I. T. A. No. 999 /JP/ 2011(assessment year 2008-09).

R. P. TOLANI (Judicial Member) and T. R. MEENA (Accountant Member)

Mahendra Gargieya and Fazlur Rehman for the appellant.
Smt. Neena Jeph for the respondent.

ORDER

The order of the Bench was delivered by

1. T. R. Meena (Accountant Member).-This is an appeal filed by the assessee emanating from the order of the learned Commissioner of Income-tax (Appeals)-III, Jaipur dated August 29, 2011 for the assessment year 2008-09. The grounds raised in the appeal are as under :

(1) The impugned additions and disallowances made in the order under section 143(3) of the Income-tax Act, 1961 dated August 29, 2011 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be deleted.

(2) Rs. 50,32,224 : The learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts of the case in denying the claim of deduction made by the society under section 80P(2)(a)(i) of the Act. The claim of deduction so denied, being totally contrary to the provisions of law and facts may kindly be allowed as claimed.

(3) The learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts of the case in confirming the application of the provisions of section 80P(4) of the Act and consequently, denying the claim of deduction made by the society under section 80P(2)(a)(i) of the Act. The claim of deduction so denied, being totally contrary to the provisions of law and facts kindly be allowed as claimed.

2. The assessee-society is engaged in the business of banking. The Assessing Officer observed that the assessee filed its return of income on September 30, 2008 declaring total income at nil. The case was scrutinised under section 143(3) of the Income-tax Act. The Assessing Officer gave show-cause notice after considering the amendment made in section 80P with effect from April 1, 2007. During the year under consideration the assessee-society had claimed deduction under section 80P(2)(a)(i) of Rs. 50,32,244 stating that the bank is a agricultural credit society and primary co-operative agricultural and rural and land development bank. As per the Assessing Officer, after the amendment, only agricultural credit society or primary co-operative agriculture and rural and land development bank are entitled for deduction by virtue of section 80P(4) of the Income-tax Act. He also considered the Central Board of Direct Taxes Circular dated September 20, 2010 on this issue. The Assessing Officer held that the assessee-bank has not furnished any documentary evidence in respect of its claim and has not furnished the objects of the bank wherefrom its claim that it is an agricultural and rural development bank can be verified. The assessee after this amendment is not entitled for deduction under section 80P(2)(a)(i). After this amendment, definition of "co-operative bank" and "primary agricultural society" and primary co-operative agricultural and rural development bank has also been given in the Act just below sub-section (4) of section 80P. Therefore, deduction claimed under section 80P at Rs. 50,32,244 was added to the income of the assessee.

3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned Commissioner of Income-tax (Appeals) who had confirmed the addition by observing as under :

"2.3. I have carefully considered the observations of the Assessing Officer and also the submission made by the learned authorised representative in this regard. The basic controversy in the present appeal is about the admissibility of section 80P(2)(a)(i) of the Act, in the case of the appellant-bank. The Assessing Officer has mentioned that after the amendment in section 80P, with effect from April 1, 2007, and introduction of sub-section (4) to the impugned section, the deduction under section 80P would be applied only to a co-oper ative bank/credit society which are primarily engaged in agricultural and rural development activities, as mentioned in the Explanation given below the sub-section of section 80P(4) of the Act. Since the appellant-bank failed to furnish any details, which could substantiate the above conditions, therefore, the Assessing Officer disallowed the claim made under section 80P(2)(a)(i) of the Act. On the other hand the learned authorised representative through his written submission, contended that a liberal interpretation of relevant sections with proper understanding of the facts would lead to a conclusion, which would support the appellant's case. In the light of the above delib erations, eventually, I find that the Assessing Officer is quite justified, while holding that the appellant-bank is not entitled for the benefit extended under section 80P of the Act, for the following reasons :

 (i) The plain reading of the provisions of relevant sections, i.e., 80P(2)(a)(i) and 80P(4) stipulate that a co-operative society engaged in carrying on business of banking and providing credit facilities to its members would be entitled for such benefit provided such co-oper ative bank/society should be fulfilling the following conditions-

a. Such bank/society must be having its area of operation confined to a taluka (tehisel), and
b. The principal object of such bank should be providing a long- term credit for the 'agriculture and rural development' activities.

2.3.1 In view of the divergent understanding of law on the part of the Assessing Officer and the learned authorised representative, to perceive the exact meaning and ambit of the above provisions, the help of the principle of interpretation of law was considered relevant and essential, under the given circumstances. The cardinal rule of interpretation of law suggests that when the meaning of the words/ phrase used in a statute is clear and unambiguous, then such words to be given its plain and grammatical meaning and effect of such law has to be given in such context only. In such cases, the court cannot add anything into a statutory provision, even if it leads to harsh consequences of the statute, if any. In simpler terms, when there is no ambiguity in the language of the statute, then such provisions cannot be interpreted in different manner to confer benefit on the assessee. In this regard the reliance is placed on following decisions :

(i) Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) ;
 (ii) Patil Vijaykumar v. Union of India [1985] 151 ITR 48 (Karn);
 (iii) CIT v. T. N. Aravinda Reddy [1979] 120 ITR 46 (SC) ; and
 (iv) IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 (SC).

The learned authorised representative, in his submission, contended that the interpretation of law should be done, in a manner, which is beneficial to the assessee, therefore, the crucial word used in the Explanation to sub-section (4) of section 80P, i.e. 'a taluka' includes more than one taluka in numbers. Moreover, the objects of the appellant-bank are akin and part and parcel of the agriculture and rural development only, though they have given different nomencla ture in the 'Manual of the Bank'. However in view of the above settled law, towards the interpretation of a statute, the appellant requests of perceiving and understanding the relevant provisions in different manner than what they appear from their plain meaning of relevant phrases used therein, is found untenable and rejected accordingly.

2.3.2 In view of the above legal position, the factual position of the appellant is examined and the outcome of the same is being discussed as under :

2.3.3 As far as the issue of allowability of impugned deduction in the assessment year 2007-08 by my learned predecessor is concerned, the same is not found relevant now, as the legal situation has changed, after the amendment in section 80P of the Act, which is effective from April 1, 2007 relevant to the assessment year 2008-09. In the present appellate proceeding, the relevant year is the assess ment year 2008-09, therefore the decision given in the earlier year, i.e., before the amendment in the Act, has no bearing in the current year. Accordingly, in the current year the claim of the appellant for impugned deduction has been considered in the light of the amended relevant provisions, as discussed hereinabove.

Under the above facts and circumstances, it is evident that the appellant-bank has not fulfilled the necessary criterions and condi tions, therefore, they are found not eligible for the deduction under section 80P(2)(a)(i) of the Act. Accordingly the Assessing Officer's stand, in this regard, is upheld and the present ground of appeal is hereby rejected."

4. Now the assessee is before us. The learned authorised representative for the assessee submitted that from a bare reading of the provisions contained under section 80P of the Act, it is explicitly clear that if a co-operative society is engaged in carrying on the business of banking or providing credit facilities to its members and its gross total income includes any income therefrom, such co-operative society is entitled for the deduction under section 80P(2)(a)(i). The assessee is a co-operative society and has been providing credit facilities to its members. The assessee is not a co-operative bank or not a primary co-operative bank or not even a Regional Rural Bank. The assessee is not engaged in the business of banking inasmuch as it has not obtained licence required from the Reserve Bank of India. The Assessing Officer wrongly interpreted section 80P(4). Only a primary agricultural co-operative society (PACS) or a primary co-operative agricultural and rural development bank (PCARDB) is entitled to the deduction provided under section 80P(2)(a)(i) of the Act. In fact, the assessee is not found to be a co-operative bank, the provision of section 80P(4) becomes irrelevant and, therefore, one need not consider the further exception to a co-operative bank, i.e., primary agricultural co-operative society or primary co-operative agricultural and rural development bank. Section 80P(2)(a)(i) nowhere suggests so. The law contemplates all types of credit societies including those which are primary agricultural credit society, engaged in providing credit facilities to its members, eligible to the deduction. Thus the assessee's case is covered under section 80P(2)(a)(i). Section 80P(4) was inserted by the Finance Act, 2006 with effect from April 1, 2007, i.e., for and from the assessment year 2007-08. However, the learned Assessing Officer allowed the deduction under section 80P(2)(a)(i) in the assessment year 2007-08. Therefore, the present year also covered by the order of the Assessing Officer himself. Though the doctrine of res judicata do not apply to the Income-tax proceedings yet however, unless there is a change in the facts and circumstances, the view taken earlier should normally be taken consistently. For this he relied on in the case of Sardar Kehar Singh v. CIT [1992] 195 ITR 769 (Raj) and a very recent decision in CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC). This view is also supported by Central Board of Direct Taxes Circular No. 14 of 2006 dated December 28, 2006 ([2007] 288 ITR (St.) 9 ) . He further drew our attention to definition of "banking", "co-operative bank". He further relied on the following cases :

(i) Deputy CIT v. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. [2012] 137 ITD 163 (Panaji)
(ii) CIT v. Jafari Momin Vikas Co-op. Credit Society Ltd. [2014] 362 ITR 331 (Guj) ;
(iii) CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niya mitha Bagalkot I. T. A. No. 5006 of 2013 dated February 5, 2014 [2014] 369 ITR 86 (Karn) ;
(iv) CIT v. Bangalore Credit Co-operative Society Ltd. I. T. A. No. 598 of 2013 dated June 27, 2014 ;
(v) Sagar Credit Co-operative Society Ltd. v. CIT I. T. A. No. 306/ Bangalore/2014 ;
(vi) ITO v. Yeswanthpur Credit Cooperative Society Ltd. I. T. A. No. 737/Bang/2011 dated April 11, 2012 ;
(vii) Asst. CIT v. Bangalore Commercial Transport Credit Co-op. Society Ltd. I. T. A. No. 1069/Bang/2010 dated April 8, 2011 ;
(viii) ITO v. Jankalyan Nagri Sahakari Pat Sanstha Ltd. [2012] 33 CCH 475 (Pune-Trib.) ; and
(ix) CIT v. Surat Vankar Sahakari Sangh Ltd. Tax Appeal No. 1150 of 2013 dated January 17, 2014 [2014] 43 taxmann.com 431 (Guj).

5. The authorised representative further drew our attention to the objects of the assessee, the definition of "agriculture" as provided under the NABARD Act and definition of "co-operative bank", primary agricultural credit society, primary co-operative agricultural and rural development bank and claimed that the assessee is not a co-operative bank, but providing loans to the agriculturists for agricultural purposes. The Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) considered the taluka for the assessee's activity as per the Act but the taluka consists of several tehsils and districts as per Wikipedia Encyclopedia. The law used the word "taluk" and not "tehsil". It is a settled law that every word used by the Legislatures is significant and has to be given due weightage. The courts cannot supply something missing. Therefore, following the principle of strict interpretation of fiscal statute, the word "taluk" has to be understood in its plain grammatical meaning and there is no scope of any inference. Had the Legislatures intended, it could have used the word "tehsil". Thus, even if the operation was spread to 6 tehsils, it was, in any case within one taluk only. The assessee is providing long-term credit for agricultural and rural development activities. The assessee granted loans for improvement of agricultural land and production therefrom under the Rajasthan Co- operative Societies Act.

6. In any case, if a contrary decision is available, the issue becomes debatable and the view which is favourable to the assessee, has to be adopted as held in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). Therefore, he requested to allow the deduction under section 80P(2)(a)(i) of the Act.

7. At the outset, the learned Departmental representative supported the order of the learned Commissioner of Income-tax (Appeals).

8. We have heard rival contentions and perused the material on record. The intention of the amendment made in section 80P(4) has been explained by the Central Board of Direct Taxes vide Circular No. 14 of 2006 dated December 28, 2006 which is reproduced as under (page 9 of 288 ITR (St.)) :

"Circular No. 14 of 2006, dated December 28, 2006.
1. Introduction
1.1. The Finance Act, 2006 (hereafter referred to as the Act) as passed by Parliament, received the assent of the President on 18th April, 2006 and has been enacted as Act No. 21 of 2006 See [2006] 282 ITR (St.) 14

 This circular explains the substance of the provisions of the Act relating to direct taxes . . .
22. Withdrawal of tax benefits available to certain co-operative banks

22.1 Section 80P, inter alia, provides for a deduction from the total income of the co-operative societies engaged in the business of banking or providing credit facilities to its members, or business of a cottage industry, or of marketing of agricultural produce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc.

22.2 The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new sub-section (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The expressions "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" have also been defined to lend clarity to them.

22.3 Further, a new sub-clause (viia) has been inserted in clause (24) of section 2 to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co- operative society with its members shall be included in the definition of 'income'.

22.4 Applicability-From the assessment year 2007-08 onwards."

9. The assessee is a co-operative society registered under the Rajasthan State Co-operative Societies Act, 1953. As per copy of memorandum and rules and regulations of the assessee, the name given to the assessee is Sikar Sahakari Bhoomi Vikas Bank Ltd. It operates in 6 tehsils of Sikar district. The objects of the bank are as under :

Portion in vernacular not printed here.-Ed.

The assessee is not a co-operative bank as per Banking Regulation Act. Co-operative bank means "a State co-operative bank, a Central co- operative bank and a primary co-operative bank". Primary co-operative bank as per Banking Regulations Act is as under :

"(ccv) 'primary co-operative bank' means a co-operative society, other than a primary agricultural credit society."

10. As per this Board's circular this amendment was applicable from the assessment year 2007-08. In the assessment year 2007-08, the Assessing Officer had allowed the benefit under section 80P(2)(a)(i) of the Act in the case of the assessee. This issue has been considered by the various High Courts as well as the Income-tax Appellate Tribunals particularly in the case of Asst. CIT v. Bangalore Commercial Transport Credit Co-operative Society Ltd. in I. T. A. No. 1069/Bang/2010 dated April 8, 2011. The operative portion is reproduced as under :

"9.3. If the intention of the Legislature was not to grant deduction under section 80P(2)(a)(i) to co-operative societies carrying on the business of providing credit facilities to its members, then, this section would have been deleted. The new proviso to section 80P(4) which is brought into statute is applicable only to co-operative banks and not to credit co-operative societies. The intention of the Legislature to bring in co-operative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-oper ative society and not a co-operative bank, the provisions of section 80P(4) will not have application in the assessee's case and, therefore, it is entitled to deduction under section 80P(2)(a)(i) of the Act . . . The facts being similar, the decision squarely applies."

11. The hon'ble Gujarat High Court also considered this issue in the case of CIT v. Surat Vankar Sahakari Sangh Ltd. Tax Appeal No. 1150 of 2013 dated January 17, 2014 [2014] 43 taxmann.com 431 (Guj). The operative portion is reproduced as under :

"7. From the above clarification, it can be gathered that sub- section(4) of section 80P will not apply to an assessee which is not a co-operative bank. In the case clarified by the Central Board of Direct Taxes, Delhi Co-op. Urban Thrift and Credit Society Ltd. was under consideration. Circular clarified that the said entity not being a co- operative bank, section 80P(4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenues conten tion that section 80P(4) would exclude not only the co-operative banks other than those fulfilling the description contained therein but also credit societies, which are not co-operative banks. In the present case, respondent-assessee is admittedly not a credit co-operative bank but a credit co-operative society. Exclusion clause of sub-section (4) of section 80P, therefore, would not apply. In the result, tax appeals are dismissed."

12. After considering the aims and objects of the assessee, it is held that the assessee is not a co-operative bank in terms of the Banking Regulation Act.

The case law relied upon by the Commissioner of Income-tax (Appeals) are not squarely applicable on the case of the assessee. Therefore, we reverse the order of the learned Commissioner of Income-tax (Appeals). The assessee is entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act.

13. In the result, the appeal of the assessee is allowed.

The order pronounced in the open court on July 17, 2015.