NAL Employees Credit Co-Operative Society Limited, Bangalore V. Principal Commissioner of Income Tax, Bangalore

ITA 851/BANG/2015

• Counselvise Citation: 85121114 RSA 2015
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R REDDY CITIDR
• Assessee Lawyers: G R VENKATANARAYANA
• Keywords: Gift; Question of law; Benefit of exemption
• Section: 143(3); 56; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.851/BANG/2015 ASSESSMENT YEAR : 2010-11 NAL EMPLOYEES CREDIT COOPERATIVE SOCIETY LTD., NATIONAL AEROSPACE LABORATORIES, OLD AIRPORT ROAD, BENGALURU 560 017. PAN: AAAAN 0693F VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX, BENGALURU-4, BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI G.R. VENKATANARAYANA, CA RESPONDENT BY : SHRI G.R. REDDY, CIT-I(DR) DATE OF HEARING : 27.10.2015 DATE OF PRONOUNCEMENT : 04.11.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 31.3.2015 PASSED BY THE PRINCIPAL COMMISSIONER OF INCOME-TAX, BENGALURU 4, BENGALURU [HEREINAFTER REFERRED TO AS THE PR. CIT ] U/S. 263 OF THE INCOME- TAX ACT, 1961 ['THE ACT']. ITA NO.851/BANG/2015 PAGE 2 OF 13 2. THE ASSESSEE IS A COOPERATIVE CREDIT SOCIETY AN D DERIVES ITS INCOME FROM BUSINESS OF ACCEPTING DEPOSIT AND LENDING LOAN S TO ITS MEMBERS. THE SOCIETY DERIVED INCOME OF RS. 25,00,066/- AND DECLA RED NIL INCOME IN ITS RETURN FILED ON 23-09-2010 AFTER CLAIMING DEDUCTION OF THE ENTIRE PROFIT U/S. 80P(2)(A)(I). THE SAME WAS PROCESSED AND ASSESSMENT CONCLUDED U/S. 143(3) DATED 13-12-2012 ACCEPTING NIL INCOME. 3. THE LD. PR. CIT IN THE COURSE OF INSPECTION OF THE CASE OBSERVED AS FOLLOWS:- (1) CLAUSE (VIIA) OF SECTION 2(24) OF THE FINANCE ACT 2006 (W.E.F 1/4/2007) HAS BEEN INSERTED TO INCLUDE THE P ROFITS AND GAINS OF ANY BUSINESS OF BANKING (INCLUDING PROVIDING CRE DIT FACILITIES) CARRIED ON BY A COOPERATIVE SOCIETY WITH ITS MEMBER S IN THE DEFINITION OF INCOME. THIS MEANS THAT, IF THE BUSIN ESS OF BANKING IS CARRIED ON BY A COOPERATIVE SOCIETY, EVEN THOUGH THE BUSINESS MAY BE WITH ITS MEMBERS ONLY, THE PROFITS WOULD BE CONSIDERED AS INCOME AND THE PRINCIPLE OF MUTUALITY WOULD NOT BE ATTRACTED TO THE PROFITS AND GAINS OF SUCH COOPERATIVE SOCIETY. THE DEFINITION OF BUSINESS OF BANKING IS ENLARGED FOR THE PURPOSE OF THE INCOME TAX ACT TO INCLUDE PROVIDING CREDIT FACILITIES TO T HE MEMBERS OF SUCH COOPERATIVE SOCIETIES. (2) FURTHER, A DEDUCTION FROM GROSS TOTAL INCOME I N RESPECT OF INCOME OF CERTAIN COOPERATIVE SOCIETIES IS PROVI DED UNDER THE INCOME TAX ACT U/S. 80P(1). SUB CLAUSE 1 OF CLAUSE (A) OF SUB SECTION (2) OF THIS SECTION ALLOWS THIS DEDUCTION T O A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANK ING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. SUB SEC TION (4), INSERTED W.E.F 1-4-2007, PROVIDES THAT THE PROVISIO NS OF SECTION 80(P) SHALL NOT APPLY IN RELATION TO ANY COOPERATIV E BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRI MARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, THUS TAKIN G AWAY, EFFECTIVELY, THE PRIVILEGE GIVEN U/S. 80P(2)(A)(I) FROM COOPERATIVE BANKS. THE TERMS COOPERATIVE BANK, PRIMARY AGRIC ULTURAL CREDIT SOCIETY, AND PRIMARY CO-OPERATIVE AGRICULT URAL AND RURAL ITA NO.851/BANG/2015 PAGE 3 OF 13 DEVELOPMENT BANK, HAVE BEEN DEFINED IN THE EXPLANA TION TO SEC. 80P TO LEND CLARITY TO THE MEANING ASSIGNED TO THEM IN SEC. 56, PART V OF THE BANKING REGULATION ACT, 1949. THE EFF ECT OF THE AMENDMENTS BROUGHT ABOUT BY THE FINANCE ACT, 2006, ARE APPLICABLE TO ASSESSMENT FOR THE ASST. YEAR 2007-08 AND SUBSEQUENT ASST. YEARS IS THAT INCOME OF A COOPERA TIVE SOCIETY INCLUDING THE PROFITS AND GAINS FROM BUSINESS OF PR OVIDING CREDIT FACILITIES IS EXEMPT FROM TAX U/S. 80P UNLESS THEY ARE CLASSIFIED AS COOPERATIVE BANKS (NOT BEING A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEV ELOPMENT BANK) HENCE, THE ALLOWABILITY OF DEDUCTION U/S 80P (2)(A)(I) OF THE INCOME TAX ACT, 1961 NEEDS TO BE EXAMINED IN THE AB OVE CONTEXT. 4. THE PR. CIT WAS OF THE OPINION THAT THE ASSESSIN G OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS DID NOT EXAMINE TH E APPLICABILITY OF SECTION 80P(4) IN THIS CASE IN THE CONTEXT OF SECTI ON 56 OF PART V OF THE BANKING REGULATION ACT, 1949. HE WAS THEREFORE OF THE VIEW THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) ON 13/12 /2012 WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND ACT ION U/S .263 WAS INITIATED BY ISSUANCE OF A PROPOSAL TO THE ASSESSEE. 5. THE BASIC ISSUE THAT AROSE IN THIS CASE BEFORE T HE PR. CIT WAS WITH REGARD TO THE STATUS OF THE ASSESSEE WHICH IS PRIMA RILY ENGAGED IN GIVING FINANCIAL ASSISTANCE TO ITS MEMBERS AND ACCEPTING D EPOSITS FROM THEM. THE CASE OF THE ASSESSEE WAS THAT IT IS NOT REGISTERED UNDER THE PROVISIONS OF BANKING REGULATION ACT, 1949 BUT REGISTERED UNDER T HE PROVISIONS OF KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959. AS SUCH , IT WAS CLAIMED THAT THE ASSESSEE COULD NOT BE CONSIDERED TO BE A COOPER ATIVE BANK, SINCE IT ITA NO.851/BANG/2015 PAGE 4 OF 13 DOES NOT POSSESS A LICENSE FROM RESERVE BANK OF IND IA TO CARRY ON BUSINESS OF CO-OPERATIVE BANK. 6. HOWEVER, THE LD. PR. CIT WAS OF THE VIEW THAT TH E ASSESSEE IS A COOPERATIVE CREDIT SOCIETY, ENGAGED IN ACCEPTING DE POSITS FROM AND EXTENDING CREDIT FACILITIES TO ITS MEMBERS. ACCORDI NG TO SEC 2(24)(VIIA) THE PROFITS AND GAINS OF ANY BUSINESS OF BANKING CARR IED ON BY A COOPERATIVE SOCIETY WITH ITS MEMBERS (WHICH INCLUDES PROVIDING CREDIT FACILITIES TO ITS MEMBERS) IS TO BE CONSTRUED AS INCOME FROM BANKING. FURTHER, THE PR. CIT OBSERVED THAT ACCORDING TO THE AMENDED PROVISIONS O F THE BANKING REGULATION ACT, VIDE SEC. 5(CCII) AND 5(CCVI), IN C ASES WHERE THE PRINCIPAL BUSINESS OF A PRIMARY CREDIT SOCIETY IS THE TRANSA CTION OF BANKING BUSINESS AND ITS PAID-UP CAPITAL AND RESERVES HAS ATTAINED A LEVEL OF RS. 1 LAKH, THE PRIMARY CREDIT SOCIETY AUTOMATICALLY BECOMES A PRIM ARY COOPERATIVE BANK. THUS, THE PR.CIT HELD THAT THERE IS NO DISTINCTION BETWEEN A COOPERATIVE CREDIT SOCIETY AND A COOPERATIVE BANK EXCEPT FOR TH E THRESHOLD OF PAID-UP CAPITAL AND RESERVES PLACED BY THE BANKING REGULATI ON ACT ON EVERY CREDIT SOCIETY WHOSE PRIMARY OBJECTIVE OF PRINCIPLE BUSINE SS IS TRANSACTING OF BANKING BUSINESS. THE PR. CIT OBSERVED THAT THE AS SESSEES RELIANCE ON THE LETTER DATED 09/05/2007 ISSUED BY THE CBDT TO A RGUE THAT CO-OPERATIVE SOCIETIES DO NOT FALL WITHIN THE MEANING OF COOPER ATIVE BANK DOES NOT HAVE A BEARING, AS CAN BE PERUSED FROM PARA NO.4 OF THE REFERRED LETTER THAT THE CBDT HAS NOT GIVEN BLANKET INSTRUCTION THAT COO PERATIVE SOCIETIES CANNOT BE TERMED AS CO-OPERATIVE BANK. ACCORDING T O THE PR. CIT, A CLEAR ITA NO.851/BANG/2015 PAGE 5 OF 13 READING OF THE STATEMENT THAT IF THE DELHI CO-OP. URBAN T & C SOCIETY LTD. DOES NOT FALL WITHIN THE MEANING OF CO-OPERATIVE B ANK SHOWS THAT THE APPLICABILITY OF PART V OF THE BANKING REGULATION A CT, 1949 IS TO BE EXAMINED IN DEFINING A COOPERATIVE SOCIETY AS COOPE RATIVE BANK OR NOT. 7. THE LD. PR. CIT FURTHER OBSERVED THAT A PRIMARY COOPERATIVE BANK IS DEFINED IN SEC 5 (CCV) OF THE BANKING REGULATION AC T, 1949 AND THREE CONDITIONS ARE SET THEREIN FOR A COOPERATIVE SOCIET Y TO BE CONSIDERED AS A COOPERATIVE BANK, WHICH IS CLEARLY A DEEMING PROVIS ION. THE PR. CIT STATED THAT THOUGH THE ISSUE OF APPLICABILITY OF SEC 80P ( 4) OF THE IT ACT 1961 TO COOPERATIVE SOCIETIES HAS BEEN ADJUDICATED BY THE I TAT BENGALURU AS WELL AS THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGAL KOT , BOTH HAVE LAID DOWN THAT A COOPERATIVE SOCIETY SHOULD NO BE CONSID ERED AS A COOPERATIVE BANK IN THE ABSENCE OF A BANKING LICENSE FROM RBI. ACCORDING TO THE PR. CIT, BOTH THESE JUDGMENTS HAVE NOT HELD THAT THE D EFINITION OF COOPERATIVE BANKS AS PER PART V OF THE BANKING REGULATION ACT, 1949 NOT BE FOLLOWED. THE HONBLE JURISDICTIONAL HIGH COURT HAS ALSO NOT COMMENTED ON THE SPECIFIC APPLICABILITY OF THE ENABLING CONDITIONS L AID DOWN IN PART V OF THE BANKING REGULATING ACT, 1949 IN THE ABOVE MENTIONED ORDER. 8. THE PR. CIT CONCLUDED THAT THE ASSESSING OFFICER HAS FAILED TO APPLY THE CONDITIONS SET OUT IN PART V OF THE BANKING REG ULATION ACT, 1949 READ WITH SECTION 2(24)(VIIIA) OF THE INCOME-TAX ACT, 19 61 TO THE FACTS OF THE ITA NO.851/BANG/2015 PAGE 6 OF 13 ASSESSEES ACTIVITIES WHICH ARE ADMITTEDLY TO ACCEP T DEPOSITS FROM AND PROVIDE CREDIT FACILITIES TO, ITS MEMBERS, WHICH WA S THE SOCIETYS PRIMARY ACTIVITY. HE THEREFORE HELD THE ORDER U/S 143(3) DA TED 13/12/2012 BY THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE THEREFORE SET ASIDE THE SAME WITH A DIRECTION TO THE AO TO REDO THE ASS ESSMENT AFTER APPLYING THE CONDITIONS OF PART V OF THE BANKING REGULATION ACT 1949 AND SECTION 2(24)(VIIA) OF THE INCOME-TAX ACT, 1961 TO THE FACT S OF THE CASE. 9. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US O N THE ISSUE OF DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. IT IS TH E CASE OF THE ASSESSEE THAT IT HAS NOT OBTAINED ANY BANKING LICENSE AND IT CANNOT CARRY ON ANY BANKING BUSINESS. IT IS ENGAGED IN THE ACTIVITY OF PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS AND SECTION 80P(4) IS NOT APPLICABLE AS HEL D BY VARIOUS HIGH COURTS AND TRIBUNAL. RELIANCE WAS PLACED ON THE JU DGMENT DATED 5.2.2014 OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT IN ITA NO.5006/2013 . 10. THE LD. DR SUPPORTED THE ORDER OF THE PR. CIT. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 12. WE FIND THAT IDENTICAL ISSUE HAS ALREADY BEEN C ONSIDERED AND DECIDED BY THIS TRIBUNAL IN THE CASE OF ACIT, CIRCLE 3(1), BANGALORE V. M/S. BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LTD. IN ITA NO.1069/BANG/2010 DT. 8.4.2011 , WHEREIN THIS TRIBUNAL HELD THAT SECTION ITA NO.851/BANG/2015 PAGE 7 OF 13 80P(4) IS APPLICABLE ONLY TO COOPERATIVE BANKS AND NOT TO CREDIT COOPERATIVE SOCIETIES. THE INTENTION OF THE LEGISLATURE OF BRI NGING IN COOPERATIVE BANKS INTO THE TAXATION STRUCTURE WAS MAINLY TO BRING IN PAR WITH COMMERCIAL BANKS. SINCE THE ASSESSEE IS A COOPERATIVE SOCIETY AND NOT A COOPERATIVE BANK, THE PROVISIONS OF SECTION 80P(4) WILL NOT HAV E APPLICATION IN THE ASSESSEES CASE AND THEREFORE, IT IS ENTITLED TO DE DUCTION U/S 80P(2)(A)(I) OF THE ACT. THE FOLLOWING WERE THE RELEVANT OBSERVATI ONS OF THE TRIBUNAL:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE WAS DENIED THE DE DUCTION U/S 80-P(2)(A)(I) OF THE ACT FOR THE REASON OF INTRODUC TION OF SUB SECTION 4 TO SECTION 80P. SECTION 80P(4) READS AS FOLLOWS:- (4) THE PROVISIONS OF THIS SECTION SHALL NOT A PPLY IN RELATION TO ANY COOPERATIVE BANK OTHER THAN A PRIMA RY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY COOPERATIV E 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 RESPECTIVEL Y ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); (B) PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT 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. 9.1 THE ABOVE SUB-SECTION 4 OF SECTION 80P PROVIDES THAT DEDUCTION UNDER THE SAID SECTION SHALL NOT BE AVAIL ABLE TO ANY COOPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR RURAL DEVELOPMENT BANK. FOR THE PURPOSE OF THE SAID SUB SECTION, COOPERATIVE BANK SHALL HAVE THE MEANING AS SIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949. IN PAR T V OF THE BANKING REGULATION ACT, COOPERATIVE BANK MEANS A STATE COOPERATIVE BANK, A CENTRAL COOPERATIVE BANK AND A PRIMATE COOPERATIVE BANK. ITA NO.851/BANG/2015 PAGE 8 OF 13 9.2 FROM THE ABOVE SECTION, IT IS CLEAR THAT THE PR OVISIONS OF SECTION 80P(4) HAS GOT ITS APPLICATION ONLY TO COOP ERATIVE BANKS. SECTION 80P(4) DOES NOT DEFINE THE WORD COOPERATIV E SOCIETY. THE EXISTING SUB-SECTION 80P(2)(A)(I) SHALL BE APPL ICABLE TO A COOPERATIVE SOCIETY CARRYING ON CREDIT FACILITY TO ITS MEMBERS. THIS VIEW IS CLARIFIED BY CENTRAL BOARD OF DIRECT T AX VIDE ITS CLARIFICATION NO.133/06/2007-TPL DATED 9 TH MAY, 2007. THE DIFFERENCE BETWEEN A COOPERATIVE BANK AND A COOPERA TIVE SOCIETY ARE AS FOLLOWS:- NATURE COOPERATIVE SOCIETY REGISTERED UNDER BANKING REGULATION ACT, 1949 COOPERATIVE SOCIETY REGISTERED UNDER KARNATAKA COOPERATIVE SOCIETY ACT, 1959. REGISTRA -TION UNDER THE BANKING REGULATION ACT, 1949 AND COOPERATIVE SOCIETIES ACT, 1959. COOPERATIVE SOCIETIES ACT, 1959. NATURE OF BUSINESS 1. AS DEFINED IN SECTION 6 OF BANKING REGULATION ACT. 2. CAN OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, OVERDRAFT ACCOUNT, CASH CREDIT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFTS (DD), PAY ORDERS, GIFT CHEQUES, LOCKERS, BANK GUARANTEES ETC. 3. COOPERATIVE BANKS CAN ACT AS CLEARING AGENT FOR CHEQUES, DDS, PAY ORDERS AND OTHER FORMS. 4. BANKS ARE BOUND TO FOLLOW THE RULES, REGULATIONS AND DIRECTIONS ISSUED BY RESERVE BANK OF INDIA (RBI). 1. AS PER THE BYE LAWS OF THE COOPERATIVE SOCIETY. 2. SOCIETY CANNOT OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFTS, PAY ORDERS, GIFT CHEQUES, LOCKERS, BANK GUARANTEES ETC. 3. SOCIETY CANNOT ACT AS CLEARING AGENT, FOR CHEQUES, DDS, PAY ORDERS AND OTHER FORMS. 4. SOCIETY ARE BOUND BY RULES AND REGULATIONS AS SPECIFIED BY IN THE COOPERATIVE SOCIETIES ACT. FILING OF RETURNS COOPERATIVE BANKS HAVE TO SUBMIT ANNUAL RETURN TO RBI EVERY YEAR. SOCIETY HAS TO SUBMIT THE ANNUAL RETURN TO REGISTRAR OF SOCIETIES. INSPEC- TION RBI HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. REGISTRAR HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. PART V PART V OF THE BANKING REGULATION ACT IS APPLICABLE TO COOPERATIVE BANKS. PART V OF THE BANKING REGULATION ACT IS NOT APPLICABLE TO COOPERATIVE BANKS. USE OF WORDS THE WORD BANK, BANKER, BANKING CAN BE USED BY A COOPERATIVE BANK. THE WORD BANK, BANKER, BANKING CANNOT BE USED BY A COOPERATIVE SOCIETY. ITA NO.851/BANG/2015 PAGE 9 OF 13 9.3 IF THE INTENTION OF THE LEGISLATURE WAS NOT TO GRANT DEDUCTION U/S 80P(2)(A)(I) TO COOPERATIVE SOCIETIES CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS, THEN THIS SECTION WOULD HAVE BEEN DELETED. THE NEW PROVISO T O SECTION 80P(4) WHICH IS BROUGHT INTO STATUTE IS APPLICABLE ONLY TO COOPERATIVE BANKS AND NOT TO CREDIT COOPERATIVE SOC IETIES. THE INTENTION OF THE LEGISLATURE OF BRINGING IN COOPERA TIVE BANKS INTO THE TAXATION STRUCTURE WAS MAINLY TO BRING IN PAR W ITH COMMERCIAL BANKS. SINCE THE ASSESSEE IS A COOPERATIVE SOCIETY AND NOT A COOPERATIVE BANK, THE PROVISIONS OF SECTION 80P(4) WILL NOT HAVE APPLICATION IN THE ASSESSEES CASE AND THEREFORE, I T IS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. HENCE, WE A RE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCO RDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. 13. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF T AX APPEAL NO.442 OF 2013 WITH TAX APPEAL NO.443 OF 2013 WITH TAX APPEAL NO.863 OF 2013 IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS CO-OP CREDIT SOCIETY LTD. BY JUDGMENT DATED 15.1.2014 ON HAD TO DEAL WITH THE FO LLOWING QUESTION OF LAW: WHETHER THE HONBLE TRIBUNAL IS CORRECT IN ALLOWI NG DEDUCTION UNDER SECTION 80P(2)(A)(I) TO ASSESSEES SOCIETY EV EN THOUGH SAME IS COVERED UNDER SECTION 80P(4) RWS 2(24) (VIIA) BE ING INCOME FROM PROVIDING CREDIT FACILITIES CARRIED ON BY A CO -OPERATIVE SOCIETY WITH ITS MEMBER? THE HONBLE COURT HELD AS FOLLOWS: 4. AS PER SECTION 80P(4), THE PROVISIONS OF SECTION 80P WOULD NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHE R THAN PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. AS PER THE EXPLANATION, THE TERMS CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDI T SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO TH EM IN PART V OF THE BANKING REGULATION ACT, 1949. ITA NO.851/BANG/2015 PAGE 10 OF 13 5. ASSESSING OFFICER HELD THAT BY VIRTUE OF SECTION 80P(4), THE RESPONDENT ASSESSEE WOULD NOT BE ENTITLED TO BENEFI TS OF DEDUCTION UNDER SECTION 80P. CIT(APPEALS) AS WELL AS THE TRIB UNAL REVERSED THE DECISION OF THE ASSESSING OFFICER ON THE PREMIS E THAT THE RESPONDENT ASSESSEE NOT BEING A BANK, EXCLUSION PRO VIDED IN SUB- SECTION(4) OF SECTION 80P WOULD NOT APPLY. THIS, IR RESPECTIVE OF THE FACT THAT THE RESPONDENT WOULD NOT FALL WITHIN THE EXPRESSION PRIMARY AGRICULTURAL CREDIT SOCIETY. 6. HAD THIS BEEN THE PLAIN STATUTORY PROVISIONS UND ER CONSIDERATION IN ISOLATION, IN OUR OPINION, THE QUE STION OF LAW COULD BE STATED TO HAVE ARISEN. WHEN, AS CONTENDED BY THE ASSESSEE, BY VIRTUE OF SUBSECTION(4) ONLY CO-OPERAT IVE BANKS OTHER THAN THOSE MENTIONED THEREIN WERE MEANT TO BE EXCLU DED FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80P, A QUESTION WOULD ARISE WHY THEN LEGISLATURE SPECIFIED PRIMARY AGRICULTURAL CREDIT SOCIETIES ALONG WITH PRIMARY COOPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANKS FOR EXCLUSION FROM SUCH EXCLUSION AND IN OTHER WORDS, CONTINUED TO HOLD SUCH ENTITY AS ELIGI BLE FOR DEDUCTION. HOWEVER, THE ISSUE HAS BEEN CONSIDERABLY SIMPLIFIED BY VIRTUE OF CBDT CIRCULAR NO.133 OF 2007 DATED 9.5 .2007. CIRCULAR PROVIDES AS UNDER:- SUBJECT: CLARIFICATION REGARDING ADMISSIBLY OF DEDUCTION UNDER SECTION 80P OF THE INCOME-TAX ACT, 1961. 1. PLEASE REFER TO YOUR LETTER NO.DCUS/30688/2007, DATED 28.03.2007 ADDRESSED TO CHAIRMAN, CENTRAL BOA RD OF DIRECT TAXES, ON THE ABOVE GIVEN SUBJECT. 2. IN THIS REGARD, I HAVE BEEN DIRECTED TO STATE TH AT SUB- SECTION(4) OF SECTION 80P PROVIDES THAT DEDUCTION U NDER THE SAID SECTION SHALL NOT BE ALLOWABLE TO ANY CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. FOR THE PURPOSE OF THE SAID SUB- SECTION, CO-OPERATIVE BANK SHALL HAVE THE MEANING ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949. 3. IN PART V OF THE BANKING REGULATION ACT,CO-OPER ATIVE BANK MEANS A STATE CO-OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK. ITA NO.851/BANG/2015 PAGE 11 OF 13 4. THUS, IF THE DELHI CO OP URBAN T & C SOCIETY LTD . DOES NOT FALL WITHIN THE MEANING OF CO-OPERATIVE BANK AS DEFINED IN PART V OF THE BANKING REGULATION ACT, 19 49, SUBSECTION(4) OF SECTION 80P WILL NOT APPLY IN THIS CASE. 5. THE ISSUES WITH THE APPROVAL OF CHAIRMAN,CENTRAL BOARD OF DIRECT TAXES. 7. FROM THE ABOVE CLARIFICATION, IT CAN BE GATHERED THAT SUB- SECTION(4) OF SECTION 80P WILL NOT APPLY TO AN ASSE SSEE WHICH IS NOT A CO-OPERATIVE BANK. IN THE CASE CLARIFIED BY C BDT, DELHI COOP URBAN THRIFT & CREDIT SOCIETY LTD. WAS UNDER CONSIDERATION. CIRCULAR CLARIFIED THAT THE SAID ENT ITY NOT BEING A COOPERATIVE BANK, SECTION 80P(4) OF THE ACT WOULD N OT APPLY TO IT. IN VIEW OF SUCH CLARIFICATION, WE CANNOT ENTERTAIN THE REVENUES CONTENTION THAT SECTION 80P(4) WOULD EXCLUDE NOT ON LY THE CO- OPERATIVE BANKS OTHER THAN THOSE FULFILLING THE DES CRIPTION CONTAINED THEREIN BUT ALSO CREDIT SOCIETIES, WHICH ARE NOT COOPERATIVE BANKS. IN THE PRESENT CASE, RESPONDENT ASSESSEE IS ADMITTEDLY NOT A CREDIT CO-OPERATIVE BANK BUT A CRE DIT CO- OPERATIVE SOCIETY. EXCLUSION CLAUSE OF SUB-SECTION (4) OF SECTION 80P, THEREFORE, WOULD NOT APPLY. IN THE RESULT, TAX APPEALS ARE DISMISSED. 14. THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA , BAGALKOT (SUPRA) CONSIDERED THE FOLLOWING SUBSTANTIAL QUESTION OF LA W:- IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, WH ETHER THE REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER UNDER SECTION 263 OF THE ACT WITHOUT THE FOUNDATIONAL FAC T OF ASSESSEE BEING CO-OPERATIVE BANK WAS NOT THERE? ITA NO.851/BANG/2015 PAGE 12 OF 13 15. THE HONBLE JURISDICTIONAL HIGH COURT HELD AT P ARA 9 OF ITS ORDER IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAM ITHA, BAGALKOT (SUPRA) HELD AS UNDER:- 9. THIS COURT HAD AN OCCASION TO CONSIDER SECTION 263 OF THE ACT IN THE CASE OF - COMMISSIONER OF INCOME-TAX AND ANOTHER V. DIGITAL GLOBAL SOFT LTD. [2013] 354 ITR 489 (KARN) WHERE PARAGRAPH-18, IT HAS HELD AS UNDER : AS IS CLEAR FROM THE WORDING IN SECTION 263, THE COMMISSIONER GETS THE JURISDICTION TO REVISE ANY PROCEEDINGS UNDER THIS ACT IF HE CONSIDERS THAT AN Y ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. THEREFORE, IT IS CLEAR THAT HE CANNOT EXERCISE THE POWER OF REVISION SOLELY ON THE GROUND THAT THE ORDER PASSED IS ERRONEOUS. HE GETS JURISDICTION ONLY IF SUCH ERRONE OUS ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . PREJUDICIAL TO THE REVENUE MEANS, LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZ ED. IN OTHER WORDS, BY THE ORDER OF THE ASSESSING AUTHORIT Y IF THE LAWFUL REVENUE TO THE STATE HAS NOT BEEN REALIZED O R CANNOT BE REALIZED, AS THE SAID ORDER IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE AND ALSO ERRONEOUS, HE GET S JURISDICTION TO INTERFERE WITH THE SAID ORDER UNDER SECTION 263. THEREFORE, FOR ATTRACTING SECTION 263, THE CON DITION PRECEDENT IS (A) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS, AND (B) IT IS PREJUDICI AL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT, I.E., IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BU T IS NOT PREJUDICIAL TO THE REVENUE, RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE SATISFACTION OF BOTH THE CONDITIONS STIPULATED IN THE SECTION IS THE SINE QU A NON FOR THE COMMISSIONER TO EXERCISE HIS JURISDICTION UNDER SECTION 263. IN THE INSTANT CASE, WHEN THE STATUS OF THE ASSESS EE IS A CO- OPERATIVE SOCIETY AND IS NOT A CO-OPERATIVE BANK, T HE ORDER PASSED BY THE ASSESSING AUTHORITY EXTENDING THE BENEFIT OF EXEMPTION FROM PAYMENT OF TAX UNDER SECTION 80P(2)(A)(I) OF T HE ACT IS CORRECT. THERE IS NO ERROR. WHEN THERE IS NO ERROR, THE QUESTION OF ORDER BEING PREJUDICIAL WOULD NOT ARISE . THE TRIBU NAL HAS RIGHTLY ITA NO.851/BANG/2015 PAGE 13 OF 13 ENTERTAINED THE APPEAL AND SET-ASIDE THE ORDER. THE REFORE, THE SAID ORDER IS IN ACCORDANCE WITH LAW AND CANNOT BE FOUND FAULT WITH. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. 16. IN VIEW OF THE ABOVE DECISIONS OF THE HIGH COUR TS AND FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF BANGALORE V. M/S. BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERA TIVE SOCIETY LTD. (SUPRA) , WE QUASH THE ORDER U/S. 263 PASSED BY THE LD. PR. CIT. 17. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( JASON P. BOAZ ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 4 TH NOVEMBER, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.