ITO 22(2)(2), NAVI MUMBAI vs. THE BARC EMPLOYEE CO OP CREDIT SOCIETY LTD, MUMBAI

This is an appeal filed by the Revenue against the order of Ld. CIT(A) for the A.Y. 2010-11, in the matter of order decided under section 143(3) of the Income Tax Act.

In this appeal Revenue has challenged the action of Ld. CIT(A) in allowing assessee’s claim for deduction under section 80P of the Act.

Rival contentions have been heard and perused. The brief facts of the case are that the assessee is a co-operative society registered under the Maharashtra Co-operative Societies Act, 1960. For the assessment year under appeal the return of income was filed on 15.10.2010 declaring income of Rs.3,39,400/- after claiming deduction u/s 80P amounting to Rs.6,33,94,235/-. The AO held that assessee is a cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank, therefore, it is not entitled for deduction claimed by it.

By the impugned order, the Ld. CIT(A) allowed assessee’s claim under section 80P observing as under: “7. I have carefully considered the findings of the AO as well as submission of the appellant. I have also gone through the case laws relied upon by the appellant. A perusal of the decision quoted by the appellant reveals that: (i) Where the assesses were indulging in the business of banking by providing various facilities related to banking to general public at large, in such cases the assesses were held to be belonging to the category of Co-op. Bank (ii) Where the activities of the assesses were limited to the acceptance of deposits from the members and providing loan facilities to the members only, without providing other facilities of banking such as the facility of cheque books, drafts, etc, such assesess have not been held to be belonging under the category of Co-op. Bank. 8. From the facts of the instant case it is quite clear that the appellant has limited itself to the members of employees of BARC. Further, the appellant has not provided banking facilities either to general public at large or even to the members of the society. Even the bye laws of the appellant does not provide for the banking activities. The facts of the instant case are almost similar to the decisions relied upon by the appellant particularly, the facts in the case of a) ITO Vs. Jankalyan Nagri Sahakari Pat Sanstha 24 taxman.com 127 Pune Tribunal,- b) ACIT Vs. Buldana Urban Co-operative Credit Society Ltd. 32 taxmaan.com 69 Nagpur Tribunal and c) DCIT vs. Jayalkshi Mahila Vividodeshagala Souliarda Sahakari Ltd. 23 taxmaan.com 313 Panaji Tribunal, where the activities of the assesses were limited to the members of a specific group and the area of operation was also limited to the acceptance of deposits of the members and providing credit facilities only to the members, which have been held as not falling under the banking activities as defined in the Banking Regulation Act. Therefore, respectfully following the aforesaid decisions of ITATs Pune, Nagpur, and Panji, the appellant also cannot be held as a Co-op. Bank, hence the deduction claim u/s.80(P)(2)(a)(1) cannot be denied to it. A.O. is accordingly directed to allow the deduction claimed by the appellant. This ground is allowed”.

Against the above order of the Ld. CIT(A), Revenue is in further appeal before us.

We have heard the rival contentions and have also gone through the orders of the authorities below. The issue under consideration is squarely covered by the decision of the Hon’ble Bombay High Court in the case of “Quepem Urban Co-operative Society? 120 TRR 153 wherein the Hon'ble High Court held as under: “Deduction u/s 80P(4)—Deduction with respect of cooperative society— Allowability—Assessee who were registered Co-operative society had filed its return of income declaring gross total income—Assessee had claimed deduction of its entire income under Section 80P(2)(a)(i) resulting in nil taxable income—AO had disallowed assessees claim for deduction u/s 80P(2)(a)(i) on the ground that the assessee was a primary Co-operative Bank and therefore, hit by the provisions of Section SOP(4) which excluded the benefit of Section 80P to cooperative banks— CIT(A) had allowed the asessee's appeal holding that the assessee was not a Co- operative Bank but a Co-operative Credit Society and not hit by the exclusion provided u/s 80P(4) and AO was directed to extend the benefit of deduction u/s 80P(2)(a)(i) to the assessee— Tribunal had allowed revenue's appeal and had held that the assesee was not entitled to the benefit of Section 80P(2)(a)(i), as it was a Primary Co-operative Bank, thus hit by the exclusion provided in Section 80P(4)— Held, assessee was admittedly a co-operative society registered under the Co- operative Societies Act and was engaged in providing credit facilities to its members—Consequently, the income earned by the assessee from its activity of providing credit facilities to its members, was entitled to deduction u/s 80P(2)(a) (i)—Assessee was not a co-operative Bank and thus the exclusion provided u/s 80P (4) would have no application—Banking was not its primary object nor its principal business nor does it prohibit any other cooperative society from becoming its member—Thus the assessee was not a cooperative bank as defined in the Explanation to Section 80P(4) and therefore not hit by the exclusion provided4 therein —Assessees appeal allowed.”

The issue is also covered by the following decisions of the co-ordinate benches of the Tribunal: (i) Quepem Urban Co-operative Credit Society Ltd. vs. ACIT 120 DTR 153 (Bombay) 2015 order dt.17.04.2015. (ii) CIT vs. Jafari Momin Vikas Co-op. Credit Society Ltd. 49 taxmann.com 571 (Gujarat) (2014) (iii) Tumkur Merchants Souharda Credit Co-operative Ltd. vs. ITO 230 Taxman 309 (Karnataka) (2015) (iv) ITO vs. Kulswami Co-operative Society ITAT, “A” Bench, Mumbai order dt.21.08.2015 (v) ITO vs. The Maharashtra Mantraliya vs. Sanlagana Shaskiya Karamchari Co-op. Credit Society Ltd. ITA No.5051/Mum/2013, ITAT, “B” Bench, Mumbai order dt.29.10.2014 (vi) ITO vs. M/s. Mumbai Teleworkers Co-op. Credit Society Ltd. ITA No.7106/Mum/2012, ITAT “B” Bench, Mumbai order dt.30.06.2014 (vii) ITO vs. Niphad Nagari Sahakari Patsanstha Ltd. ITA

In the result, the appeal of the Revenue is dismissed.