PR. COMMISSIONER OF INCOME TAX, AJMER vs. M/S BHILWARA ZILA DUGDH UTPADAK SAHAKARI SANGH LTD.

Judgment 13/08/2019 The revenue urges that the grant of exemption under Section 80P(2) of the Income Tax Act, 1961 (the Act of 1961) to the respondent-assessee was not warranted. The assessee, a milk cooperative society had deposited amounts and earned interest of Rs.2,09,91,701/-. The amounts were deposited with a Regional Rural Bank i.e., Baroda Rajasthan Regional Rural Bank. The disallowance made by the Assessing Officer (AO) and confirmed by the CIT (Appeals), was set aside by the ITAT, which noticed that Section 22 of the Regional Rural Banks Act, 1976, that bank’s setup under the enactment are cooperative societies for the purposes of Income Tax Act, 1961. The revenue cites a CBDT Circular (No.6/2010 dated 20.9.2010) and contends that the Board categorically stated that interest income derived from deposits, made with non-cooperative (Uploaded on 19/08/2019 at 04:05:13 PM) (Downloaded on 28/10/2026 at 12:50:54 AM) (2 of 3) [ITA-2/2019] institutions and more specifically Regional Rural Banks do not qualify for the benefit under Section 80P(2) of the Act of 1961. Section 22 of the Regional Rural Banks Act, 1976 states as follows:

“22. Regional Rural Bank to be deemed to be a co- operative society for purpose of the Income Tax Act, 1961- For the purpose of the Income Tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to any tax on income, profits, or gains, a Regional Rural Bank shall be deemed to be a cooperative society.” The CBDT reasoning appears to be that Section 80P was amended w.e.f. 1.4.2007 introducing specifically that the benefit of exemption would not apply to any cooperative bank other than Primary Agricultural Credit Society or a Primary Cooperative Agricultural and Rural Development Bank. The circular then stated that in the light of this inclusion – to Section 80P by way of introduction of Section 80P(4), the exemption could not be availed of by the banks invested in Regional Rural Banks. This Court is of the opinion that the revenue’s contention is unsustainable. Section 22 in uncertain terms categorically deems Regional Rural Banks (of which description Baroda Rajasthan Regional Rural Banks answer to) as Cooperative Societies for the purposes of Income Tax Act. In the absence of non-obstante clause, the mere fact that a restrictive condition was imposed in relation to a Cooperative Bank for regulating the benefit of Section 80P, does not in any manner, alter the pre-existing situation. By virtue of Section 22, Regional Rural Banks continue to be deemed Cooperative Societies and all the contingent consequences that flow from it. (Uploaded on 19/08/2019 at 04:05:13 PM) (Downloaded on 28/10/2026 at 12:50:54 AM) (3 of 3) [ITA-2/2019] For the above reasons, this Court is of the opinion that there is no substantial question of law involved in the present appeal.

The appeal is, therefore, dismissed. (DINESH MEHTA),J (S. RAVINDRA BHAT),CJ 42-CPGoyal/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 19/08/2019 at 04:05:13 PM) (Downloaded on 28/10/2026 at 12:50:54 AM)