Pr. Commissioner Of Income Tax, Ajmer v. M/S Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd., 5 Kmstone, Ajmer Road Bhilwara (Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 2/2019 Pr. Commissioner Of Income Tax, Ajmer ----Appellant Versus M/s Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd., 5 KmStone, Ajmer Road Bhilwara (Rajasthan) ----Respondent For Appellant(s) : Mr. KK Bissa For Respondent(s): Mr. Sanjeev Johari with Mr. Lalit Parihar HON'BLE THE CHIEF JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE DINESH MEHTA 13/08/2019 Judgment The revenue urges that the grant of exemption under Section80P(2) of the Income Tax Act, 1961 (the Act of 1961) to therespondent-assessee was not warranted. The assessee, a milk cooperative society had depositedamounts and earned interest of Rs.2,09,91,701/-. The amountswere deposited with a Regional Rural Bank i.e., Baroda RajasthanRegional Rural Bank. The disallowance made by the AssessingOfficer (AO) and confirmed by the CIT (Appeals), was set aside bythe ITAT, which noticed that Section 22 of the Regional RuralBanks Act, 1976, that bank’s setup under the enactment arecooperative societies for the purposes of Income Tax Act, 1961. The revenue cites a CBDT Circular (No.6/2010 dated20.9.2010) and contends that the Board categorically stated thatinterest income derived from deposits, made with non-cooperative institutions and more specifically Regional Rural Banks do notqualify 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 of1961), or any other enactment for the time being in forcerelating to any tax on income, profits, or gains, a RegionalRural Bank shall be deemed to be a cooperative society.” The CBDT reasoning appears to be that Section 80P wasamended w.e.f. 1.4.2007 introducing specifically that the benefitof exemption would not apply to any cooperative bank other thanPrimary Agricultural Credit Society or a Primary CooperativeAgricultural and Rural Development Bank. The circular thenstated that in the light of this inclusion – to Section 80P by way ofintroduction of Section 80P(4), the exemption could not be availedof by the banks invested in Regional Rural Banks. This Court is of the opinion that the revenue’s contention isunsustainable. Section 22 in uncertain terms categorically deemsRegional Rural Banks (of which description Baroda RajasthanRegional Rural Banks answer to) as Cooperative Societies for thepurposes of Income Tax Act. In the absence of non-obstante clause, the mere fact that arestrictive condition was imposed in relation to a Cooperative Bankfor 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 bedeemed Cooperative Societies and all the contingentconsequences that flow from it. For the above reasons, this Court is of the opinion that thereis no substantial question of law involved in the present appeal. The appeal is, therefore, dismissed. (DINESH MEHTA),J (S. RAVINDRA BHAT),CJ 42-CPGoyal/-