9911796707
TMI Blog2020 (2) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent in all WPs Standing Counsel : Mr. ANR. Jaya Prathap COMMON ORDER I. W.P.Nos.17, 20, 22, 23, 26, 29, 1150, 1155 and 1161 of 2020: This batch of nine (9) Writ Petitions have been filed by entities claiming to be Primary Agricultural Cooperative Credit Societies. Since the issues that arise are common to the petitioners and by consent expressed by all learned counsel, the matters are taken up for adjudication and disposal finally. 2. Returns of income had been filed by the petitioners claiming exemption in terms of Section 80 P of the Income Tax Act, 1961 (in short 'I.T.Act'). The respondent - Assessing Officer took the returns up for examination and issued notices and questionnaires calling for details in regard to whether deduction was available under Chapter VIA as claimed, whether the sales receipts/turnover had been correctly offered to tax and calling for explanations of the assessee/petitioner in regard to investments/advances/loans. 3. The petitioners responded to the queries raised by the Officer. One of the issues that arose for consideration was the eligibility to exemption claimed on the interest income received by the petitioner from deposits/invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest received or in other words, there should be a netting of the interest paid and received and only the resultant figure be brought to tax. 8. The Assessing Authority however rejected the submissions cursorily stating in a single line that 'statutory reserve can also be considered as surplus funds of the assessee'. The judgement of the Supreme Court in the case of Nawanshahar (supra) has not been considered or discussed and neither has the plea of the petitioner for netting of interest paid and earned. 9. In Nawanshahar (supra), the Supreme Court considered the question of whether investments made by a banking concern are part of the business of banking. The conclusion was that the income arising from investments would be attributable to the business of the bank and fall under the head 'profits and gains of business', deductible under Section 80P(2)(a)(i) of the I.T. Act. The earlier view in Bihar Coop. BankLtd. V. CIT ((1960) 39 ITR 114, CIT V. Karnataka State Coop. Apex Bank ((2001) 7 SCC 654) and CIT V. Ramanathapuram Distt. Coop.Central Bank Ltd. ((2009) 17 SCC 620) was followed. 10. At paragraph 4 of the short judgment, the Bench has stated that the principle i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from other sources' without allowing any deduction in respect of cost of funds and proportionate administrative and other expenses under section 57?' 15. Thus the issue before the Court in Totgars (supra) was on the classification of interest generated by deposits held with scheduled banks, bonds and other securities without providing for a deduction in respect of cost of funds and proportionate administrative and other expenses under Section 57. The question of interest generated from deposits made by reason of a statutory mandate was raised and finds reference in the narration of the petitioners' submissions, the Court has, at para 8 of the report (ITR) stated that 'At the outset, an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduction under Section 80P(2)(a)(i) of the Act is not the interest received from the members for providing credit facilities to them. What is sought to be taxed under Section 56 of the Act is the interest income arising on the surplus invested in short-term deposits and securities which surplus was not required for business purposes. Assessee(s) markets the produce of its membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety and the word attributable is having elaborate meaning as derived in Commissioner of Income-tax vs. Nawanshahar Central Co-operative bank Ltd. Civil Appeal Nos.2499, 2500 of 2005 8th April 2005. So, the funds deposited is not a surplus fund as decided in Totgars Cooperative Sale Society Ltd., but a statutory reserve maintained as decided in Commissioner of Income tax Vs. Nanshahar Central Cooperative Bank Ltd. The amount in investments is Rs. 15,51,18,027/- out of this Rs. 12,57,23,490/0 was borrowed from Coimbatore District Central Cooperative Bank. if interest earned is taxed the interest paid to such loans are deducted form the interest on other sources. So, kindly drop the proceeding by taxing the interest income and accept the returned income' W.P.No.29 of 2020: 'Received you show cause notice and noted the contents. In this regard we wish to submit the following for your consideration. The Supreme Court judgement in Totgars Cooperative Sale Society Ltd., not applicable to our society as the above society is a sale society and ours is Primary Agricultural Cooperative Credit Society. The former is dealing sale of goods and ours is dealing in credit facility e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in the decisions aforementioned and in the order under appeal. 5. The civil appeals are dismissed with costs. Also the jurisdictional Madras High Court also looking into the Totgars case and allowed the interest received is allowed under section 80P in case of Madras High Court The Commissioner Of Income Tax vs M/S. Veerakeralam Primary ... on 5 July, 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 05.07.2016 CORAM : THE HONOURABLE MR. JUSTICE S.MANIKUMAR and THE HONOURABLE MR. JUSTICE D.KRISHNAKUMAR Tax Case Appeal Nos.735, 755 of 2014 and 460 of 2015 The Commissioner of Income Tax, 63, Race Course Road Coimbatore. .. Appellant in all the above appeals Vs M/s. Veerakeralam Primary Agricultural Co-operative Credit Society No.17, Peria Thottam Colony Veerakeralam Coimbatore 641 007. So, on the basis of the above kindly drop the proceedings by taxing the interest income and accept the returned income.' 18. Though all petitioners have not replied identically to the notices issued by the officer, the above replies are illustrative of the stands adopted by the petitioners at the time of assessment and crystallize the arguments of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anded to the file of the Assessing Officer for de novo consideration. The petitioners are directed to appear before their respective Assessing Officer on 14.02.2020 at 10.30 a.m. without expecting any further notice in this regard. The petitioners will be heard specifically on the question of classification of interest generated by investments made for the purpose of statutory reserve and the judgments of the Supreme Court in Nawanshahar and Totgars' (supra) as well as other relevant case law shall be taken into account by the Assessing Officer in framing assessments by way of speaking and detailed orders. This exercise shall be completed within a period of six (6) weeks from date of conclusion of personal hearing. 22. W.P.Nos.17, 20, 22, 23, 26, 29, 1150, 1155 and 1161 of 2020 are allowed. No costs. Connected Miscellaneous Petitions are closed. II. W.P.Nos.1124, 1123, 1127, 1131, 1133, 1136, 1138, 1141, 1143, 1145, 1149, 1293, 1299 and 1420 of 2020: 23. The issue that arises in W.P.Nos.1124, 1123, 1127, 1131, 1133, 1136, 1138, 1141, 1143, 1145, 1149, 1293, 1299 and 1420 of 2020 also involves the entitlement of the petitioners that claim to be Primary Agricultural Co-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 reads as follows: 'Undoubtedly, if one has to go by the aforesaid definition of 'co-operative bank', the appellant does not get covered thereby. It is also a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a licence from the Reserve Bank of India, which the appellant does not possess. Not only this, as noticed above, the Reserve Bank of India has itself clarified that the business of the appellant does not amount to that of a co-operative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80P.' 27. Thus, though categorised as A and B, there are vital distinctions that were drawn between the members of the two classes and hence the principle of mutuality that was relied upon by the petitioners was rejected as being inapplicable to its case. 28. A Division Bench of this Court has, on identical facts as in the present case, in the case of The Principal Commissioner of Income Tax, Salem V. M/s.S- 1303 Ammapet Primary Agricultural Cooperative Bank Ltd., Ammapet, Salem (T.C.(A)Nos.882 and 891 of 2018 dated 06.12.2018) held that the assessee would be entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety 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 01.4.2007 i.e from the assessment year 2007-08, the 'primary cooperative agricultural and rural development bank' means 'a society having its area of operation confined to a taluk, the principal object of which is to provide for long term credit for agricultural and rural development activities'. What was excluded was the 'cooperative banks' and admittedly, the assessee society is a primary agricultural cooperative credit society and therefore, would be entitled to the benefit of Section 80P of the Act. 15. Further, for the assessment year 2014-15, the decision in the case of Citizen Cooperative Society Limited was relied upon by the Revenue before the Tribunal, which, in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as confirmed by the Tribunal. We do not find any good ground to entertain these appeals. 18. Accordingly, the above tax case appeals are dismissed. The substantial questions of law framed are answered against the Revenue. ' 31. Learned counsel for the Revenue states that there are cases of other identically placed Agricultural Cooperative Marketing Societies that the Revenue has carried/intends to carry to the Supreme Court where the stakes involved are significantly higher, such as, Tiruchengode Agricultural Producers Cooperative Marketing Society Ltd. and Veerakeralam Primary Agricultural Cooperative Credit Society, Coimbatore. In such a case, the questions of law would be decided in those cases. 32. In the light of the fact that the questions of law in this regard are still at large, the petitioners are directed to file a statutory appeal before the Commissioner of Income Tax (Appeals) within a period of three(3) weeks from today. However, let no recovery of the demand relating to this issue be enforced till the disposal of the appeals. 33. W.P.Nos.1124, 1123, 1127, 1131, 1133, 1136, 1138, 1141, 1143, 1145, 1149, 1293, 1299 and 1420 of 2020 are disposed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
