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2018 (2) TMI 502 - AT - Income TaxEligibility of deduction u/s. 80P - whether the assessee was a Primary Agricultural Credit Society or a Co-operative bank - Held that - CIT(A) is justified in directing the Assessing Officer to grant deduction u/s. 80P(2). See Edanad-Kannur Service Co-operative Bank Ltd. and others 2018 (1) TMI 848 - ITAT COCHIN wherein as held Assessing officer was not competent and did not possess the jurisdiction to resolve / decide the issue as to whether the assessee was a Primary Agricultural Credit Society or a Co-operative bank , within the meaning assigned to it under the provisions of the Banking Regulation Act and to take a contrary view especially in view of the Explanation provided after the clause (ccvi) of section 5 r.w.s Section 56 of the Banking Regulation Act. - Decided against revenue
Issues Involved:
1. Eligibility for deduction under Section 80P(2) of the Income Tax Act. 2. Applicability of the Supreme Court judgment in the case of The Citizens Co-Operative Society Limited. 3. Distinction between primary agricultural credit societies and cooperative banks. 4. Inclusion of nominal members as members under the Kerala Cooperative Societies Act. Detailed Analysis: 1. Eligibility for Deduction under Section 80P(2): The primary issue in these appeals was whether the assessee, a primary agricultural credit society registered under the Kerala Co-operative Societies Act, 1969, was entitled to deduction under Section 80P(2) of the Income Tax Act for the assessment years 2008-09 and 2013-14. The Assessing Officer had denied the deduction, arguing that the assessee was mainly engaged in banking activities and thus ineligible under the amended Section 80P(4). However, the CIT(A) allowed the deduction, relying on the Kerala High Court's judgment in Chirakkal Service Co-operative Bank Ltd., which held that primary agricultural credit societies registered under the Kerala Co-operative Societies Act are entitled to such deductions. 2. Applicability of the Supreme Court Judgment in the Case of The Citizens Co-Operative Society Limited: The Revenue contended that the CIT(A)’s decision was against the law, citing the Supreme Court's ruling in The Citizens Co-Operative Society Limited, which emphasized examining the activities of the society rather than merely its registration status. The Tribunal, however, noted that the Supreme Court's judgment was specific to the facts of that case, where the society was operating beyond its permitted framework by accepting deposits from non-members. The Tribunal distinguished this from the present case, where the assessee was a primary agricultural credit society registered under the Kerala Co-operative Societies Act, thus entitled to the deduction under Section 80P(2). 3. Distinction between Primary Agricultural Credit Societies and Cooperative Banks: The Tribunal reiterated that the Kerala High Court in Chirakkal Service Co-operative Bank Ltd. had established that once a society is registered as a primary agricultural credit society under the Kerala Co-operative Societies Act, it is presumed to undertake agricultural credit activities. The Tribunal emphasized that the authorities under the Income Tax Act cannot question this classification. The Tribunal also noted that the Reserve Bank of India (RBI) treats such societies as primary agricultural credit societies and not as cooperative banks, further reinforcing their eligibility for the deduction. 4. Inclusion of Nominal Members as Members under the Kerala Cooperative Societies Act: The Tribunal addressed the Revenue's argument about the inclusion of nominal members by referencing the Kerala Cooperative Societies Act, which defines "members" to include nominal members. The Tribunal clarified that deposits from nominal members could not be considered as from the public, distinguishing the facts from the Supreme Court case where the society had nominal members who were not recognized as members under the relevant law. Conclusion: The Tribunal concluded that the CIT(A) was justified in allowing the deduction under Section 80P(2) of the Income Tax Act. The Tribunal upheld the CIT(A)’s order, finding it consistent with the Kerala High Court’s judgment in Chirakkal Service Co-operative Bank Ltd. and not in conflict with the Supreme Court's ruling in The Citizens Co-Operative Society Limited. Consequently, the appeals filed by the Revenue were dismissed. Judgment: The appeals filed by the Revenue were dismissed, and the CIT(A)'s orders allowing the deduction under Section 80P(2) were upheld. The Tribunal pronounced this judgment in the open court on 1-2-2018.
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