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2016 (5) TMI 1164 - KERALA HIGH COURT

2016 (5) TMI 1164 - KERALA HIGH COURT - [2016] 383 ITR 610 - Applicability of provisions of section 80P - whether the appellant is a "co- operative bank" which is a "primary agricultural credit society"? - Are the provisions of section 80P of the Income-tax Act excluded in terms of sub-section (4) of that section ; from application in relation to the Kerala State Co-operative Agricultural and Rural Development Bank Limited ; governed by the provisions of the Kerala State Co-operative (Agricultur .....

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-operative Agricultural and Rural Development Bank Limited may admit a primary bank as its member. "Primary bank" as defined in section 2(h) of the CARDB Act means, among other things, a co-operative society. Therefore, the appellant does not satisfy the condition prescribed in sub-clause (2) of clause (cciv) of section 5 of the Banking Regulation Act and hence, it is not a co- operative bank which is a primary agricultural credit society.

In view of the aforesaid conclusion, we answe .....

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il B. Radhakrishnan, J. 1. Having heard the learned counsel appearing for the appellant and the learned senior advocate for the Revenue, we encapsulate the question for decision in this appeal under section 260A of the Income-tax Act, 1961, "IT Act", for brevity, as follows : "Are the provisions of section 80P of the Income-tax Act excluded in terms of sub-section (4) of that section ; from application in relation to the Kerala State Co-operative Agricultural and Rural Development .....

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led to different deductions with respect to sub-sections (1) and (2) of section 80P of the Income-tax Act as may be claimed by it ; even if it does not escape from the application of section 80P by recourse to sub- section (4) of that section. We do so because no such issue appears to have been pointedly addressed by the Appellate Tribunal, which could be decided by us in this appeal ; without prejudicing the contentions of the appellant and the Department in another appeal ; namely, I. T. A. No .....

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ural development bank" and therefore, section 80P of the Income-tax Act does not apply to it in view of sub-section (4) thereof. 5. Per contra, the learned senior advocate appearing for the Revenue argued that the view taken by the Tribunal does not warrant interference at the hands of this court and that those findings of the Tribunal are in accordance with the relevant statutory provisions which govern the situation in hand. 6. Before further proceeding, we may acknowledge that the learne .....

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ndia Act, 1934, "RBI Act", for short, were also referred to. 7. Sub-section (1) of section 80P of the Income-tax Act authorises deductions in respect of co-operative societies ; in terms of sub-section (2) of section 80P. That is a provision made in the case of an assessee being a co- operative society. Sub-section (4) of section 80P provides that the provisions of section 80P shall not apply in relation to any "co-operative bank" other than a "primary agricultural credi .....

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. Apart from its principal object and activities, an assessee can fall under that Explanation only if it is a society having its area of operation confined to a taluk. The appellant does not have a case that its area of operation is confined to a taluk. Therefore, the appellant does not belong to that category. 9. The question, therefore, would be as to whether the appellant is a "co- operative bank" which is a "primary agricultural credit society". Hereinafter, we proceed to .....

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modifications regarding the application of that Part to co-operative societies. By the effect of section 56 among Part V of the Banking Regulation Act, among other things ; section 5 of the Banking Regulation Act, which is the interpretation clause of that statute, got modified by incorporation of different definitions, including the terms "co-operative bank" and "primary agricultural credit society". Those terms stood thus incorporated at sequences (cci) and (cciv) respecti .....

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rative bank" and "State co-operative bank" shall have the meaning respectively assigned to them in the NABARD Act. Those terms are defined in clauses (d) and (u) of section 2 of the NABARD Act to, respectively, mean the principal co-operative society in a district, or, in a State ; the primary object of which is the financing of other co-operative societies in the district and State respectively. 13. The primary element required to be satisfied to fall under either of the definiti .....

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ction 2(a) of the CARDB Act defines the "Agricultural and Rural Development Bank" as the one registered under section 10 of the Travancore-Cochin Co-operative Societies Act, 1951 and it is that entity which, in turn ; under section 2(a) of the CARDB Act, is to be thereafter known as the "Kerala State Co-operative Agricultural and Rural Development Bank Limited". Obviously, therefore, while the affairs of that institution, namely, the Kerala State Co-operative Agricultural and .....

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date of commencement of the KCS Act, which has been registered or deemed to be registered under the provisions of any of the enactments repealed through section 110 of the KCS Act shall be deemed to be registered under the KCS Act, and the bye-laws of such society shall, so far as they are not inconsistent with the provisions of the KCS Act, continue in force until altered or rescinded. Therefore, the appellant, Kerala State Co- operative Agricultural and Rural Development Bank Limited is a soc .....

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ted in the Agricultural and Rural Development Bank and its primary banks. The Central Land Mortgage Bank and the primary land mortgage banks referred to in section 47 of that Act are respectively the Central Mortgage Bank and the primary mortgage banks which stood governed by the provisions of the Kerala Co-operative Land Mortgage Banks Act, 1960 which enactment stood repealed as per section 52(1) of CARDB Act with saving clauses relating to all matters including the relationship between the Cen .....

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de an operational mechanism through the primary banks and primary agricultural credit societies as defined in clauses (g) and (h) of section 2 of the CARDB Act. These provisions would show that the appellant falls within the term "co-operative bank" in clause (cci) of section 5 of the Banking Regulation Act and thereby is a co-operative bank for the purpose of section 80P of the Income-tax Act. 15. Having held as aforesaid, the question for further consideration is as to whether the ap .....

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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-operative society as member : Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capita .....

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