Shri Sharad v. Magadum, Advocate

IN THE HIGH COURT OF KARNATAKADHARWAD BENCH DATED THIS THE 21 DAY OF SEPTEMBER, 2015 PRESENT THE HONOURABLE MR.JUSTICE ANAND BYRAREDDY AND THE HONOURABLE MRS.JUSTICE S.SUJATHA INCOME TAX APPEAL NO.100078 OF 2014 BETWEEN 1.The Commissioner of Income Tax,Dr. B.R. Ambedkar Road,Belgaum.Dr. B.R. Ambedkar Road,Belgaum. 2.The Income Tax Officer,Ward-1, Nippani.Ward-1, Nippani. ... APPELLANTS. (By Shri Y.V. Raviraj, Advocate) AND Shri Siddheshwar Co-operativeCredit Society Ltd.,Borgaon,Taluk Chikodi,Belgaum District. ... RESPONDENT. (Shri Sharad V. Magadum, Advocate) This ITA is filed under Section 260A of the Income TaxAct, 1961, against the order passed in ITA No.192/PNJ/2013dated 04.04.2014 on the file of the Income Tax AppellateTribunal, Panaji Bench, Panaji, allowing the appeal filed by theassessee. This appeal having been heard and reserved and comingon for pronouncement of judgment, this day, Anand ByrareddyJ., delivered the following: JUDGMENT This appeal is by the revenue under the Income Tax Act,1961 (Hereinafter referred to as the 'IT Act, for brevity). Theassessee is said to be a Co-operative Society registered underthe Karnataka State Co-operative Societies Act, 1956,(Hereinafter referred to as the ‘KCS Act’, for brevity). 2. The appeal pertains to the Assessment year 2009-10.The respondent - Society had filed its return of income for theassessment year 2009-10 and after claiming deduction underSection 80 P(2) (a) (i) of the IT Act, the total income wasdeclared as 'nil'. The Assessing Officer had however, opined that theassessee was not entitled to the deduction, as claimed, for thereason, inter alia, that the activity of the respondent was covered by Section 2 (24 (vii a) of the IT Act, which requiresthe inclusion of profits and gains of any business of banking(including providing credit facilities) carried on by a co-operative society. Reference was made to the Explanation appended toSection 80 P (4) - which lays down that a co-operative bank anda primary agricultural credit society, shall have the samemeaning assigned to them in Part V of the Banking RegulationAct, 1949 (Hereinafter referred to as the 'BR Act' , for brevity.)It was held that the Bye -laws of the Assessee indicated thattheir primary object was transactions that were apparently in thenature of banking. In that, the assessee was receiving depositsfrom its members and providing loans to other members andhence it satisfied all the three conditions contemplated underSection 56 (ccv) of the BR Act. For this premise, the AssessingOfficer had proceeded on the basis that a primary co-operativebank, meant a Co-operative Society. Therefore, the AssessingOfficer held that the respondent - society being a primary co- operative bank, was not eligible for deduction under Section 80P of the IT Act. 3. The respondent - Society had then preferred an appealbefore the Commissioner of Income Tax (Appeals) challengingthe above order of the Assessing Officer. The same was said tohave been dismissed. The respondent - Assessee had then approached theIncome Tax Appellate Tribunal. The Tribunal having acceptedthe case of the respondent, it was held that: i) The assessee – Society had satisfied condition no.1mentioned in Section 5(ccv) of the BR Act, to become primaryco-operative bank as the assessee is carrying on bankingbusiness by accepting deposits from persons who are notmembers. ii) The second condition was also satisfied by theassessee since paid up share capital and reserves is more thanRs.1 lakh. iii) With regard to the last condition, i.e., the bye-laws ofthe society whether permits other co-operative society to become a member, the Tribunal held that the said condition isnot satisfied since the bye-laws of the society permits other co-operative society to become its member. The respondent - Assessee had then approached theIncome Tax Appellate Tribunal. The Tribunal having acceptedthe case of the respondent, it was held that: i) The assessee – Society had satisfied condition no.1mentioned in Section 5(ccv) of the BR Act, to become primaryco-operative bank as the assessee is carrying on bankingbusiness by accepting deposits from persons who are notmembers. ii) The second condition was also satisfied by theassessee since paid up share capital and reserves is more thanRs.1 lakh. iii) With regard to the last condition, i.e., the bye-laws ofthe society whether permits other co-operative society to become a member, the Tribunal held that the said condition isnot satisfied since the bye-laws of the society permits other co-operative society to become its member. The Tribunal held that the assessee – Society is not to beregarded to be a primary co-operative bank as all the three basicconditions are not complied with and therefore, it is not a co-operative bank and the provisions of section 80P(4) are notapplicable in the case of the assessee and the assessee is entitledfor deduction under Section 80P(2)(a)(i). Hence, the Revenue is in appeal before this Court. 4. The questions of law that arise for our consideration inthis appeal are : i. Whether the benefit of deduction, under Section 80 P(2) (a) (i) of the IT Act, could be denied to the assessee on thefooting that, though the respondent was said to be a Co-operative Society, it was in fact a co-operative bank, within themeaning as assigned to such bank under Part V of the BR Act. ii. Whether the Authorities under the IT Act werecompetent and possessed the jurisdiction to resolve the controversy as to whether the assessee was a co-operativesociety or co-operative bank, as defined under the provisions ofthe BR Act?” 5. In addressing the above, it would be useful to extract the relevant provisions for ready reference. “80P. (1) Where, in the case of an assesseebeing a co-operative society, the gross total incomeincludes any income referred to in sub-section (2),there shall be deducted, in accordance with and subjectto the provisions of this section, the sums specified insub-section (2), in computing the total income of theassessee. (2) The sums referred to in sub-section (1) shallbe the following, namely :— (a) in the case of a co-operative society engaged in— (i) carrying on the business of banking or providingcredit facilities to its members, or (ii) x x x x x (iii) x x x x x x x x x x (4) The provisions of this section shall notapply in relation to any co-operative bank other than aprimary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.-- For the purposes of this sub-section, (a) “co-operative bank” and “primaryagricultural credit society” shall have the meaningsrespectively assigned to them in Part V of the BankingRegulation Act, 1949 (10 of 1949); (b) “primary co-operative agricultural and ruraldevelopment bank” means a society having its area ofoperation confined to a taluk and the principal object ofwhich is to provide for long-term credit for agriculturaland rural development activities.]” “Section 56 of the BR Act:- Act to apply to co-operative societies subject tomodifications. —The provisions of this Act, as in force forthe time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation tobanking companies subject to the following modifications,namely:— (a) throughout this Act, unless the context otherwiserequires,— (i) references to a “banking company” or “thecompany” or “such company” shall be construed asreferences to a co-operative bank; (ii) references to “commencement of this Act” shallbe construed as references to commencement of theBanking Laws (Application to Co-operative Societies) Act,1965 (23 of 1965); (b) in section 2, the words and figures “the Companies Act,1956 (1 of 1956) and” shall be omitted; (c) in section 5,— “Section 56 of the BR Act:- Act to apply to co-operative societies subject tomodifications. —The provisions of this Act, as in force forthe time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation tobanking companies subject to the following modifications,namely:— (a) throughout this Act, unless the context otherwiserequires,— (i) references to a “banking company” or “thecompany” or “such company” shall be construed asreferences to a co-operative bank; (ii) references to “commencement of this Act” shallbe construed as references to commencement of theBanking Laws (Application to Co-operative Societies) Act,1965 (23 of 1965); (b) in section 2, the words and figures “the Companies Act,1956 (1 of 1956) and” shall be omitted; (c) in section 5,— [(i) after clause (cc), the following clauses shall beinserted, namely:— (cci) “Co-operative bank” means a state co-operative bank, a central co-operative bank and a primaryco-operative bank; (ccii) “co-operative credit society” means a co-operative society, the primary object of which is to providefinancial accommodation to its members and includes a co-operative land mortgage bank; (cciia) “co-operative society” means a societyregistered or deemed to have been registered under anyCentral Act for the time being in force relating to themulti-State co-operative societies, or any other Central orState law relating to co-operative societies for the timebeing in force;] (cciii) “director” in relation to a co-operativesociety, includes a member of any committee or body for the time being vested with the management of the affairs ofthat society; [(cciiia) “multi-State co-operative bank” means amulti-State co-operative society which is a primary co-operative bank;] [(cciiib) “multi-State co-operative society” means amulti-State co-operative society registered as such underany Central Act for the time being in force relating to themulti-State co-operative societies but does not include anational co-operative society and a federal co-operative;] (cciv) “primary agricultural credit society” meansa co-operative society,— (1) the primary object or principal business ofwhich is to provide financial accommodation to itsmembers for agricultural purposes or for purposesconnected with agricultural activities (including themarketing of crops); and (2) the bye-laws of which do not permit admissionof any other co-operative society as member: Provided that this sub-clause shall not apply to theadmission of a co-operative bank as a member by reason ofsuch co-operative bank sub-scribing to the share capital ofsuch co-operative society out of funds provided by the StateGovernment for the purpose; (ccv) “primary co-operative bank” means a co-operative society, other than a primary agricultural creditsociety,— (1) the primary object or principal business ofwhich is the transaction of banking business; (2) the paid-up share capital and reserves of whichare not less than one lakh of rupees; and (3) the bye-laws of which do not permit admissionof any other co-operative society as a member: Providedthat this sub-clause shall not apply to the admission of aco-operative bank as a member by reason of such co-operative bank subscribing to the share capital of suchco-operative society out of funds provided by the StateGovernment for the purpose; (ccvi) “primary credit society” means a co-operative society, other than a primary agricultural creditsociety,— (1) the primary object or principal business ofwhich is the transaction of banking business; (2) the paid-up share capital and reserves of whichare less than one lakh of rupees; and (3) the bye-laws of which do not permit admissionof any other co-operative society as a member: Provided that this sub-clause shall not apply to theadmission of a co-operative bank as a member by reason ofsuch co-operative bank subscribing to the share capital ofsuch co-operative socie-ty out of funds provided by theState Government for the purpose. (ccvi) “primary credit society” means a co-operative society, other than a primary agricultural creditsociety,— (1) the primary object or principal business ofwhich is the transaction of banking business; (2) the paid-up share capital and reserves of whichare less than one lakh of rupees; and (3) the bye-laws of which do not permit admissionof any other co-operative society as a member: Provided that this sub-clause shall not apply to theadmission of a co-operative bank as a member by reason ofsuch co-operative bank subscribing to the share capital ofsuch co-operative socie-ty out of funds provided by theState Government for the purpose. Explanation.— If any dispute arises as to theprimary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), adetermination thereof by the Reserve Bank shall be final; x x x x x x 6. The learned counsel Shri Y.V. Raviraj, appearing onbehalf of the Revenue contends as follows : Section 80P(2)(a)(i) provides deduction of income of co-operative societies “carrying on the business of banking orproviding credit facilities to its members”. However, an exception to this is provided under Section80P(4) which provides that this deduction will not be availableto any co-operative bank other than a primary agricultural creditsociety or a primary co-operative agricultural and ruraldevelopment bank. For the purpose of sub-section 80P(4), a co-operativebank has been given a meaning assigned to them in Part V ofthe Banking Regulation Act, 1949. In Part V of the Banking Regulation Act, 1949, section5(b), a “co-operative bank” means a State Co-operative Bank, aCentral Co-operative Bank and a Primary Co-operative Bank. A Primary Co-operative Bank is defined in section 5(ccv)of the Banking Regulation Act, 1949 as the co-operative societywhich fulfills three conditions namely: i) The primary object or principal business of which istransaction of banking business. ii) The paid-up share capital and reserves of which arenot less than one lakh of rupees and iii) The bye-laws of which do not permit admission ofany other co-operative society as a member. If a co-operative society fulfills all the above threeconditions, it is to be treated as a co-operative bank for thepurpose of section 80P(4) and the benefit of deduction underSection 80P(2)(a)(i) is denied. After insertion of Section 80P(4), the provisions ofSection 80P(2)(a)(i) were not amended and the co-operativesocieties engaged in carrying on business in banking with itsmembers continued to be entitled for deduction. The embargo put under Section 80P(4) are applicableonly to a co-operative society, treated as a bank by a legal fiction created under Section 80P(4) as defined in theExplanation to the said section with reference to Part V of theBanking Regulation Act, 1949. However, if an assessee society does not fulfill any of theabove three conditions as defined under Section 5(ccv) ofBanking Regulation Act, 1949, it cannot be treated as a‘primary co-operative bank’ and as such will be eligible to getthe deduction under Section 80P(2)(a)(i) Attention is also drawn to the relevant portion of theFinance Minister’s Budget Speech explaining the reasons forwithdrawal of tax benefits to some Societies by way ofinsertion of sub-section 80P(4) and insertion of new sub-clause(viia) in clause (24) of Section 2 definition of “income” by theFinance Act, 2006, with effect from 1.4.2007, is as under: “The Co-operative banks are functioning at parwith other commercial banks, which do not enjoy anytax benefits. It is, therefore proposed to amend section80P by inserting a new sub-section (4) so as to providethat the provisions of the said section shall not apply inrelation to any co-operative bank other than primary credit society or a primary co-operative agriculturaland rural development bank. It is also proposed todefine the expressions “co-operative bank”, “primaryagricultural credit society” and “primary co-operativeagricultural and rural development bank”. “The Co-operative banks are functioning at parwith other commercial banks, which do not enjoy anytax benefits. It is, therefore proposed to amend section80P by inserting a new sub-section (4) so as to providethat the provisions of the said section shall not apply inrelation to any co-operative bank other than primary credit society or a primary co-operative agriculturaland rural development bank. It is also proposed todefine the expressions “co-operative bank”, “primaryagricultural credit society” and “primary co-operativeagricultural and rural development bank”. It is also proposed to insert a new sub-clause(viia) in clause (24) of the Section 2 so as to providethat ttheprofits and gains of any business of banking(including providing credit facilities) carried on by aco-operative society with its members shall beincluded in the definition of “income”. Section 2(24(viia) of the Income Tax Act inserted by theFinance Act, 2006, with effect from 1.4.2007 includes thefollowing in its definition of “income” as under: “profits and gains of any business of banking(including providing credit facilities) carried on by aco-operative society with its members.” The relevant portion of Section 80P is as under: “80P(1): Where, in the case of an assesseebeing a co-operative society, the gross total incomeincludes any income referred to in sub-section (2),there shall be deducted, in accordance with an subjectto the provisions of this section, the sums specified in sub-section (2), in computing the total income of theassessee. (2) The sum referred to in sub-section (1) shall be the following, namely:- (a)the case of a co-operative societyengaged in :- (i)Carrying on the business of banking orproviding credit facilities to its memebrs, or …… (ii)………………..(iii)………………..(iv)………………..(v)………………..(vi)………………..(vii)……………….. The whole of the amount of profits and gains ofbusiness attributable to any one or more of suchactivities. Section 80P(4) which came to be introduced in the statute by the Finance Act, 2006, with effect from 1.4.2007, reads asunder: 80P(4) The provisions of this section shall not apply inrelation to any co-operative bank other than a primaryagricultural credit society or a primary co-operativeagricultural and rural development bank. Explanation:- For the purposes of this sub-section, (a) “co-operative bank” and “primary agricultural creditsociety” shall have the meanings respectively assignedto them in Part V of the Banking Regulation Act, 1949(10 of 1949); (b) “primary co-operative agricultural and ruraldevelopment bank” means a society having its area ofoperation confined to a taluk and the principal object ofwhich is to provide for long-term credit for agriculturaland rural development activities. Part V of the Banking Regulation Act, 1949, section 5(cci): In order to examine in a given case of an assesseesociety whether it is a co-operative bank or not as defined inPart V of the Banking Regulation Act, 1949, of the said Act hasto be looked into. Section 5(cci) states as under: “Co-operative bank” means a state co-operativebank, a central co-operative bank and a primary co-operative bank.” The primary co-operative bank is defined under Section 5(ccv) of the BR Act as under: “”primary co-operative bank” means a co-operativesociety, other than a primary agricultural creditsociety— (1)The primary object or principal business of whichis transaction of banking business:is transaction of banking business: (2)The paid-up share capital and reserves of which arenot less than one lakh of rupees andnot less than one lakh of rupees and (3)The bye-laws of which do not permit admission ofany other co-operative society as a member:any other co-operative society as a member: Provided that this sub-clause shall not apply to theadmission of a co-operative bank as a member byreason of such co-operative bank subscribing to theshare capital of such Co-operative society out of fundsprovided by the State Government ‘for the purpose’”. Section 5(cciia) of Banking Regulation Act, 1949 defines “”primary co-operative bank” means a co-operativesociety, other than a primary agricultural creditsociety— (1)The primary object or principal business of whichis transaction of banking business:is transaction of banking business: (2)The paid-up share capital and reserves of which arenot less than one lakh of rupees andnot less than one lakh of rupees and (3)The bye-laws of which do not permit admission ofany other co-operative society as a member:any other co-operative society as a member: Provided that this sub-clause shall not apply to theadmission of a co-operative bank as a member byreason of such co-operative bank subscribing to theshare capital of such Co-operative society out of fundsprovided by the State Government ‘for the purpose’”. Section 5(cciia) of Banking Regulation Act, 1949 defines a Co-operative Society as under: “Co-operative Society means a societyregistered or deemed to have been registered under anyCentral Act for the time being in force relating to themulti-State co-operative societies or any other Centralor State law relating to co-operative societies for thetime being in force;” Section 5(b) of the Banking Regulation Act, will also have to be looked into to examine whether the primary object orprincipal business of the co-operative society is transaction ofbanking business. The section is as under: “banking” means the accepting, for the purposeof lending or investment, of deposits of money fromthe public, repayable on demand or otherwise, andwithdrawable by cheque, draft, order or otherwise” The learned counsel would incidentally contend that theTribunal while taking the cue from the decisions of this Courtin CIT v. Sri Biluru Gurubasava Pattina Sahakari SanghaNiyamithaand other cases, in certain other appeals apart fromthe present has also formed an opinion on certain furtherpropositions, namely: Proposition: Assessee society has not fulfilled the thirdcondition mentioned in Section 5(ccv) of the BR Act and assuch, cannot be treated as a primary co-operative bank asdefined therein: The Tribunal has referred to section 16 of the KarnatakaState Co-operative Societies Act, 1959 and held that the saidprovisions permit admission of any other co-operative societyas a member. The Tribunal however has erred in not examiningwhether the bye-laws of the assessee society permits other co- operative society to become member as per Section 5(ccv) ofthe Banking Regulation Act, 1949. Provisions of Section 16(1)and 16(2) of the Karnataka State Co-operative Societies Act,1959 does not help in any way to come to the conclusion thatthe bye-laws in the case of a particular assessee society permitsadmission of any other co-operative society as a member. Proposition: The Tribunal has referred to section 20 to21A of the Karnataka Souhardha Sahakari Co-operativeSocieties Act, 1997, and held that the said provisions permitadmission of any other co-operative society as a member. The Tribunal however ought to have examined into theaspect as to whether the bye-laws in the case of a particularassessee society permits admission of any other co-operativesociety as a member. Proposition: Referring to the bye-laws of the assesseesociety, the Tribunal has observed that the Societies registeredunder the Karnataka Societies Registration Act, 1960 areallowed to become members. The Tribunal had failed to appreciate that a societyregistered under the Karnataka Societies Registration Act, 1960is established or created for different purposes and cannot betreated as that of the one registered under the Karnataka Co-operative Societies Act, 1959 or that registered under theKarnataka Souhardha Sahakari Co-operative Societies Act,1997. Proposition:The issue is covered by the decision of aDivision Bench of this Hon’ble Court in the case of Sri. BiluruGurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot inITA No.5006/2013 dated 5[th] February 2014: The substantial question of law pleaded on behalf of theRevenue in the said case was as follows: The Tribunal had failed to appreciate that a societyregistered under the Karnataka Societies Registration Act, 1960is established or created for different purposes and cannot betreated as that of the one registered under the Karnataka Co-operative Societies Act, 1959 or that registered under theKarnataka Souhardha Sahakari Co-operative Societies Act,1997. Proposition:The issue is covered by the decision of aDivision Bench of this Hon’ble Court in the case of Sri. BiluruGurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot inITA No.5006/2013 dated 5[th] February 2014: The substantial question of law pleaded on behalf of theRevenue in the said case was as follows: “In the facts and circumstances of this case,whether the Revisional Authority was justified ininvoking his power under Section 263 of the Actwithout the foundational fact of assessee being co-operative bank was not there?” It is pointed out that this Court, in the above case, had notexamined the applicability of the provisions of the definition ofa co-operative bank as per Part V of the Banking RegulationAct, 1949 by reading Explanation to section 80P(4). The factsof the above case are clearly distinguishable and are notapplicable. However, a Review Petition was filed in the saidcase and subsequently, a memo had been filed to withdraw thesaid Review Petition, which is pending. It is submitted that thematter is being taken up by the Revenue in appeal before theHon’ble Apex Court. It is also stated that in some matters, the Tribunal hasgranted relief by holding that Section 80P(4) is not applicable,by referring to one circular of CBDT No.133 of 2007 dated9.5.2007 which provided as under:- “Subject: clarification regarding admissibility ofdeduction under Section 80P of the Income Tax Act,1961. 1. Please refer to your letter No.DCUS/30688/2007, dated 28.03.2007 addressed to the Chairman, Central Board of Direct Taxes, on the above given subject. 2. In this regard, I have been directed to statethat sub-section (4) of section 80P provides thatdeduction under the said section shall not be allowableto any co-operative bank other than a primaryagricultural credit society or a primary co-operativeagricultural and rural development bank. For thepurpose of the said sub-section, co-operative bankshall have the meaning assigned to it in part V of theBanking Regulations Act, 1949. 3. In part V of the Banking Regulation Act,“Co-operative Bank” means a State co-operative bank,a Central Co-operative Bank and a primary Co-operative bank. 4. Thus, if the Delhi Co-op Urban T and CSociety Ltd. does not fall within the meaning of “Co-operative Banks” as defined in part V of the BankingRegulation Act, 1949, sub-section (4) of Section 80Pwill not apply in this case. 5. The issues with the approval of Chairman,Central Board of Direct Taxes.” The learned counsel contends that the above circular hasonly clarified that if the societies do not fall within the meaning of the co-operative bank as per Part V of the BankingRegulation Act, 1949, then exception under Section 80P(4) willnot apply. Proposition: The assessee Society has not obtainedBanking Licence from the R.B.I: It is contended that it is also pertinent to note that it isnecessary that a co-operative society should have a bankinglicence as per the definition under the Income Tax Act, forcarrying on banking business and if the required licence is notobtained as per other laws, it can only be termed as an illegalbanking business under a particular statute prescribing thesame. Income Tax Act, however is concerned with the taxingof “income” as per the provisions of the Income Tax Act and“income” if any, has to be taxed whether it is from a legal orillegal business. Hence, it is contended by the learned counsel that, by theinsertion of Section 2(24(viia) and Section 80P(4), by adoptingthe words ‘primary co-operative bank’ means a co-operative It is contended that it is also pertinent to note that it isnecessary that a co-operative society should have a bankinglicence as per the definition under the Income Tax Act, forcarrying on banking business and if the required licence is notobtained as per other laws, it can only be termed as an illegalbanking business under a particular statute prescribing thesame. Income Tax Act, however is concerned with the taxingof “income” as per the provisions of the Income Tax Act and“income” if any, has to be taxed whether it is from a legal orillegal business. Hence, it is contended by the learned counsel that, by theinsertion of Section 2(24(viia) and Section 80P(4), by adoptingthe words ‘primary co-operative bank’ means a co-operative society other than …’ in clause (ccv) of BR Act, theLegislature has created a legal fiction for the purpose of taxingunder certain circumstances, a Society which is to be treated asa ‘bank’ for the purposes of the Income Tax Act, 1961 whiledealing with the issue of its claim of deduction under Section80P. Further, when a Statute enacts that something shall bedeemed to be treated as something else, which in fact is nottrue, the Court shall appreciate and ascertain for what purposesthe statutory fiction is resorted and then give full effect to thestatutory fiction to carry it to the logical conclusion. Therefore, in the case of an assessee – Co-operativeSociety claiming deductions under Section 80P, an examinationof the factual aspects will have to be conducted by the Revenueauthorities on the basis of the facts and materials on record toconclude whether the assessee – Society is to be treated as a‘primary co-operative bank’ which fulfills the above threeconditions. 7. In so far as the first question of law is concerned, thereare a series of decisions of this court wherein it has beenrepeatedly answered in favour of the assessee. Two of the saiddecisions are as follows : 1.CIT v. Sri Biluru Gurubasava Pattina Sahakari SanghaNiyamitha in ITA No.5006/2013Niyamitha in ITA No.5006/2013 2.CIT vs. Bangalore Commercial Transporter Credit Societyin ITA No.351/2011 & ITA No.599/2013in ITA No.351/2011 & ITA No.599/2013 In interpreting Section 80 P (4) in CIT v. Sri BiluruGurubasava Pattina Sahakari Sangha Niyamitha of the I T Act,it was held as follows : “If a Co-operative Bank is exclusivelycarrying on banking business, then the incomederived from the said business cannot be deductedin computing the total income of the assessee. Thesaid income is liable for tax. A Co-operative bankas defined under the Banking Regulation Actincludes the primary agricultural credit society ora primary co-operative agricultural and ruraldevelopment bank. The Legislature did not wantto deny the said benefits to a primary agriculturalcredit society or a primary co-operative agricultural and rural development bank. Theydid not want to extend the said benefit to a Co-operative bank which is exclusively carrying onbanking business i.e. the purport of thisamendment. Therefore, as the assessee is not aCo-operative bank carrying on exclusively bankingbusiness and as it does not possess a licence fromReserve Bank of India to carry on business, it isnot a Co-operative bank. It is a Co-operativesociety which also carries on the business oflending money to its members which is coveredunder Section 80P(2)(a)(i) i.e. carrying on thebusiness of banking for providing credit facilitiesto its members. The object of the aforesaidamendment is not to exclude the benefit extendedunder Section 80P(1) to such society. Therefore,there was no error committed by the AssessingAuthority.” In CIT vs. Bangalore Commercial Transporter CreditSociety (supra), this court has cited with approval the followingdifferences between a co-operative society and a co-operativebank - as depicted by the Tribunal, in tabular form thus : And this court had dismissed the appeal of the revenuefollowing the decision in CIT v. Sri Biluru Gurubasava PattinaSahakari Sangha Niyamitha (supra ). The same view has been taken in the following decisions : In CIT vs. Bangalore Commercial Transporter CreditSociety (supra), this court has cited with approval the followingdifferences between a co-operative society and a co-operativebank - as depicted by the Tribunal, in tabular form thus : And this court had dismissed the appeal of the revenuefollowing the decision in CIT v. Sri Biluru Gurubasava PattinaSahakari Sangha Niyamitha (supra ). The same view has been taken in the following decisions : 1.CIT vs. Bangalore Credit Co-operative Society Ltd. in ITANo.598/2013No.598/2013 2.CIT vs. Yeshwanthpur Credit Co-operative Society Ltd. inITA 237/2012ITA 237/2012 3.CIT vs. Mysore University Employees Co-operative CreditSociety Ltd. in ITA 298/2013Society Ltd. in ITA 298/2013 4.CIT vs. Vasavi Credit Co-operative Society Ltd. in ITANo.118/2012No.118/2012 5.CIT vs. Sri Vasavi Multi Purpose Souharda SahakariSangha Niyamitha in ITA No.505/2013Sangha Niyamitha in ITA No.505/2013 6.CIT vs. General Insurance Employees Co-operative SocietyLtd. in ITA No.273/2013.Ltd. in ITA No.273/2013. 8. The learned counsel Shri A. Shankar while drawingattention of this court to the tenor of the relevant provisions oflaw and the above decisions, would contend that this court hascategorically held that the assessee, as a co-operative society,was entitled to the benefit of deduction under Section 80 P (2)(a) (i) of the IT Act. Notwithstanding the aforesaid decisions ofthis court, the Tribunal which was bound by the same, hasignored the said decisions. It is also pointed out that though other benches of theAppellate Tribunal had followed the dictum of this court, andwhich circumstance was brought to the attention of the Tribunal, it had not chosen to distinguish the said decisions norhas it chosen to refer the matter to a special bench, as proprietydemanded. It is hence contended that the point of law as to theentitlement of deduction under Section 80 P (2) (a) (i) in so faras the assessee is concerned, would have to be held in itsfavour. He would contend that all co-operative banks may be co-operative Societies, but all co-operative Societies are notnecessarily co-operative banks. It is further contended that the activity of "banking", isdefined under Section 5 (b) of the BR Act as follows : “5(b) “banking” means the accepting, for thepurpose of lending or investment, of deposits of moneyfrom the public, repayable on demand or otherwise,and withdrawal by cheque, draft, order or otherwise; It is asserted that the assessee did not carry on any suchactivity. And if they did carry on any such activity, it would beillegal and becomes subject to the rigour of Section 37 of the BR Act. It is further contended that even if there was adisputed question as to whether the assessee was indeed a co-operative bank. The authorities under the IT Act were notcompetent and did not have the jurisdiction to arrive at afinding in that regard and attention is drawn to the Explanationappended to clause (ccvi ) to Section 56 of the BR Act, whichreads as follows : “Explanation- If any dispute arises as to theprimary object or principal business of any co-operative society referred to in clauses (cciv), (ccv)and (ccvi), a determination thereof by the ReserveBank shall be final;” It is hence contended that the appeal be allowed and thejudgment of the Tribunal be set aside. 9. In the light of the above contentions and on anexamination of the relevant legal provisions, it is to be noticedat the outset that this court in the appeal in ITA 351/ 2011, CITv. Bangalore Commercial Transport Credit Co-operative Society Limited, decided on 27.6.2014, had framed thefollowing substantial questions of law : “(i) Whether the Tribunal was correct inholding that the provision of sub-section (4) of Section80P of the Income Tax Act are applicable only to co-operative Banks and not to credit Co-operativeSocieties, which are engaged in business of banking,including providing credit facilities to their members? It is hence contended that the appeal be allowed and thejudgment of the Tribunal be set aside. 9. In the light of the above contentions and on anexamination of the relevant legal provisions, it is to be noticedat the outset that this court in the appeal in ITA 351/ 2011, CITv. Bangalore Commercial Transport Credit Co-operative Society Limited, decided on 27.6.2014, had framed thefollowing substantial questions of law : “(i) Whether the Tribunal was correct inholding that the provision of sub-section (4) of Section80P of the Income Tax Act are applicable only to co-operative Banks and not to credit Co-operativeSocieties, which are engaged in business of banking,including providing credit facilities to their members? (ii) Whether the Tribunal was correct in holdingthat the assessee is a co-operative society and not a co-operative Bank in terms of sub-section (4) of Section80P of the Income Tax Act without considering themeaning of co-operative Bank as envisaged under PartV of the Banking Regulation Act, 1949, wherein it isdefined that co-operative Bank includes primary co-operative Bank, which is further defined as co-operative Society with the primary object oftransactions of Banking business?” The said issues were answered in favour of the Assessee. 10. We are in respectful agreement with the general viewtaken as to the interpretation of the relevant provisions of law, by the co-ordinate bench of this court, in the above and severalother judgments adopting the same view. However, it is to benoticed that there is a seriously disputed question of fact whichthe Authorities under the IT Act have taken upon themselves tointerpret in the face of the BR Act prescribing that in the eventof a dispute as to the primary object or principal business of anyco-operative society referred to in clauses (cciv), (ccv) and(ccvi) of Section 56 of the BR Act, a determination thereof bythe Reserve Bank shall be final, would require the dispute to beresolved by the Reserve Bank of India, before the authoritiescould term the assessee as a co-operative bank, for purposes ofSection 80 P of the IT Act. Any opinion expressed therefore istentative and is not final. The view expressed by this court,however, as to the assessee being a co-operative society and nota co-operative bank in terms of Section 80P (4) of the IT Act,shall hold the field and shall bind the authorities unless heldotherwise by the Reserve Bank of India. In the result, the above questions are answered in favourof the assessee and the present appeal of the revenue isdismissed. Sd/-JUDGESd/- JUDGE KS*