TMI Blog2018 (1) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... on provided after the clause (ccvi) of section 5 r.w.s Section 56 of the Banking Regulation Act. CIT(A) has correctly allowed the claim of deduction - Decided against revenue - ITA No. 442, 443, 444, 445, 446/Coch/2017 - - - Dated:- 15-1-2018 - Shri George George K, JM Shri Manjunatha G., AM Appellant by : Sri. A.Dhanaraj, Sr.DR Respondent by : Sri. Arun Raj S ORDER Per Bench These appeals at the instance of the Revenue are directed against the consolidated order of the CIT(A) dated 29.05.2015. The relevant assessment years are 2007,2008, 2008-2009, 2009-2010, 2012-2013 and 2013-2014. Since common issues are raised in these appeals, they were heard together and are being disposed off by this consolidated order. 2. Briefly stated the facts of the case are as follow: 2.1 The assessee is a primary agricultural credit society, registered under the Kerala State Co-operative Societies Act, 1969. It is providing credit facilities to its members. For the assessment years 2007,2008, 2008-2009, 2009-2010, 2012- 2013 and 2013-2014, the assessee had filed return of income and claimed deduction u/s 80P of the Income-tax Act, 1961. The details of the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax (Appeals) against law and the facts and circumstances of the case? 2. The Commissioner of Income Tax (Appeals) had in the instant case placing reliance on the decision of the Honourable High Court of Kerala in the case of M/s Chirakkal Service Co-op Bank ltd. And others in ITA 212 of 2013, held that the assessee is eligible for deduction u/s 80P of the Income Tax Act solely on the basis that it has been registered and classified as a Primary Agricultural Credit Society by the Competent Authority under the Kerala Co-operative Societies (KCS) Act. As against this, the Honourable Supreme Court has while deciding in the case of The Citizen Co-Operative Society limited vs Assistant Commissioner of Income Tax, Circle- 9(1), Hyderabad taken into consideration the activities of the assessee society and not relied only on the certificate of registration issued by the Central Registrar of Cooperative societies. In view of this, is not the decision of the CIT(A) against the prevailing positions of law that differentiates between de jure and de facto positions and which permits the principle of penetration of the corporate veil to determine the true nature of the activities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit society once it is registered and classified as primary agricultural credit society by the competent authorities under the provisions of the Kerala Co operative Societies Act,1969. 7. The judicial ratios in the cases of Rodier Mill Employees Co-op Stores Ltd. vs CIT 135 ITR 355 (Mad), CIT vs Kerala State Co-operative Marketing Federation Ltd.[1998] 234 ITR 301(Ker) and Kerala State Co-operative Agricultural Rural Development Bank Ltd. vs ACIT [ITA No.506/Coch/2010 S.P. No.67/Coch/2010 hold that carte blanche deductions u/s 80P are not available to cooperative societies merely on the basis of professed agricultural credits on the basis of mere registration and classification. In view of this, is not the decision of the CIT(A) without merits? 8. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the CIT(A) may be set aside and that of the Assessing Officer restored. 5. The learned Departmental Representative, apart from relying on the grounds raised, submitted that the issue is covered in favour of the Revenue by the judgment of the Hon ble Apex Court in the case of The Citizens Co-operative Society Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se by the Parliament recognizing the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural credit societies by the competent authority under the KCS Act it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes; the rate of interest on such loans and advances to be at the rate fixed by the Registrar of co-operative societies under the KCS Act and having its area of operation confined to a village, panchayat or a municipality. This is the consequence of the definition clause in section 2(oaa) of the KCS Act. The authorities under the IT Act cannot probe into any issue or such matter relating to such applicants. 16. The position of law being as above with reference to the statutory provisions, the appellants had shown to the authorities and the Tribunal that they are primary agricultural credit societies in terms of clause (cciv) of section 5 of the BR Act having regard to the primary object or principal business of each of the appellants. It is also cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us examine whether the judgment of the Hon ble Apex Court in the case of Citizens Co-operative Society Ltd. (supra) has application to the facts of the present cases. 8. The Hon ble Apex Court judgment in the case of Citizen Co-operative Society (supra) Ltd. was rendered in the context of eligibility of a Credit Co-operative Society for deduction under section 80 P of the Act. The Apex Court, referring to the specific facts of the case held that the assessee therein is not entitled for deduction under section 80P of the Income-tax Act. In the aforesaid case, the Hon'ble Apex Court was not dealing with a case of eligibility of a Primary Agricultural Credit Society for deduction under section 80P of the Income tax Act. The Hon ble Supreme Court at Para 23 of the aforesaid judgment had emphasized that even after the amendment made to the provisions of section 80P of the Act by insertion of section 80P(4) of the Income-tax Act, the Primary Agricultural Credit Society is eligible for deduction under section 80P of the Act. 8.1 The assessee society in the case considered by the Hon ble Supreme Court was established on 31-5-1997 and was registered under section 5 of the Andhra P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the approval from the Registrar of the Societies. 8.3 As far as the Kerala Co-operative Societies Act which is applicable to the present case is concerned, the definition of a 'member' as provided in Section 2(1) of the Kerala Cooperative Societies Act includes a nominal member. Section 2 (1) of the said Act is as follows: Member means a person joining in the application for the registration of a co-operative society or a person admitted to membership after such registration in accordance with this Act, the Rules and the Bye law and includes a nominal or associate member 8.4 The `normal member is defined under 2(M) of the Kerala Co-operative Societies Act, 1969, which reads as follow:- (m) `nominal or associate member means a member who possesses only such privileges and rights of a member and who is subject only to such liabilities of a member as may be specified in the bye-laws; 8.5 Therefore, in the present cases, the nominal members are members as provided in law and deposits from such nominal members cannot be considered or treated as from the non-members or from public as was noted by the Apex Court judgment cited supra. 8.6 In this context, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative Societies Act, 1960 includes a nominal member or a sympathizer member. It is further held that notwithstanding the fact that a nominal member does not enjoy all the rights and privileges which are available to an ordinary member, his status is that of a member as defined in Section 2(19) of the Act. 20. Division Bench of this Court in the case of The Commissioner of Income Tax, Nasik (cited supra) has also taken a similar view that the definition of Member under section 2(19)(a) of the Maharashtra Co-operative Societies Act, 1960 includes a nominal member. It is further held by the Division Bench that there is nothing in Section 80P(2)(iii) of the Income Tax Act to the contrary. 8.8 As per section 3 of the Banking Regulation Act, 1949, the provisions of Banking Regulation Act shall not apply to Primary Agricultural Credit Societies. The explanation to section 80P(4) states that 'Primary Agricultural Credit Society' and 'Co-operative Bank' will have the same meaning as provided in Part V of the Banking Regulation Act, 1949. The explanation provided after clause (ccvi) of section 5 r.w.s 56 of the Banking Regulation Act specifically provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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