TMI Blog2017 (3) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... held that primary agricultural societies registered under the Kerala Cooperative Society Act and classified so, under that Act, are entitled to the benefit of deduction u/s 80P(2) In the instant case, admittedly, the Joint Registrar (General) Kottayam, by certificate dated 23.12.2011 had certified that the assessee is a primary agricultural credit cooperative society. This fact also admitted by the Assessing Officer at page 2 of the assessment order. In view of the clear finding of the Hon ble jurisdictional High Court, we are of the view that the assessee is entitled to the benefit of deduction u/s 80P(2) . As per section 80P(2)(d) interest income received by the cooperative society from its investment from another cooperative society, is eligible for exemption from taxation. The whole of interest income was received from other cooperative society/banks and hence, as per provisions of section 80P(2)(d) of the Act, the same is to be allowed as deduction. By virtue of section 80P(2)(a)(i) in the case of cooperative society carrying on the business of banking or providing credit facilities to its members, whole of the profits and gains attributable to such activities is eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent type of loans, it is seen that the minimum rate of interest on loan was from 7% to 15.5%. Though the primary agricultural credit societies are formed for the purpose of providing finance to farmers, there are nonagricultural loans, like gold loans, housing loans and trade loans etc. Though the loans are paid to its members, the purpose of loan could not be proved to be fore agricultural purposes other than the loans such as Kissan Credits, Agricultural Short Term and Biogas loans. In the assessee s case. it is observed that majority of loans given were for nonagricultural activities. On gold-loan, housing loan and ordinary loan etc. the rate of interest was from 12% to 15.5%. Therefore, the loans bearing the lowest interest rate and for agricultural purposes are accepted to be agricultural loans. Out of the total interest received, the interest received on the following loans comes to ₹ 27963652/- which is not for the benefit of agricultural members and for the purpose of the activities of the society. Hence this income is not eligible for deduction u/s. 80P(1) and hence assessed under section 56. (i) Own Fund Long Term Loan - 70,60,773/- (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 3.11.2015, restored the assessment order and rejected the claim of the assessee for deduction u/s 80P(2) of the I T Act. 5 Aggrieved by the order of the Tribunal, the assessee preferred appeal before the Hon ble High Court u/s 260A of the Act. The Hon ble High Court, vide judgment dated 18.10.2016 restored the matter to the Tribunal. The Hon ble High Court directed the Tribunal to decide the issue afresh in light of the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Co-op Bank Ltd vs CIT reported in 384 ITR 490 and the Board Circular No. 18/2015 dated 2.11.2015. It is in this context, the cases were heard on 20th March, 2017. 6 The ld counsel for the assessee submitted that the circular no.18 of 2015 dated 2.11.2015 clearly states interest on deposits on non SLR securities is taxable under the head income from business and are eligible for deduction u/s 80P(2)(a)(i) of the Act. It was submitted that in the instant case, the assessee is a cooperative Society providing credit facility to its members and therefore, provisions to circular no.18 of 2015 will have clear application to the facts of the instant case. It was furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble Apex Court in the case of Totgar s Cooperative Sale Society Ltd (supra). The relevant finding of the coordinate Bench of the Tribunal in the case of the Muttom Service Cooperative Bank Ltd (supra) read as follows: 5. We have considered the rival submission on either side and also perused the material available on record. We have also carefully gone through the order of the lower authority. No doubt, the latest judgment in Totgar s Co-operative Sale Society Ltd vs ITO (supra), the Apex court found that the deposit of surplus funds by the cooperative society is not eligible for deduction u/s 80P(2). In the case before the Apex Court in Totgar s Co-operative Sale Society Ltd vs ITO (supra), the assessee cooperative society was to provide credit facility to its members and market the agricultural produce. The assessee is not in the business of banking. Therefore, this Tribunal is of the opinion that the judgment of the Apex court in Totgar s Co-operative Sale Society Ltd (supra) is not applicable in respect of the co-operative society whose business is banking. Admittedly, the assessee has invested funds in state promoted treasury small savings fixed deposit schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial question a in favour of the appellants and hold that the Tribunal erred in law in deciding the issue regarding the entitlement of exemption under section 80P against the appellants. We hold that the primary agricultural credit societies, registered as such under the KCS Act; and classified so, under that Act, including the appellants are entitled to such exemptions. 8.4 In the instant case, admittedly, the Joint Registrar (General) Kottayam, by certificate dated 23.12.2011 had certified that the assessee is a primary agricultural credit cooperative society. This fact also admitted by the Assessing Officer at page 2 of the assessment order. In view of the clear finding of the Hon ble jurisdictional High Court, we are of the view that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act. 9 The details of interest income of ₹ 33,85,886/-, which was denied the benefit of deduction u/s 80P(2) are as follows: a) District Coop Bank, Pala ₹ 5,57,461/- b) District Coop Bank, Pala ₹ 417/- c) District Coop Bank, Erattupetta ₹ 20,08,270/- d) Meenachil taluk Coop Employees Soc. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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