ITA Nos. 53 & 54/PNJ/2014, (Assessment Year: 2009-2010;2010-2011). Case: Income Tax Officer, Belgaum Vs M/s. Renukadevi Urban Co-operative Credit Society Ltd.. ITAT (Income Tax Appellate Tribunal)

Case NumberITA Nos. 53 & 54/PNJ/2014, (Assessment Year: 2009-2010;2010-2011)
CounselFor Appellant: Smt. Sonal L. Sonkavde, Ld. DR. and For Respondents: Shri Ashok G. Mudnur, C.A.
JudgesP.K. Bansal, Member (A) and D.T. Garasia, Member (J)
IssueBanking Regulation Act, 1949 - Sections 5, 5(b), 5(ccv); Income Tax Act, 1961 - Sections 14, 80P, 80P(2)(a)(i), 80P(4); Karnataka Co-operative Societies Act, 1959 - Sections 16, 16(1), 17
Judgement DateMay 23, 2014
CourtITAT (Income Tax Appellate Tribunal)

Order:

P.K. Bansal, Member (A), (ITAT Panaji Bench)

  1. Both these appeals have been filed by the revenue against the respective orders of CIT(A), Belgaum dtd. 02.12.2013 by taking the following common grounds of appeal:-

  2. The Learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee is a co-operative society which fulfills all the three conditions of being held a Primary Co-operative Bank as given in section 5(ccv) of the Banking Regulation Act, 1949.

  3. The Learned CIT(Appeals) erred in relying on the provisions of the Karnataka Societies Act, 1959 which gives the definition of a "co-operative society" to mean a society registered or deemed to be registered under that Act. The above definition of co-operative society appears in the Karnataka Co-operative Societies Act, 1959 and the definition of co-operative society means a society registered under that Act.

  4. The Learned CIT(Appeals) erred in law and on facts in relying on this definition which was applicable to the Karnataka Co-operative Societies Act, 1959 only to deem it to include co-operative societies under the Karnataka Societies Registration Act, 1960. The Karnataka Societies Registration Act, 1960 does not apply to a co-operative society but only applies to the Societies registered under that Act.

  5. The Learned CIT(Appeals) erred in law and on facts in allowing deduction under section 80P(2)(a)(i) to the assessee ignoring the fact that the assessee does not permit co-operative societies to become a member and as such, satisfy conditions to become primary co-operative bank.

  6. The Learned CIT(Appeals) erred in law and on facts in not appreciating the definition of a co-operative bank which as per Explanation below section 80P(4) "the co-operative bank" shall have the meaning assigned to it in Part-V of the Banking Regulation Act, 1949.

  7. The Learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee society being a credit co-operative society engaged in banking business is a Primary Co-operative Bank within the definition of section 5(ccv) of the Banking Regulation Act, 1949 and as such, not eligible for deduction under section 80P(2)(a)(i) of the I.T. Act, 1961.

  8. 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. The Assessee filed return declaring gross total income of Rs. 13,65,845/- 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. 13,76,620/-. The AO while denying the deduction to the Assessee u/s. 80P(2)(a)(i) took the view that the Assessee is a primary co-operative bank and therefore provisions of Sec. 80P(4) are applicable in the case of the Assessee. The Assessee went in appeal before the CIT(A). CIT(A) partly dismissed the appeal of the Assessee.

    2.1 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 cooperative society is carrying on banking 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.

    2.2 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 Cooperative Societies Act, 1959. The primary object of the Assessee is encouraging members economically and saving economy and encouraging to help and co-operations. For this, our attention was drawn towards the bye-laws of the Assessee from (I) to (XVI). 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 cooperative credit society 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 the 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 Karnataka & Ors. for the proposition of law by referring to para 12 that merely because the co-operative society is required to advance loan to its members, it does not cease to be a co-operative society governed by the Co-operative Societies Act nor can they be treated as banking companies. The activities carried out by the society cannot be regarded to be banking activities as contemplated under the Banking Regulation Act, 1949. Reliance was also placed on the decision of the Bangalore Bench of this Tribunal in ITA No. 72/Bang/2013 in the case of ITO vs. 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 society. 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 No. 229 & 230/PNJ/2013 in the case of Tarani Mahila Co-operative Credit Society, vs. ITO. Reliance was also placed in ACIT vs. Palhawas Primary Agriculture Co-operative Society Ltd., 23 Taxman.com 318(Delhi), ITO vs. Jankalyan Nagri Sahakari Pat Sanstha Ltd., 24 Taxman.com 127(Pune).

  9. We have 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...

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