TMI Blog2018 (4) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows:- 2.1 The assessee is a primary agricultural credit society, registered under the Kerala Co-operative Societies Act, 1969. For the assessment year 2013-2014, the return of income was filed on 26.12.2014 declaring Nil income after claiming exemption u/s 80P(2) of the Income-tax Act, 1961, amounting to ₹ 1,01,62,056. The assessment u/s 143(3) of the I.T.Act was completed vide order dated 28.03.2016. In the assessment completed, the Assessing Officer rejected the claim of deduction u/s 80P(2) of the I.T.Act. The Assessing Officer concluded that since the assessee was doing the business of banking it was not entitled to deduction u/s 80P(2) of the I.T.Act, in view of the insertion of section 80P(4) of the I.T.Act with effect from 01.04.2007. 3. Aggrieved by the assessment completed by denying deduction u/s 80P(2) of the I.T.Act, the assessee preferred an appeal to the first appellate authority. The CIT(A) following the judgment of the Hon ble Kerala High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others vs. CIT [(2016) 384 ITR 490 (Ker.)] held that the assessees is entitled to the benefit of deduction u/s 80P(2) of the I.T.Act. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds and the additional grounds. 7. The learned AR submitted that the issue in question is squarely covered by the decision of the Hon ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others vs. CIT (supra). 8. We have heard the rival submissions and perused the material on record. On perusal of the grounds and the additional grounds raised by the Revenue, we find that identical grounds were adjudicated by the Tribunal in the following Tribunal orders:- (i) Edanad-Kannur Service Co-operative Bank Ltd. Ors. in ITA No.431 to 433/Coch/2017 others, order dated 10.01.2018. (ii) The ITO v. M/s.Nannambra Service Co-operative Bank Ltd. in ITA No.436 to 438/Coch/2016, order dated 08.02.2018. 8.1 The above orders of the Tribunal followed the dictum laid down by the Hon ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others v. CIT (supra) . The relevant finding of the Tribunal in the case of M/s.Nannambra Service Co-operative Bank Ltd. in ITA No.436 to 438/Coch/2016, reads as follow:- 7. We have heard the rival submissions and perused the material on record. An identic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g; it cannot but be taken that the purpose of the societies so registered under the State Law and its objects have to be understood as those which have been approved by the competent authority under such State law. This, we visualize as due reciprocative legislative exercise 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 cooperative 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 provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral public / nominal members or loans are disbursed to general public / nominal members, the assessee would be doing the business of banking and therefore, would not be entitled to deduction u/s 80P(2) of the Income-tax Act. In the context of the submission made by the Revenue let me 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 case. 9. The Hon'ble Apex Court judgment in the case of Citizen Cooperative 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 8OP 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 80 P of the Act by insertion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interalia; on the factual finding that the assessee was receiving deposits mostly from a carved out category of member viz 'nominal member' who are not members as per the provisions of law referred,, and that most of the business of the assessee therein was with this carved out category of person and also granting loans to public and without the approval from the Registrar of the Societies. 9.3 As far as the Kerala Co-operative Societies Act which is applicable to the present cases are 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 9.4 The 'nominal member' is defined under 2(M) of the Kerala Cooperative Societies Act, 1969, which reads as follow: - ( m) nominal or associate member' means a member who possesses only such privileges and rights of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arashtra Co-operative Societies Act, 1960 takes within its sweep even a nominal member, associate member and sympathizer member. There is no distinction made between duly registered member and nominal, associate and sympathizer member. 19. In the case of K.K.Adhikari (cited supra), Division Bench of this Court has held that the definition of a Member under Section 2(19) of the Maharashtra Co-operative 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. 9.8 As per section 3 of the Banking Regulation Act, 1949 the provisions of Banking Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, we hold that the CIT(A) is justified in directing the Assessing Officer to grant deduction u/s. 80P(2) of the Act. 7.2 Before concluding, it has to be mentioned that the case law relied on by the Revenue in the grounds, additional grounds are not applicable to the facts of the present case. Undisputedly, the assessee is a primary agricultural credit society and is providing credit facilities to its members for agriculture and agriculture allied activities. The competent authority of Co-operative Department of Government of Kerala having been satisfied with the activities of the assessee, has classified the assessee as PACS (primary agricultural credit society). The Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Limited , Ors. (supra) has elaborately considered the issue and has categorically held that the certificate issued by the competent authority in this regard is binding and the income tax authorities have no right to probe further. 7.3. In Ground Nos. 4, 5 6 of the Memorandum of Appeal, it is mentioned that the CIT(A) has erred in not placing reliance on the judgment of the Hon ble Jurisdictional High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the members. Deduction u/s. 80P is allowed only for the said income. The assessee had claimed deduction u/s. 80P only in respect of net income which is derived by extending credit facilities to the members. For the aforesaid reasons, the judicial pronouncements relied on by the Revenue in the grounds and the additional grounds does not have application to the instant case. Therefore, we hold that CIT(A) s order is correct and in accordance with law. It is ordered accordingly. 8.2 In view of the judgment of the Hon ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others (supra) and the orders of the Tribunal mentioned above, which had adjudicated identical issue to the issue raised in the present appeal, we hold that the CIT(A) was justified in directing the A.O. to grant deduction u/s 80P(2) of the I.T.Act to the assessee. 9. The Cross Objection filed by the assessee is supportive of the order of the CIT(A). Since we have dismissed the appeal of the Revenue, the Cross Objection filed by the assessee has been rendered infructuous and we dismiss the same as infructuous. It is ordered accordingly. 10. In the result, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
