIATION WELFARE FUND, AND THE INTERES T HAS BEEN EARNED ON SUCH INVESTMENT FOR EXAMPLE, ING MUTUAL F UND [AS SAID BY THE MD VIDE HIS STATEMENT DATED 20.12.2010] . [THOUGH THE BANK FORMED THE THIRD PARTY VIS-A-VIS THE ASSES SEE ENTITLED BETWEEN CONTRIBUTOR AND RECIPIENT IS LOST IN SUCH C ASE. THE OTHER IT(TP)A NO.309/BANG/2014 PAGE 11 OF 12 INGREDIENTS OF MUTUALITY ARE ALSO FOUND TO BE MISSI NG AS DISCUSSED IN FURTHER PARAGRAPHS]. IN THE PRESENT CASE BOTH THE PARTIES TO THE TRANSAC TION ARE THE CONTRIBUTORS TOWARDS SURPLUS, HOWEVER, THERE AR E NO PARTICIPATORS IN THE SURPLUSES. THERE IS NO COMMON CONSENT OF WHATSOEVER FOR PARTICIPATORS AS THEIR IDENTITY IS N OT ESTABLISHED. HENCE, THE ASSESSEE FAILS TO SATISFY THE TEST OF MU TUALITY AT THE TIME OF MAKING THE PAYMENTS THE NUMBER IN REFERRED AS MEMBERS MAY NOT BE THE MEMBER OF THE SOCIETY AS SUCH THE AO P BODY BY THE SOCIETY IS NOT COVERED BY CONCEPT OF MUTUALITY AT ALL. 27) THESE ARE THE FINDINGS OF FACT WHICH HAVE REMA INED UNSHAKEN TILL THE STAGE OF THE HIGH COURT. ONCE WE KEEP THE AFORESAID ASPECTS IN MIND, THE CONCLUSION IS OBVIOU S, NAMELY, THE APPELLANT CANNOT BE TREATED AS A CO-OPERATIVE SOCIE TY MEANT ONLY FOR ITS MEMBERS AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS. WE ARE AFRAID SUCH A SOCIETY CANNOT CLAIM THE BENEFIT OF SECTION 80P OF THE ACT. 9. IN THE PRESENT CASE ALSO, DURING THE COURSE OF H EARING WE HAD CALLED FOR THE FINANCIAL STATEMENTS OF THE RESPONDENT-ASSE SSEE FROM WHICH IT IS CLEAR THAT THERE IS INCOME IN THE FORM OF INTEREST ON INVESTMENTS OF RS.1,11,84,095 AND COMMISSION INCOME OF RS.24,02,18 3 INDICATING THAT THE RESPONDENT-SOCIETY HAD DEALINGS WITH THE OTHER NON- MEMBERS. FURTHERMORE, THE FACT THAT THE CO-OPERATIVE SOCIETY HAD PAID COMMISSION TO PIGMI AGENTS OF RS.1,70,46,946 GOES TO INDICATE THA T IT HAS ACCEPTED DEPOSITS EVEN FROM NON-MEMBERS. THESE ASPECTS NEED TO BE EXAMINED THOROUGHLY IN THE LIGHT OF THE JUDGMENT OF THE HON BLE APEX COURT IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. V. ACIT (SUPR A) . THEREFORE, WE REMAND THIS ISSUE BACK TO THE FILE OF THE AO FOR DE NOVO ASSESSMENT ON THE ABOVE LINES. IT(TP)A NO.309/BANG/2014 PAGE 12 OF 12 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2017. SD/- SD/- ( LALIET KUMAR ) ( INTURI RAMA RAO ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST OCTOBER, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.