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TMI Blog2018 (1) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... e placed on record). That being the case, the 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 - 431 to 433/Coch/2017, 567/Coch/2017, 561/Coch/2017, 525 to 527/Coch/2017, 560/Coch/2017, 410/Coch/2017, 411/Coch/2017, 412/Coch/2017, 413/Coch/2017, 566/Coch/2017, 426 to 428/Coch/2017 And 429 And 430/Coch/2017 - - - Dated:- 10-1-2018 - Shri George George K, Judicial Member For The Appellant : Sri. A. Dhanaraj, Sr. DR For The Respondents : Sri. T.M.Sreedharan, Smt.Parvathy Amma, Sri. Arun Raj S And Ms.Mekhala M.Benny ORDER These 19 appeals filed by the Revenue are directed against different orders of the CIT(A) concerning different assessees. 2. In the above cases, the Revenue has raised a common issue, viz., whether the assessees are entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Bank and the same will not apply to any co-operative bank. (para 5.1 of the assessment order for Asst.Year 2009-2010). (ii) The primary object or principal business transacted is banking business. The assessee bank is doing banking business and carrying out various activities which are listed out in para 5.5, page 4 of the assessment order for A.Y. 2009- 2010. (iii) The assessee was accepting deposits from members as well as non-members and the amounts were used for lending or investment. According to the Assessing Officer, all the three conditions for becoming a primary co-operative bank stand complied with in the case of the assessee. Hence, it will fall within the provisions of section 80P(4) and is not eligible for deduction u/s 80P(2)(a)(i) of the Income-tax Act. 5. Aggrieved by the assessment orders denying the benefit of deduction u/s 80P(2) of the Act, filed appeals before the first appellate authority. The CIT(A) followed the ratio of the judgment of the Hon ble High Court of Kerala in the case of The Chirakkal Service Co-operative Bank Ltd. and Others (2016) 384 ITR 490 (Kerala) wherein it has been held that the primary agricultural credit society registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such assessees. (Para 5 of the grounds of the department) (vi) The learned CIT(Appeals) ought to have seen that the above Apex Court decision is in sharp contrast to the deduction of the Hon ble Kerala High Court in the case of Chirakkal Co-operative Bank Ltd. (Para 6 of the grounds of appeal). (vii) The judicial ratios in 135 ITR 355 (Mad.) and 234 ITR 301 (Ker.) hold that carte blanche deduction u/s 80P are not available merely on the basis of professed agricultural credits on the basis of registration and classification. In view of the above, is not the decision of the CIT (Appeals) without merits? (Para 7 of the grounds). (viii) The prayer of the department is that in view of the above, the order of the CIT(Appeals) may be set aside. (Para 8). 6.1 Apart from relying on the above grounds, the learned Departmental Representative has also filed a brief written submission and also filed a paper book comprising of 41 pages enclosing the amendment to the Kerala Co-operative Societies Act, 2010 and objects and recommendations of Vaidyanathan Committee, etc. The gist of the written submission was that the assessee banks in the above cases had accepted deposits from non-mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act. It was further argued by the learned AR that the judgment of the Hon ble Apex Court in the case of Citizens Co-operative Society Ltd. (supra) had not overruled the dictum laid down by the Hon ble jurisdictional High Court. The learned Counsel stated that the judgment of the Hon ble Apex Court does not have any application to the instant case, since the disallowance of section 80P in the case considered by the Hon ble Supreme Court was due to violation of the relevant provisions of the State Act. Further, it was contended that the category of nominal members in the real sense are not members because there is no provision in the State Act to admit a person as a nominal member , and it is in this context there is a violation of the Co-operative Societies Act to the concerned State. It was submitted that whereas the Kerala Co-operative Societies Act specifically provides for admission of nominal members and providing credit facilities to such members. The learned Counsel vehemently argued that the assessee is not doing any banking business. It was submitted that the difference between primary agricultural credit society and bank has been clearly brought out in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to co-operative societies for the time being; it cannot but be taken that the purpose of the societies so registered under the State Law and its objects have to be understood as those which have been approved by the competent authority under such State law. This, we visualize as due reciprocative legislative exercise by the Parliament recognizing the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural credit societies by the competent authority under the KCS Act it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes; the rate of interest on such loans and advances to be at the rate fixed by the Registrar of co-operative societies under the KCS Act and having its area of operation confined to a village, panchayat or a municipality. This is the consequence of the definition clause in section 2(oaa) of the KCS Act. The authorities under the IT Act cannot probe into any issue or such matter relating to such applicants. 16. The position of law bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided when deposits are received from general public / nominal members or loans are disbursed to general public / nominal members, the assessee would be doing the business of banking and therefore, would not be entitled to deduction u/s 80P(2) of the Income-tax Act. In the context of the submission made by the Revenue let me examine whether the judgment of the Hon ble Apex Court in the case of Citizens Co-operative Society Ltd. (supra) has application to the facts of the present case. 9. The Hon ble Apex Court judgment in the case of Citizen Co-operative Society (supra) Ltd. was rendered in the context of eligibility of a Credit Co-operative Society for deduction under section 80 P of the Act. The Apex Court, referring to the specific facts of the case held that the assessee therein is not entitled for deduction under section 80P of the Income-tax Act. In the aforesaid case, the Hon'ble Apex Court was not dealing with a case of eligibility of a Primary Agricultural Credit Society for deduction under section 80P of the Incometax Act. The Hon ble Supreme Court at Para 23 of the aforesaid judgment had emphasized that even after the amendment made to the provisions of section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factual finding that the assessee was receiving deposits mostly from a carved out category of member viz nominal member who are not members as per the provisions of law referred,. and that most of the business of the assessee therein was with this carved out category of person and also granting loans to public and without the approval from the Registrar of the Societies. 9.3 As far as the Kerala Co-operative Societies Act which is applicable to the present cases are concerned, the definition of a 'member' as provided in Section 2(1) of the Kerala Cooperative Societies Act includes a nominal member. Section 2 (1) of the said Act is as follows: Member means a person joining in the application for the registration of a co-operative society or a person admitted to membership after such registration in accordance with this Act, the Rules and the Bye law and includes a nominal or associate member 9.4 The normal member is defined under 2(M) of the Kerala Co-operative Societies Act, 1969, which reads as follow:- ( m) nominal or associate member means a member who possesses only such privileges and rights of a member and who is subject only to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (19) of the Maharashtra Co-operative Societies Act, 1960 takes within its sweep even a nominal member, associate member and sympathizer member. There is no distinction made between duly registered member and nominal, associate and sympathizer member. 19. In the case of K.K.Adhikari (cited supra), Division Bench of this Court has held that the definition of a Member under Section 2(19) of the Maharashtra Co-operative Societies Act, 1960 includes a nominal member or a sympathizer member. It is further held that notwithstanding the fact that a nominal member does not enjoy all the rights and privileges which are available to an ordinary member, his status is that of a member as defined in Section 2(19) of the Act. 20. Division Bench of this Court in the case of The Commissioner of Income Tax, Nasik (cited supra) has also taken a similar view that the definition of Member under section 2(19)(a) of the Maharashtra Co-operative Societies Act, 1960 includes a nominal member. It is further held by the Division Bench that there is nothing in Section 80P(2)(iii) of the Income Tax Act to the contrary. 9.8 As per section 3 of the Banking Regulation Act, 1949 the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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