TMI Blog2024 (5) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural purposes, it is not a PACS by definition and, two, is a cooperative bank, i.e., a cooperative society in the business of banking, even as clarified by the Hon'ble Courts time and again, as in Mavilayi SCB Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] , THE CITIZEN CO-OPERATIVE SOCIETY LIMITED [ 2017 (8) TMI 536 - SUPREME COURT] AND MUHAMMED USMAN [ 2002 (11) TMI 686 - HIGH COURT OF KERALA] Why, the provision itself recognizes banking as an eligible activity for a cooperative society, entitling it to deduction of the profits derived therefrom (s. 80P(2)(a)(i)). It being not a PACS would thus not carry the Revenue s case far. Firstly, for the reason that exemption u/s. 80P(1) r/w s. 80P(2)(a)(i) is, as afore-noted, equally applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of banking or not a PACS is not detrimental to it s claim u/s. 80P(1) r/w s. 80P(2)(i)(a). The AO shall, upon hearing the assessee and examining such material as it may adduce in substantiation of it s claim/s, and causing such verification as he may deem fit, issue a definite finding as to if it is, or is not, a cooperative bank as defined under BRA, determining it s entitlement to exemption u/s. 80P(1) r/w s.80P(2)(a)(i) accordingly. We make it further clear that despite being not a PACS under the Act, it is yet a cooperative society under the Kerala Act, satisfying thus the requirement of s. 2(19) of the Act, which only is relevant for claiming deduction u/s. 80P(1) - Assessee s appeals allowed for statistical purposes. - Shri Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by definition: i) providing various kinds of loans (Gold loan, Mortgage loan, etc.) ii) maintaining saving bank A/c, current A/c, day deposit etc. iii) providing cheque facility iv) providing demand draft facility v) providing locker facility That is, it being registered as PACS is thus a ruse, with a view to avoid tax, with in fact the Kerala Act being amended in 2010 to provide that if the principal object of the PACS is not fulfilled, the assessee shall loose all the characteristics of a PACS as specified in the Act, rules and byelaws, except qua the existing staff strength (s. 2(oaa). The bye-laws clearly permit the assessee to accept deposits from members as well as non-members. Adverting to the defining provisions of the Banking Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not translate into it being in the business of banking, what we wonder does, and toward which we also advert to s. 5(b) of BRA which regulates the business of banking in India, defining banking as under: 5. Interpretation. In this Act, unless there is anything repugnant in the subject or context,- (a).......... (b) banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise; 5.2 The assessee s lending being admittedly not primarily for agricultural purposes, it is not a PACS by definition and, two, is a cooperative bank, i.e., a cooperative society in the business of banking, even as clarified by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-operative bank, a central co-operative bank and a primary co-operative bank; Section 5 (ccv) of BRA defines 'primary co-operative bank' as under: 5 (ccv) 'primary co-operative bank' means a co-operative society, other than a primary agricultural credit society, (1) the primary object or principal business of which is the trans action of banking business; (2) the paid-up share capital and reserves of which are not less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of banking. However, as afore-noted, it being in the business of banking or not a PACS is not detrimental to it s claim u/s. 80P(1) r/w s. 80P(2)(i)(a). The AO shall, upon hearing the assessee and examining such material as it may adduce in substantiation of it s claim/s, and causing such verification as he may deem fit, issue a definite finding as to if it is, or is not, a cooperative bank as defined under BRA, determining it s entitlement to exemption u/s. 80P(1) r/w s.80P(2)(a)(i) accordingly. We make it further clear that despite being not a PACS under the Act, it is yet a cooperative society under the Kerala Act, satisfying thus the requirement of s. 2(19) of the Act, which only is relevant for claiming deduction u/s. 80P(1). We decid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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