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2024 (1) TMI 765 - AT - Income TaxDenial of deduction u/s.80P - assessee/s having been found to be in the business of banking - Revenue’s case was of the assessees, claiming to be primary cooperative societies under the Kerala Act, undertaking the business of banking and, thus, cooperative banks, ineligible for exemption u/s. 80P u/s. 80P(4) - HELD THAT:- A society registered as a PACS stands to loose all it’s characteristics, i.e., other than existing staff strength, on failing to fulfill, as in the instant case, it’s principal object, i.e., providing credit through it’s members primarily for agricultural and allied purposes, it yet continues to be, in terms of the said Act, a cooperative society, defined u/s. 2(f) thereof as a society registered or deemed to be registered under the said Act. And on which there can be no quarrel, particularly in view of s. 8 of the said Act, stating the registration certificate to be a conclusive evidence of it’s registration, which is, further, on the basis of declared objects (s.7). The appellant-societies, thus, despite loosing all the characteristics of a PACS in view of their activities subsequent to registration, yet continue to be primary agricultural cooperative societies under the Kerala Act. This is again principally for the reason that taxing statutes, and more so the exemption provisions, are to be strictly read. It would be a different matter, we may add, where the benefit u/s. 80P(1), which in the instant case is u/s. 80P(2)(a)(i), was for agricultural credit. Taxing statutes are to be strictly construed; more so, exemption provisions, with the burden to prove it’s claims being on the assessee. This, coupled with the mandate that the statute is to be read in a manner so as to effectuate it’s object, rather than defeat it, led us to examine the obtaining facts in light of the law as explained by the Hon’ble higher courts. The object of s. 80P(4), as explained by the Apex Court in Mavilayi SCB Ltd. [2021 (1) TMI 488 - SUPREME COURT], is not the financing of agriculture per se, as understood by the Hon’ble jurisdictional High Court in Poonjar SCB Ltd [2019 (3) TMI 1580 - KERALA HIGH COURT] but the exclusion of the ‘cooperative banks’ from the purview of the beneficial provision of s. 80P. The appellants are, despite the extent of their agricultural financing, found to be engaged in the business of banking, albeit unlicensed, and which is one of the two eligible activities u/s. 80P(2)(a)(i). On the basis of their activities and bye-laws, mutually consistent, they are further found to be a ‘cooperative society’ in terms of s. 2(19) of the Act, operating in pursuance of their bye-laws, consistent with the Kerala Act. And, two, not a ‘cooperative bank’ in terms of s. 80P(4) of the Act. The assessees’ are, accordingly, entitled to deduction in full u/s. 80P(1) r/w s. 80P(2)(a)(i) in respect of income of their banking business, unimpacted by it being of an unlicensed business. As regards the claim for deduction u/s. 80P(2)(d), i.e., in the case of Sivapuram Co-operative Society Ltd, no argument in this regard was made before us, as indeed before the Revenue authorities and, accordingly, their orders are sans any findings in the matter. The assessee’s relevant ground speaks of interest on investment with co-operative bank. The same, to the extent not covered as a part of banking business, would stand to be exempt u/s. 80P(2)(d) in view of the decision in Pr. CIT v. Perroorkada SCB Ltd [2021 (12) TMI 1084 - KERALA HIGH COURT] The same is accordingly admitted and allowed to that extent.
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