Commissioner of Income Tax and Others vs Saptharishi Credit Co-operative Society Ltd.

Vineet Saran, J.—This appeal is preferred by the revenue challenging the order passed by the Tribunal, wherein it is held that Sub-section (4) of Section 80P of the Income Tax Act, 1961 is applicable only to co-operative banks and not to credit cooperative societies.

The substantial questions of law which are raised in the appeal are as under:

"1. Whether the Tribunal was correct in holding that the assessee is not a co-operative bank but only a cooperative society engaged in providing credit facilities to its members?

Whether the Tribunal was correct in not appreciating that the main motto of the co-operative Society is lending for its members which is in the nature of banking transaction, treated on par as per the new clause introduced in the definition of income in section 2(24)(viia) and comes under the purview of 80P sub-section (4) of the Act as inserted in Finance Act 2006 to be effective from 01.04.2007?"

The Tribunal in its order has set out the difference between the Co-operative Bank and Co-operative Society and has arrived at the conclusion, since the assessee is a Cooperative Society and not a Co-operative Bank, the provisions of the said Section 80P(4) of the Act, will not be applicable in the case of the assessee.

This Court had an occasion to consider the said question in ITA No. 5006/2013 dated 05.022014 in the case of The Commissioner of Income Tax v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot, where, after referring to the relevant provisions of the Income Tax Act, and the banking Regulation Act, held as under:

"If a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a cooperative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society." Therefore, the said issue was held in favour of the assessee and against the revenue.

The said judgment answers the issues in this case also. Accordingly, we pass the following order.

The appeal is dismissed. The substantial questions of law are answered in favour of the assessee and against the revenue.