TMI Blog2019 (10) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of CIT(A)-1, Kolhapur dated 06.05.2019 for the Assessment Year 2016-17. 2. The grounds raised by the assessee are as under :- Issue no.1 - Disallowing the Deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 on Interest Received on Loans given to Nominal Members (Disallowance of ₹ 14,94,258 u/s 80P(2)(a)(i) of the Income Tax Act, 1961) 1. The learned Commissioner of Income Tax (Appeals)-1, Kolhapur (hereinafter referred to as learned CIT(A) ) erred in law and on facts in confirming the disallowance of deduction of ₹ 14,94,258 made by Income Tax Officer, Ward 2(3), Sangli (hereinafter referred to as learned AO ) u/s 80P(2)(a)(i) of the Income Tax Act, 1961 by treating the same as Income from Other Sources 2. The learned CIT(A) and learned AO erred in law and on facts in not appreciating the facts that Nominal Members is one of the category of members of the Co-operative Society as defined in State Legislature governing the appellant. 3. The learned CIT(A) and learned AO erred in law and on facts in not appreciating the difference between category of members as defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Tribunal (supra) was not available with the lower authorities. Further, the ld. Counsel prayed that the issue may be remanded back to the file of the CIT(A) for deciding the issue afresh after considering the above settled nature on the issue at the level of the Tribunal. 7. On the other hand, ld. DR for the Revenue relied heavily on the orders of the revenue authorities. 8. Heard both the sides. On perusing the order of the Tribunal in the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit dated 03.07.2019 (supra), I find identical issue came up for adjudication before this Tribunal and the Tribunal, as per discussion given in para 3 to 11 of its order, decided the issue in favour of the assessee. For the sake of completeness, the contents of para 3 to 10 of the said order of the Tribunal (supra) are extracted hereunder :- 3. The relevant facts as culled out from the material on record are as under :- Assessee is a Co-operative Society registered under Maharashtra Cooperative Credit Societies Act, 1960 and is stated to be engaged in providing credit facilities to its Members and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.R. submitted that though assessee has raised various grounds but the sole controversy is with respect to denial of claim of deduction u/s 80P of the Act. 6. During the course of assessment proceedings, AO noticed that assessee was providing credit facilities to its members and was accepting the deposits from them. AO noticed that assessee had provided credits facilities to 10 new non-members and the aggregate loan disbursed to these new non-members was ₹ 9,14,500/- and on which assessee had received interest of ₹ 46,901/-. AO also noticed that assessee had also provided credits facilities to 9 nominal members to whom the aggregate loan disbursed was ₹ 4,50,500/- and has received interest at ₹ 37,652/-. AO also noticed that assessee had invested surplus funds with PDCC Banks and other Banks and from which assessee had received interest aggregating to ₹ 12,79,098/-. AO was of the view that as per the provisions of Sec.80P(2)(d) of the Act, the assessee Society has to invest the surplus funds with Co-operative Society and not with Co-operative Banks. AO noted that no details for justification were furnished by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htra Co-operative Societies Act, 1960 and thus falls within the definition of co-operative society mentioned in Sec.2(19) of the I.T. Act. The activity of the appellant is that of accepting deposits and providing credit facilities to its members and therefore gets covered under the clause 80P(2)(a)(i) which refers to any co-operative society engaged in carrying on the business of banking or providing credit facilities to its members. However, with the introduction of Sec.80P(4), by Finance Act 2006 w.e.f. A.Y. 07-08, the benefit of Sec.80P has been removed for co-operative banks which were hitherto enjoying the benefit of deduction under this section. The relevant Sec.80P(4) reads as : The provision of this section 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 purpose of this sub-section : a. Co-operative bank and primary agricultural credit society shall have the meaning respectively assigned to them in Part V of the Banking Regulation Act 1949 (10 of 1949). b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as a Co-operative bank as it does not have the license from the RBI to do the business of banking. Therefore, the provisions of Sec.80P(4) would not be applicable to the appellant also. 7. In the assessment order, the AO has brought on record that the appellant has nominal members who have deposited moneys and also availed loans. The nominal members are not regular members and they are not allotted any shares of the society and thus are not entitled to any profits or assets of the society. They are not entitled to vote and also not eligible to be a member of a committee or for appointment as a representative of the society on any other society. It is also seen that the Maharashtra Co-operative Society Act 1960 provides for open membership as per Sec.23 of the Act. The society cannot refuse membership to any person duly qualified under the Act and its by-laws. The appellant s society by its very nature is not restricted to any class of persons or people from any specified area. As brought by the AO, the appellant has been admitting new members who are in need of loans. Thus, the activity of the appellant is more in the nature of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh. He further submitted that the Madras High Court in the case of PCIT Vs. M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. reported in Tax Appeal No.882 and 891 of 2018 order dated 06.12.2018 and after considering the difference in the definition of members and after considering the decision of Hon ble Apex Court in the case of Citizen Co-operative Society (supra), has decided the issue in favour of the assessee. He also placed on record the copy of the aforesaid decision. Ld.A.R. further relying on the decision of Hon ble Bombay High Court in the case of Jalgaon District Central Cooperative Bank Ltd., (2004) 134 Taxmann.com 1 (Bom) submitted that the Hon ble Bombay High Court has observed that the definition of Member given in Sec.2(19) of Maharashtra Cooperative Societies Act takes within its sweep even a nominal member, associate members and sympathizer members and has further observed that there is no distinction made between duly registered member, nominal and associate member and sympathizer member. He further submitted that the other reason for denying the claim of deduction u/s 80P was that since the assessee has deposited surplus funds with Co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or expression is to be ascertained in the context of provisions of referred Act. As per Sub-sec. (4) of Sec. 80P of the I. T. Act, Co-operative Bank means State Co-operative Bank, a Central Co-operative Bank and a Primary Co-operative Bank. It is seen that Cooperative Bank is deprived of the benefit of the deduction u/s. 80P(2)(a)(i) of the Act. As per the interpretation given by the AO, assessee Co-Operative Credit Society partakes the character of the Primary Co-operative Bank and as the Primary Co-operative Bank is included in the definition of the Cooperative Bank and hence, is not entitled to the benefits of Sec. 80P(2)(a)(i) of I. T. Act. In our opinion, this is not the correct interpretation. It is well settled principle in the interpretation of the taxing provisions that the same are to be strictly construed and there is n room for any intendment. There is no presumption as to tax.Nothing is to be read or nothing is to be implied. One has to fairly look into language used by the Parliament. The Parliament has adopted the definition of the Co-operative Bank by referring the same as given in the Banking Regulation Act, 1949. It is called Legislation by reference and we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder and the By-laws and includes an associate member. The expression 'associate member' is defined under Section 2(6) of the TNCS Act to mean 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 this Act, the Rules and the By-law. 13. Thus, the definition of the word 'members' includes an associate member and therefore, the Assessing Officer fell into an error in drawing a distinction between A Class members and B Class members. For the purpose of being entitled to a relief under Section 80P of the Act, all that is required is that the cooperative society should answer the description of a society engaged in carrying on the business of providing credit facilities to its member. Once the description is answered, then automatically, the benefit of Section 80P of the Act would stand attracted subject to the provisions contained in Sub-Section (2) of Section 80P of the Act. 14. Further, it is to be pointed out that in terms of Sub-Section (4) of Section 80P of the Act, which was inserted vide the Finance Act, 2006 with effect from 01.4.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the TNCS Act. Furthermore, the Assessing Officer himself found that the associate members are also admitted as members of the society. In such circumstances, the Assessing Officer fell into an error in not granting any relief to the assessee society, which was rightly granted by the CIT (A) as confirmed by the Tribunal. In addition to that, the Assessing Officer has not pointed out that loans have been disbursed to all and sundry in terms of the provisions of the TNCS Act and in terms of Clause (b) to Sub-Section (4) of Section 80P of the Act, the society has an area of operation, operates within the taluk and will provide long term credit for agricultural and rural development activities as well. The CIT (A) rightly granted the relief to the assessee as confirmed by the Tribunal. We do not find any good ground to entertain these appeals. I further find that Hon ble Bombay High Court in the case of Jalgaon District Co-operative Central Cooperative Bank Ltd. (supra) has held that the definition of member given in section 2(19) of the Maharashtra Co-operative Societies Act takes within its sweep even a nominal member, associate member and s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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