9911796707
TMI Blog2022 (9) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER This appeal filed by the assessee is directed against order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 04.05.2022 and pertains to assessment year 2016-17. 2. At the outset, we find that there is a delay of 24 days in appeals filed by the assessee. During the course of hearing, learned AR for the assessee submitted that delay in filing of appeal is on account of the fact that even when order was made available in IT Portal, same could not be downloaded. The AR further submitted that the assessee could not file appeal within the time allowed under the Act, for, the aforesaid reason which caused delay of 24 days. The delay in filing appeal is neither intentional nor willful but for the unavoidable reasons, therefore, the learned AR for the assessee prayed that delay may be condoned in the interest of advancement of substantial justice. 3. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee do not come within the ambit of reasonable and bonafide reasons, which can be considered for condonation of delay a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety is nothing but business income and the assessee is entitled for deduction u/s. 80P(2)(d) of the Act, because Coimbatore District Central Co-operative Bank is also a co-operative society registered under Tamil Nadu Co-operative Societies Act, 1983. The learned CIT(A) however, was not convinced with the explanation furnished by the assessee and accordingly, rejected arguments of the assessee and sustained additions towards interest income under the head income from other sources . Aggrieved by the learned CIT(A) order, the assessee is in appeal before us. 8. The learned AR for the assessee submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT., Chennai, in the case of Varathappam Palayam Primary Agricultural Co-op.Credit Society Vs. ITO in ITA No. 282/Chny/2021, where the Tribunal by considering relevant facts, including by following decision of the Hon'ble High Court of Madras in the case of The Salem Agricultural Producers Co-operative Marketing Society Ltd. Vs ITO in TCA No. 5 of 2015 dated 10.08.2016 and deleted additions made by the Assessing Officer. 9. The learned DR, on the other hand, supporting order of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment Bank Limited, supra held as under:- 21. We have heard the rival contentions and had gone through the facts and circumstances of the case. We have perused the case records, including the assessment order and the order of the CIT(A). We have also perused the paper-book filed by the learned Counsel of the Assessee consisting of pages 1 to 120 and pages 1 to 25. The Revenue has also filed a paper-book consisting of 1 to 84 pages and also filed written submissions along with annexures which were considered. We noted that the first objection of the learned CIT-DR is that the Assessee is a Co-operative Bank and not a Co-operative Society. We will deal with this argument of the learned CIT-DR. First of all, we have gone through the bye-laws of the Assessee Society which are placed at page 92. The relevant objects of the Assessee are mentioned at pages 93 and 94 of the Assessee s paper-book and the relevant reads as under: Objects : 3. The object of the Bank shall be primarily to finance Primary Land Development Banks. 4. In order to fulfil such object, it shall have power: a) To float debentures on the security / of its assets and of land mortgages, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a Cooperative Society registered under the Tamil Nadu Co-operative Society Act, 1983 and obtained registration as a Cooperative Society on 12.12.1929 and since then, it has been operating as a Cooperative Society providing finance to the members of the Society. We noted that the Assessee, like other co-operative institutions is a Co-operative Society and was entitled for deduction u/s. 80P of the Act, the legislature, through the Finance Act 2006, introduced Section 80P(4) of the Act with a specific intention to exclude co-operative banks from this scope of deduction u/s. 80P of the Act. The reasons sighted in the Finance Act, 2006 reads as under: 166. Co-operative Banks, like any other Bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies [PACS] and Primary Co-operative Agricultural and Rural Development Banks [PCARDb] stand on a special footing and will continue to be exempt for tax under section 80P of the Income Tax Act. However, I propose to exclude all other co-operative banks from the scope of that section. From the above, it is clear that the provisions of Section 80P(4) of the Act was brought under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not obtained any authorization or License from RBI to operate as a Banking Institution. Added to that, there is no inspection by the Reserve Bank of India [RBI], no reports are sent to RBI, there is no cheque withdrawal facility, the Society is not allowed to issue Demand Drafts and finally, the deposits are only from members and no non-members are involved; V. That the Society has taken due approval for admission of members from the Registrar of Co-operative Societies and with members capital only, it has been lending and conducting its business transactions; 24. Now, coming to an another objection of the learned CIT-DR that the Assessee never gave the list of B category members or Associate members, as they were general public and whole of their accounts were in the banks. It was the argument of the learned CIT-DR that B category members were general public derived the facilities of the Assessee Bank without having any voting right in the Bank and moreover, they only gave the maximum business support to the Assessee Bank. We have considered this argument and noted that the Assessee has two categories of members, as under: a) Members State Government an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the Assessee explained the procedure and argued that an individual member, to become an Associate member of the Assessee Society, they will have to get the approval from the Registrar of the Co-operative Society. He agreed that the bye-laws of the Assessee Society clearly states that all the members are required to hold shares but Associate members are exempted from holding such shares, in view of the Section 22(2) of the Tamil Nadu Co-operative Societies Act, 1983 and the Rules as amended from time to time. We noted that the Assessee s transactions are restricted only to the members or Associate members and not to the general public as alleged by the learned CIT-DR. According to us, the Assessee cannot be construed to carry the business of Banking as defined u/s. 5(b) of the Banking Regulation Act, 1949. Thus, if the Banking Regulation Act, 1949 is now to be seen, what is clear from Section 3, read with Section 56 of the Banking Regulation Act, 1949 is that, a Primary Co-operative Bank cannot be a Primary Agriculture Credit Society as such a Co-operative Bank must be engaged in the business of banking, as defined by Section 5(b) of the Banking Regulation Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operative Bank Limited (supra) considering the earlier decision in the case of Citizen Co-operative Society Limited (supra) has considered exactly an identical issue on exactly identical facts and held in paragraph nos. 39 and 40, as under: 39. The above material would clearly indicate that the limited object of Section 80P(4) is to exclude cooperative banks that function at par with other commercial banks, i.e. which lend money to members of the public. Thus, if the Banking Regulation Act, 1949 is not to be seen, what is clear from Section 3 read with section 56 is that a primary co-operative bank cannot be a primary agricultural credit society, as such co-operative bank must be engaged in the business of banking as defined by section 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment of deposits of money from the public. Likewise, under section 22(1)(b) of the Banking Regulation Act, 1949 as applicable to co-operative societies, no co-operative society shall carry on banking business in India, unless it is a cooperative bank and holds a license issued in that behalf by the RBI. As opposed to this, a primary agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of harm s way, all the Assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. 46. It must also be mentioned here that unlike the Andhra Act that Citizen Co-operative Society Limited (supra) considered, nominal members are members as defined under the Kerala Act. This Court in U.P. Cooperative Cane Unions Federation Limited vs. Commissioner of Income Tax [1997] 11 SCC 287 referred to section 80P of the Income Tax Act and then held: 8. The expression members is not defined in the Act. Since a co-operative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression members in section 80P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the Co-operative Society claiming exemption has been formed. It is therefore, nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use Co-operative Bank must be engaged in the business of Banking as defined in the Section 5(b) of the Banking Regulation Act, which means accepting, for the purpose of lending or investment of deposits of money from the public. Similarly, u/s. 22(1)(b) of the Banking Regulation Act, as applicable to Co-operative Societies, no Co-operative Society shall carry on in banking business in India, unless it is a Co-operative Bank and holds license issued on this behalf by the Reserve Bank of India. In the present case also, there is no banking activity and it is not registered as a Bank and it does not hold any license issued by the Reserve Bank of India. The Assessee being a Primary Agriculture Credit Society is a Co-operative Society. The primary object of which is to provide financial accommodation to its members, i.e. members as well as Associate members for agriculture purposes or for purpose connected with the agricultural activities. Further, we are of the view that the provision of Section 80P(4) of the Act is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in the banking business, i.e. engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of interest income received under section 80P of the Act. However, the Assessing Officer has denied the same and held that the interest income falls in the category of Other Income and brought to tax, which was confirmed by the ld. CIT(A). Similar issue on identical facts was subject matter in appeal before the Tribunal in the case of The Salem Agricultural Producers Co-operative Marketing Society Ltd. v. ITO (supra), wherein, the Tribunal has observed and held as under: 8. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The case of the assessee is that the income by way of interest and dividend earned by the assessee society are from investments made in Salem District Central Cooperative Bank, which is also admittedly, a co-operative society and are allowable deduction. The Assessing Officer has held that the assessee has made only with Salem District Central Cooperative Bank and therefore, the income from investment with the Bank is not entitled for deduction under section 80P(2)(d) of the Act. On appeal, the ld. CIT(Appeals confirmed the order passed by the ld. CIT(Appeals). We find that in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
