TMI Blog2020 (3) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in endorsing the disallowances made by the Assessing Officer, wherein the Assessing Officer has disallowed all deductions claimed by the appellant under section 80P(2)(a)(i), 80P(2)(d) 80P(2)(c)(ii). 2. On the facts circumstances of the case, whether the learned CIT(A) as well as the Assessing Officer erred in disregarding the factum, that the Appellant has already offered to tax income earned by the appellant from the nominal members. 3. Appellant craves leave to add or alter any other ground that may be taken at the time of hearing. 3. Briefly stated the relevant facts include that the assessee is a MSEB Employees Co-operative Credit Society Ltd. registered under the Maharashtra State Co-operative Act. The assessee society is formed for the mutual benefit of employees working with Maharashtra State Electricity Board (MSEB) in the adjoining districts of Chandrapur and Gadchiroli. Only employees serving the MSEB of these two districts can become members of the said society. The assessee filed the return of income declaring total income of ₹ 1,28,450/- after claiming deduction of ₹ 51,33,710/- u/s 80P of the Act. The return of income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Citizen Co-operative Society Ltd. (supra). However, the Tribunal distinguished the facts and relied on the Hon ble Bombay High Court s judgement in the case of Jalgaon District Central Cooperative Bank Ltd., (2004) 134 Taxmann.com 1 (Bom-HC). In this regard, ld. Counsel for the assessee brought our attention to para 6 to 9 of the said decision of the Tribunal in the case of Sarroday Gramin Bigarsheti Sahakari Path Sanstha Maryadit (supra). For the sake of completeness, the said para 6 to 9 of the order of the Tribunal (supra) are extracted hereunder :- 6. Before me, ld. Counsel for the assessee explained the above facts of the case and submitted that the similar issue came up for adjudication before this Tribunal in the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit vs. ITO in ITA No.1431/PUN/2018 and many others dated 03.07.2019 and submitted that the issue stands now covered by the said order of the Tribunal (supra). The contents of para 3 to 10 of the said order of the Tribunal (supra) are relevant in this regard. 7. On the other hand, ld. DR for the Revenue relied heavily on the orders of the revenue authorities. 8. On hearing bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h co-operative banks from safety and prudence perspective. 4. Alternatively and without prejudice to Ground No. 1, 2 3, the learned IT Authorities erred in law and on facts by not allowing proportionate deduction u/s 80P of the ITA, 1961 to the extent of eligible income earned; against the taxation of total income of ₹ 18,38,878/-. 4. Similar grounds have been raised in the all the remaining appeals by different assessees i.e., ITA Nos.1361, 1386,1430 1517/PUN/2018 for A.Y. 2015-16 and ITA No.1940/PUN/2018 for A.Y. 2014-15. Though the grounds are worded differently but the crux of the grounds is denial of claim of deduction u/s 80P of the Act. 5. Before me, at the outset, Ld.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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds with PDDC i.e., Co-operative Banks and other Banks assessee was not eligible for deduction u/s 80P(2)(d) of the Act. He accordingly denied the claim of deduction of ₹ 18,38,878/- u/s 80P of the Act. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who upheld the order of AO by observing as under : 6. The submissions have been gone through. It is seen that Sec.80P is applicable only to the assessees which are co-operative societies and which are involved in the activities mentioned in the sub-section-2(1) and (b) of sec.80P. The appellant is a cooperative society as it is registered under the Maharashtra Cooperative 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 cooperative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s namely i) Those carrying on the business of banking and ii) those providing credit facilities to its members. It further held that in order to do the business of a cooperative bank, it is imperative to have a license from the RBI and therefore held that the business of the appellant in that case does not amount to that of a co-operative bank and held that the appellant would not come within the mischief of Sec.80P(4). 6.1.4 Considering the facts of the appellant s case, the appellant also cannot 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Mutually Aided Co-operative Societies Act. He submitted that on the contrary, the Maharashtra Co-operative Societies Act with respect to the definition of Members was some- what similar to that of Tamilnadu Co-operative Societies Act, 1983. In support of his contentions, he placed on record the comparative chart of the different relevant clauses in the Acts of Societies applicable in Maharashtra, Tamilnadu and Andhra Pradesh. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te by way of independent definition in view of Clause (ccii) of Sec. 5 of the Banking Regulation Act which defines what is meaning of Credit Co-operative Society . On plain reading of the Banking Regulation Act, 1949, nowhere it is suggested that the term Co-operative Bank also includes Co-Operative Credit Society also. Meaning of any term 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 roo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the TNCS Act. It defines the word 'members' under Section 2(16) to mean a person joining in the application for the registration of society and a person admitted to the membership after registration in accordance with the provisions of the Act, the Rules framed thereunder 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 att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs, we have pointed out the definitions of the expressions 'members' and 'associate member' under the TNCS Act and held that an 'associate member' is also a 'member' in terms of Section 2(16) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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