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TMI Blog2018 (1) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. CIT(A) has correctly allowed the claim of deduction - Decided against revenue - ITA No.451/Coch/2016, CO No.1/Coch/2017 - - - Dated:- 15-1-2018 - Shri George George K, JM And Shri Manjunatha G., AM Revenue by : Sri. A. Dhanaraj, Sr.DR Assessee by : Sri. Jojo, CA Advocate ORDER Per Bench This appeal at the instance of the Revenue and Cross Objection by the assessee are directed against the CIT(A) s order dated 21.07.2016. The relevant assessment year is 2013-2014. 2. The grounds raised by the Revenue read as follow:- 1. The order of the learned Commissioner of Income tax (Appeals), Kottayam in so far as the points stated below are concerned, is opposed to law on the facts and in the circumstances of the case. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in deleting the disallowance of deduction claimed by the assessee under section 80P(2)(a)(i) of the Act. 3. The Ld. CIT (Appeals) ought to have appreciated the fact that the assessee- society had advanced agricultural loans only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the business of banking and therefore was not entitled to the benefit of deduction u/s 80P(2) of the Act, in view of insertion of section 80P(4) of the Act with effect from 01.04.2007. 4. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal to the first appellate authority. The CIT(A) following the judgment of the Hon ble Kerala High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others [(2016) 384 ITR 490 (Ker.)] decided the issue in favour of the assessee. The relevant finding of the CIT(A) reads as follow:- 7. The assessing officer has disallowed the claim u/s 80P after much discussion. All the previous judgments and arguments of assessing officer on this issue have been nullified by the recent judgment of Kerala High Court in the case of The Chirakkal Service Co-operative Bank Ltd. (ITA No.212 of 2013). Hence, the argument of the AR is upheld on this ground and the assessee is eligible for deduction u/s 80P. 5. The Revenue being aggrieved, has filed the present appeal before the Tribunal and the assessee has filed the Cross Objection supporting the order of the CIT(A). The learned Departmental Representative subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 being as above with reference to the statutory provisions, the appellants had shown to the authorities and the Tribunal that they are primary agricultural credit societies in terms of clause (cciv) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 us 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. 8. 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 80 P of the Act by insertion of section 80P(4) of the Income-tax Act, the Primary Agricultural Credit Society is eligible for deduction under section 80 P of the Act. 8.1 The assessee society in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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. 8.3 As far as the Kerala Co-operative Societies Act which is applicable to the present case is 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 8.4 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 such liabilities of a member as may be specified in the bye-laws; 8.5 Therefore, in the present case, the nominal members are members as provided in law and deposits from such nominal members cannot be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikari (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. 8.8 As per section 3 of the Banking Regulation Act, 1949, the provisions of Banking Regulation Act shall not apply to Primary Agricultural Credit Societies. The explanation to section 80P(4) states that 'Primary Agricultural Credit Society' and 'Co-operative Bank' will have the same meaning as provided in Part V of the Banking Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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