PARIJAT CO-OPERATIVE CREDIT SOCIETY LTD,MUMBAI vs. CIT 22, MUMBAI

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ITA 3496/MUM/2013Status: DisposedITAT Mumbai04 April 2016AY 2009-109 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a co-operative credit society, which only provides credit facilities to its members and does not accept public deposits, is distinct from a co-operative bank as defined for the purpose of Section 80P(4). Therefore, the restriction under Section 80P(4) does not apply to it.

What were the facts?

The assessee, a co-operative credit society, claimed deduction under Section 80P. The CIT invoked Section 263, holding that amendments to Section 80P(4) disallowed deduction for co-operative banks, and the assessee fell under this category.

What were the issues?

Whether a co-operative credit society is considered a 'co-operative bank' for the purpose of disallowing deduction under Section 80P(4) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(4),Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI

Before: SHRI SANJAY GARG & SHRI RAJESH KUMAR

For Appellant: Shri R.V. Kardekar
For Respondent: Dr. S. Pandian (DR)
Hearing: 21/03/2016Pronounced: 21/03/2016

Per Sanjay Garg, Judicial Member :

The present appeal has been preferred by the assessee against the order of Commissioner of Income Tax (in short ‘CIT’) passed u/s. 263 of the Income Tax Act, 1961 (in short ‘the Act’).

2.

The brief facts of the case are that the assessee co-operative society filed its return of income for the year under consideration on 7.8.2009. The return was processed u/s. 143(3) of the Act and the AO assessed the total income as returned by the assessee without making any addition. The ld. CIT, however, exercising his powers u/s. 263 of the Act observed that the assessee had claimed deduction u/s. 80P of the 2 Parijat Co-operative Credit Society Act. He observed that as per the amendments introduced vide Finance Act, 2006 w.e.f. 1.4.2007, as per sub-section 4 to Sec. 80P, deduction u/s. 80P is not available to the assessee society not being an agricultural co-operative society. He show caused the assessee in this respect. In reply, the assessee submitted that the assessee society was a co- operative credit society and not a co-operative bank, and thus was entitled to deduction u/s. 80P of the Act. The assessee in this respect relied upon the CBDT letter in F.No. 133/06/2007-TPL dt. 9.5.2008. The assessee also relied upon the clarification given by the RBI in this respect. The assessee also relied upon certain case laws in this respect. However, the ld. CIT rejected the contentions of the assessee and observed that the Department had not accepted the decision of the Tribunal in the case of Kulswami Co-operative Credit Society Ltd. in ITA no. 6790/Mum/2012 vide order dt. 21.8.2015 and that the Department had filed an appeal before the Hon'ble High Court against the said decision which was pending. He thereafter observed that the assessee co-operative society, registered under the Maharashtra State Co- operative Societies Act, would fall in the definition of co-operative bank and thus was not entitled to deduction u/s. 80P of the Act.

3.

We have heard the rival contentions. The ld. AR of the assessee has contended that the assessee co-operative society is engaged in the activity of providing credit facilities to its members only. The assessee co-operative society is not providing any credit facilities to non- members or public at large nor is it authorized to accept deposits from the public at large. Thus, it is different from a co-operative bank. He,

3 Parijat Co-operative Credit Society therefore, has contended that the provisions of Sub-section 4 of Sec. 80P of the Act are not attracted in case of the assessee.

4.

On the other hand, the ld. DR has strongly relied upon the findings of the CIT.

5.

We have considered the rival contentions. The controversy in this case revolves around the provisions of Sec. 80P(4) of the Act which read as under :

“80P(4) The provisions of this section shall not apply in relation to any co-operative bank other than primary agricultural credit society or a primary co-operative agricultural and rural development bank.”

6.

The ld. AR has further invited our attention to the objects of the society which reads as under :

“1. To encourage and promote habit of thrift, self-help and co- operation among the members.

2.

To accept deposit from members.

3.

To provide credit facilities to its members.

4.7.

The ld. AR has thus contended that the assessee co-operative society is different from a co-operative bank as it cannot accept deposits from any person other than a member of the society and it cannot advance loans to any other person other than a member of the society and that the provisions of the Banking Regulations Act, 1950 are not applicable to co-operative credit societies. The ld. AR has further invited our attention to the order of the coordinate Bench of the Tribunal in the case of Kulswami Co-operative Credit Society Ltd. (supra)

4 Parijat Co-operative Credit Society wherein the Tribunal has thoroughly discussed difference between a co- operative society and a co-operative bank and relying upon the decision of the coordinate Bench of the Tribunal dt. 28.3.2014 passed in ITA Nos. 3223/Mum/2011 and 505/Mum/2012 has held that a co-operative credit society is different from a co-operative bank and thus is entitled to deduction u/s. 80P of the Act. The relevant part of the findings of the Tribunal, for the sake of convenience, is reproduced below :

“6. Before us, it was a common point between the parties that identical controversy has been considered by the Tribunal in the assesse's own case for assessment years 2007-08, and 2008-09 vide ITA Nos. 3223/Mum/2011 & 505/Mum/2012 dated 28.03.2014, whereby it has been held that assessee Co-operative Society does not fall within the restriction placed in sub-section (4) of section 80P of the Act. The following discussion in the order of the Tribunal dated 28.03.2014 (supra) is relevant:-

“4. Having heard both the sides and perused the material on record, it is pertinent to mention that the only issue arising out of both the appeals relate to the allowability of the exemption/deduction claimed by the assessee u/s 80P of the Income Tax Act. The allowability of exemption of the said income depends on whether the assessee/cooperative credit society is a co-operative bank or not for the purposes of section 80P(4) of the Act since according to the said provision, deduction under section 80P shall not be available to any co- operative bank other than primary agricultural society or primary co-operative agricultural and rural development bank.

4.

1 It is the case of the Revenue that the assessee has been functioning as a cooperative bank and by virtue of section 80P(4), the assessee is not entitled for the benefit of section 80P and also the assessee is not coming within the purview of primary agricultural society or primary co-operative agricultural and rural development bank. It is the case of the assessee that it 5 Parijat Co-operative Credit Society is not a cooperative bank but only a cooperative society to which clause (4) of section 80P is not applicable.

4.

2 In this connection, it is pertinent to mention that the assessee has brought on record before the lower authorities, the letter of the CBDT bearing No. F. No. 133/06/2007-TPL dated 09.05.2008 addressed to the Delhi Urban T&C Society Ltd., stating that for the purposes of subsection 4 of section 80P, 'cooperative bank' shall have the same meaning as assigned to it in part V of the Banking Regulation Act 1949, according to which 'cooperative banks' means a State Co-operative Bank, a Central Cooperative Bank and Primary Co-operative Bank. Though the said clarification is given by the CBDT in connection with some other assessee, the crux of the matter pertains to the clarification of 'co-operative bank' for the purpose of subsection 4 of section 80P. It is observed that the said clarification has also been relied by the Tribunal in many cases. Therefore, 'cooperative banks' mentioned in the said subsection indicates only the State, Central and Primary Co-operative Banks only.

4.

3 Moreover, for commencing a banking business by the co- operative society, due license has to be obtained from the Reserve Bank of India and in the assessee's case, there is no such license obtained for commencing any banking business. The mere fact that the assessee has been providing credit facilities to its members and thereby earns interest and dividend cannot make the 'society' into a 'bank' for the purposes of section 80P(4) of the Act. If the intention of the legislature was not to grant deduction to cooperative societies carrying on the business of providing credit facilities to its members, then this section would have been deleted. This proposition is supported by various decisions including the decision of the Gujarat High Sahakari Ltd. [2012] 137 ITD 163. 6 Parijat Co-operative Credit Society

4.

4 In addition to the aforementioned discussion, the distinction between cooperative society registered under the Banking Regulation Act 1949 and the cooperative society registered under the Maharashtra State Cooperative Societies Act 1960 as brought out by the Ld.CIT(A) on the basis of the submission of the assessee is extracted hereunder:

Sl. Co-operative societies Co-operative Banks No. 1 The Co-operative Credit Societies Co-operative Banks are registered are registered under under Maharashtra Co-operative Maharashtra State Cooperative Societies Act, 1960 and administered by Societies Act, 1960 and

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