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2024 (5) TMI 54 - ITAT COCHINDeduction u/s. 80P - assessee, a cooperative society in existence since 1961, and registered under the Kerala Cooperative Societies Act, 1969 (Kerala Act) as a primary agricultural credit society (PACS) - denial of deduction even as the assessee is registered as a PACS, it is actually undertaking banking business, providing the services, with in fact only a small fraction (close to 10%) of it’s lending being to the agricultural sector, so that it is not a PACS - HELD THAT:- The assessee’s lending being admittedly not primarily for agricultural purposes, it is not a PACS by definition and, two, is a cooperative bank, i.e., a cooperative society in the business of banking, even as clarified by the Hon'ble Courts time and again, as in Mavilayi SCB Ltd. [2021 (1) TMI 488 - SUPREME COURT], THE CITIZEN CO-OPERATIVE SOCIETY LIMITED [2017 (8) TMI 536 - SUPREME COURT] AND MUHAMMED USMAN [2002 (11) TMI 686 - HIGH COURT OF KERALA] Why, the provision itself recognizes ‘banking’ as an eligible activity for a cooperative society, entitling it to deduction of the profits derived therefrom (s. 80P(2)(a)(i)). It being not a PACS would thus not carry the Revenue’s case far. Firstly, for the reason that exemption u/s. 80P(1) r/w s. 80P(2)(a)(i) is, as afore-noted, equally applicable to income derived from the business of banking, even as that from credit to members is not confined to that for agricultural purposes only. Two, inasmuch as the tax statutes are to be strictly construed, the term ‘cooperative bank’ is it be, for the purpose of s. 80P(4), excluding cooperative banks from the benefit of s. 80P, strictly construed, i.e., as defined therein. The assessee, per it’s Ground 4 before the first appellate authority, has made a specific claim as to it’s bye-laws permitting admission of other cooperative societies as members and, therefore, of not being a primary cooperative bank in terms of s. 56 r/w s. 5(ccv) of BRA. There is no finding by the ld. CIT(A) thereon, which clearly has a direct bearing on the assessee being, or not being, a primary cooperative bank and, thus, a cooperative bank for the purposes of s. 80P of the Act. Copy of the byelaws is not on record. Even the two pages (in English) thereof, forming part of the paper-book, to which Shri Narayanan would refer during hearing, are not by an authorized translator for us to place reliance thereon; the original, as explained, being in vernacular. The matter, accordingly, is restored to the file of the AO to examine if the assessee falls under the definition of a ‘cooperative bank’ under BRA, construed strictly, which definition stands adopted for the purpose of s. 80P(4) of the Act, i.e., whether as a primary cooperative bank or district/state cooperative bank. As afore-noted, it being in the business of banking or not a PACS is not detrimental to it’s claim u/s. 80P(1) r/w s. 80P(2)(i)(a). The AO shall, upon hearing the assessee and examining such material as it may adduce in substantiation of it’s claim/s, and causing such verification as he may deem fit, issue a definite finding as to if it is, or is not, a cooperative bank as defined under BRA, determining it’s entitlement to exemption u/s. 80P(1) r/w s.80P(2)(a)(i) accordingly. We make it further clear that despite being not a PACS under the Act, it is yet a cooperative society under the Kerala Act, satisfying thus the requirement of s. 2(19) of the Act, which only is relevant for claiming deduction u/s. 80P(1) - Assessee’s appeals allowed for statistical purposes.
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