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TMI Blog2016 (7) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... e accordingly dismissed. - Decided in favour of assessee - Tax Case Appeal Nos. 735, 755 of 2014 and 460 of 2015 - - - Dated:- 5-7-2016 - S. Manikumar And D. Krishnakumar, JJ. For the Appellant : Mr. T. R. Senthil Kumar For the Respondent : Mr. A. R. Sri Raman, Mr. S. Sridhar JUDGMENT ( Judgment of the Court was made by D. Krishnakumar, J ) These Appeals have been filed by the Revenue against the orders of Madras 'D' Bench dated 11.02.2014 in I.T.A.No.197/ Mds/2013, 'C' Bench dated 21.03.2014 in I.T.A.No.2287/Mds/2013 and 'A' Bench dated 30.01.2015 in I.T.A. No. 2102/Mds/2014 on the file of the Income Tax Appellate Tribunal. 2. The facts of the case are as follows :- The Assessee society, namely, Veerakeralam Primary Agricultural Co-operative Credit Society, filed return of income for the Assessment years 2008-09, 2009-10 and 2010-11 on 30.03.2010, admitting 'Nil' income. The cases were selected for scrutiny and notice under Section 143(2) of the Income Tax Act, was issued and served on the assessee. The Assessee, stating they are a Primary Agricultural Credit Society, carrying on the business of banking and providing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, as a primary agricultural cooperative credit society, has been affirmed by the audit reports of the Co-operative Auditor of the Tamil Nadu Government. At the outset of the assessment order in question, the Assessing Officer treated as well, the status of the assessee as Primary Agricultural Cooperative Credit Society, for the reason of the facts of the case of the assessee. However, the Assessing Officer erred in disallowing the deduction claimed under Section 80P by the assessee for the reason that the assessee being primary cooperative society carrying on the business of banking. Such a disallowance is not based on the facts and circumstances of the case. 2. The Assessing Officer erred in treating its interest etc., on investments made, as taxable under the head Income from other sources and not under banking business. The judicial decision cited i.e., M/s.Totgar's Cooperative Sale Society Limited Vs ITO 229 CTR 209 (SC) 2010 is not relevant to the assessee's case where the facts are entirely different. Also for the assessee the entire interest and dividend income are deductible under Section 80P(2)(d) also. 3. The Assessing Officer erred in ignoring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness it carries is not banking as per the Banking Regulation Act. Further, the interest income is derived from Investment in a cooperative society and so claimed deduction under Section 80P (2)(d). Considering the above submissions, the appellate authority, in its order has clearly defined the difference between the Cooperative Bank and the Cooperative Society and decided the appeal in favour of the assessee and granted relief under Section 80P(2)(a)(i) of the Income Tax Act. Thus, the appeal was allowed by the Appellate Authority. 6. Against the aforesaid order, the Revenue filed an appeal before the Income Tax Appellate Tribunal and the said appeal was also dismissed, based on the provisions of the Banking Regulation Act and the Cooperative Societies Act. The Tribunal also considered the decision rendered by the Bangalore Bench of the Tribunal in the case of ACIT vs. Bangalore Commercial Transport Credit Co-operative Society Limited, in ITA No.1069/Bang/2010 relevant to the AY 2007-08 decided on 08.04.2011, which was subsequently followed by the co-ordinate Benches of the Tribunal and held that the activities are not regulated by the Reserve Bank of India or by the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on par with the commercial banks. Therefore, the assessee society is not a co-operative bank but a co-operative society extending credit facilities to its members. It is submitted that in view of the above, the Appellate Authority as well as the Appellate Tribunal, have rightly rejected the contention of the Revenue and passed orders in favour of the assessee society. 10. Heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel for the appellant and Mr. A.R. Sri Raman for Mr. S. Sridhar, learned counsel for the respondent. 11. At the time of admission, this Court admitted the instant appeals, framing the following substantial questions of law :- 1. Whether on the facts and circumstances of the case, the Appellate Tribunal was right in directing the assessing officer to allow the deduction under Section 80P(2) of the Income Tax Act to the assessee who is primarily engaged in lending loans for non agricultural purposes ? 2. Whether on the facts and circumstances of the case the Appellate Tribunal was right in holding that the assessee s claim for deduction is not restricted by Section 80P (4) of the Income Tax Act ? 12. The assessee society, primarily registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acilities to the members, as per the bye-laws and as laid down in Section 5 (cciv) of the Banking Regulation Act, 1949. Further, from the CPT Circular dated 12.03.2008, it is evident that a credit co-operative society is not a co-operative bank, as defined in Part V of the Banking Regulation Act, 1949. The object of a 'Co-operative bank' is to accept deposits from the public, for lending or investment of money. On perusal of the findings of the Appellate Authority as well as the Appellate Tribunal, it is categorically made clear that the assessee society will not come under the object of the principal business of a co-operative bank, which is a banking business. The benefit of Section 80P is excluded for deductions by co-operative banks, whereas the primary agricultural credit societies are entitled for the said deduction. 14. The assessee society does not satisfy the object, as defined under Section 5(cciv) of the Banking Regulation Act, 1949, for becoming a co-operative bank. The decisions, ACIT vs. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. in ITA No.1069/Bang/2010 (AY 2007-08) decided on 08.04.2011, ITO vs. M/s. Yeswanthpur Credit Co-operati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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