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2015 (9) TMI 1422 - ITAT JAIPUR

2015 (9) TMI 1422 - ITAT JAIPUR - TMI - Disallowance for deduction u/s 80P(2)(a)(i) - Held that:- The assessee is primarily involved giving loans to its members for the purposes of purchasing minor irrigation and agricultural equipments , rearing of the cattle's namely cows, buffalos goats and sheep. These are agricultural activities within the meaning of Act itself and further comes within the scope of agricultural and rural development activities.

Thus giving the loans for the agric .....

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t. - Decided in favour of assessee - ITA No.938//JP/2013 - Dated:- 24-9-2015 - SHRI T.R. MEENA,AM & SHRI LALIET KUMAR, JM For the Appellant : Shri Sanjiv Jain & Shri Rakesh Sethi, C.A. For the Respondent: Shri Raj Mehra, JCIT ORDER PER LALIET KUMAR, JM This is an appeal filed by the assessee against the order of the ld. CIT(A), Ajmer dated 09-09-2013 for the assessment year 2007-08 wherein the assessee has raised solitary ground as under:- The ld. CIT(A) has erred in law as well as on fa .....

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in section 80P(4). For this, we reproduce here-in-below appeal its main objects (refer para 3, page 2 of the appellate order): 2. The objects for which the society is formed are as under: a) To provide finance to its members against immovable property, agricultural land, residential house and plot, liquid assets (NSC, KVP and FDR of Bhumi Vikas Bank) and taking guarantee of two persons, against salary income for the objectives mentioned in section 67 of the Rajasthan Cooperative Societies Act, .....

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roviding financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including marketing of crops), as stipulated per section 5 (cciv) of the B.R. Act, so as to qualify as a primary agricultural credit society (PACS). The only object which enables it to provide financial accommodation is its object clause 2(a). The same only specifies the assets on the security of which the assesse-society may provide finance to its members. The securi .....

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hire purchase terms, and not providing credit facilities to its members, in the present case, it is expressly so. We agree. However, that by itself is not sufficient, and it is to be in addition expressed to be for agricultural purposes or for purposes connected with agricultural activities, and on which its object clause, as also the assessee, is silent. So however, we are not inclined to oust the assessee s case on that basis. This is as there is another window available to it in law, i.e., w .....

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that each and every word of the statue has to be given its due meaning and, thus, effect. As such, though not expressly through its object clause, if it could yet be shown by the assessee that its principal business consists of providing financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including marketing of crops), it would in law qualify to be a PACS and, thus, exempt u/s. 80P(2)(a)(i) r/w s. 80P(4). As apparent, the purpo .....

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endent examination and finding/s, is strongly indicative of the nature of its lending activities, which has a direct bearing on the question of it being a PACS (or not). There being no finding in the matter by the authorities below, we restore the matter for the purpose of necessary verification and issue of definite findings of fact/s, back to the file of the first appellate authority, who shall adjudicate the same after hearing the parties, including recourse to rule 46A, where the assessee le .....

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see is not covered by the provisions of Section 80P(2)(a)(1) of the Act. The reasons recorded by the AO are given at page 12 of the Assessment order which are as under:- 2.3 Feeling aggrieved by the order of the AO, the assessee filed an appeal before the ld. CIT(A) and the ld. CIT(A) confirmed the order passed by the AO and has held as under:- 7.0 I have considered the contention of the appellant as well as the assessment order. It is seen that the order of the ITAT, it has to be examined wheth .....

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77; 934.20 lacs. Further, loan of ₹ 34.98lacs is for non-agricultural purposes, loan of ₹ 48.14 lacs is for rural housing purposes. Though assessee has claimed that loan for the rearing of cow, buffalo, goat and sheep of ₹ 411.56 lacs i.e. for animal farming should be considered as part of loan for purposes connected with the agricultural activities however same is not acceptable as this loan is for separate activity and not for agricultural purposes or purposes connected with .....

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t-V of Banking Regulation Act, 1949. The same has been reproduced in the order of Hon'ble ITAT on page 7 as under:- (cciv) "primary agricultural credit society" means a co-operative society,- (1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops); and (2) the bye-laws of which do not permit admission of any other co- .....

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gricultural purposes or purposes connected with agricultural activities as per the definition of primary agricultural activity given in Part-V of Banking Regulation Act, 1949. As such, the assessee cannot be considered as primary agricultural credit society. Further, assessee is not a primary cooperative agricultural and rural development bank as already noted in the order of the ITAT dated 23-03-2014 in para 4.4 of the order. In view of above discussion, the assessee's claim of deduction u/ .....

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the purpose of irrigation and agricultural equipments. Further it was pointed out loans of ₹ 411.56 lacs were given for rearing of cow, buffalo, goat and sheep. It was submitted by the assessee that rearing of the cow, buffalo, goat and sheep is an agricultural activity within the meaning of Section 80P(4) of the Act. to butress his argument the AR for the assessee drawn our attention to Rajasthan Cooperative Society Act, 2001, wherein it was mentioned that lending of loans by the bank fo .....

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ty to its members pre-dominantly for the purpose of agricultural or activities incidental to the agriculture is covered under section 80 P of the Act , therefore, the assessee society is entitled to deduction u/s 80P(4) of the Act. 2.5 Per contra, the Revenue has taken us to the order passed by the Tribunal dated 23-03-2012 and it was argued that the Tribunal in its earlier order has rejected the contention of the assessee and more particularly reliance was placed by the Revenue on para 4 of Sec .....

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o examine the contentions of the parties, we would like to state the provisions of law and the same are reproduced for the purpose of convenience. Section 80P - Deduction in respect of income of co-operative societies (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in comput .....

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em to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any on .....

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rs to - (i) a federal ............... or (ii) the Government or a local authority; or (iii) a Government company ..................................., the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not ex .....

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e co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by wa .....

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shall not apply in relation to any cooperative bank other than a primary 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 primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) primary co-operative agricultural and rural development bank means a society having its area of ope .....

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hase of agricultural implements, seeds, livestock or other articles intended for agricultural or for the purposes of supplying the same to its members were entitled to the deduction of profits and gains of the business attributable to any one or more activities . However after the amendment, the deduction was not available to the co-operative bank, however the deduction continued to be available to a primary agricultural credit society or a primary co-operative agricultural and rural development .....

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al object of which is to provide for long-term credit for agricultural and rural development activities" 2.8 Thus it is clear is a society having principal object is to provide long term credit for agricultural and rural development activities is entitle to deduction under this provision of the act . 2.9 Moreover, the Hon ble Gujarat High Court in Tax Appeal No.1149 of 2013 titled as CIT-II vs. Surat Vankar Sahkari Sangh Ltd., vide order dated 17th January, 2014 held vide paragraph 7 as und .....

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