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TMI Blog2018 (3) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... he members. Deduction u/s. 80P is allowed only for the said income. The assessee had claimed deduction u/s. 80P only in respect of net income which is derived by extending credit facilities to the members. - Decided against revenue - I.T.A. No. 484-486 /Coch/2017 - - - Dated:- 7-3-2018 - Shri George George K., JM Revenue by Shri A. Dhanaraj, Sr. DR Assessee by Shri George Thomas, CA ORDER Per George George K. Judicial Member These three appeals at the instance of the Department are directed against three separate orders of the CIT(A). The relevant assessment year for all the three appeals is 2013-14. 2. Since common issue is raised in these appeals, they were heard together and are being disposed of by this consolidated order. 3. The brief facts of the case are as follows: The assessees in these cases are Primary Agricultural Credit Society (PACS) registered under the Kerala Co-operative Societies Act, 1969. For the assessment year 2013-14, assessments were completed in the case of these assesses by denying the benefit of deduction u/s. 80P(2) of the I.T. Act. The Assessing Officer denied the claim of deduction u/s. 80P(2) of the Act for the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming deduction u/s. 80P on the above lines, when in the recent decision in the case of The Citizen Co-operative Society, the Honourable Supreme Court has, after taking into account the activities of the appellant Co-operative Society, held that the appellant could be treated as a co-operative society meant only for its members and providing credit facilities only to its members. 4. The Honourable Supreme Court had in the case of the Citizen Co- operative Society Limited Vs Assistant Commissioner of Income Tax, Circle- 9(1), Hyderabad observed that the depositors and borrowers in the appellant cooperative society are distinct and therefore, in reality, the activities of the appellant are that of a finance business and cannot be termed as those of a co-operative society. The facts in the present case also fall within the same contextual fabric. The categories of resident members, ordinary members and nominal members exist. This invokes the question of whether the instant appellant is merely providing agricultural credit to its members thereby validating the claim of tax exemption u/s. 80P(4) or performing activities beyond its approved framework that enables disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was considered by this Tribunal in the case of Nannambra Service Co-operative Bank Ltd. in I.T.A. Nos. 436-438/Coch/2016 dated 08/02/2018. The Tribunal followed the judgment of the Hon ble High Court of Kerala in the case of Chirakkal Service Co-operative Bank Ltd. (supra). The Tribunal also distinguished the judicial pronouncements relied on by the Revenue in its grounds and additional grounds in the case of Nannambra Service Co-operative Bank Ltd. (supra) and decided the issue in favour of the assessee by following the judgment of the Hon ble Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (supra). The relevant finding of the Tribunal in the case of Nannambra Service Co-operative Bank Ltd. reads as follows: 7. We have heard the rival submissions and perused the material on record. An identical issue was considered by this Tribunal in the case of Edanad-Kannur Service Co-operative Bank Ltd. and others in I.T.A. Nos. 431 to 433/Coch/2017 others dated 10/01/2018. The Tribunal followed the judgment of the Hon ble High Court of Kerala in the case of Chirakkal Service Co-operative Bank Ltd. (supra). The Tribunal held that the judgment of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 5 of the BR Act having regard to the primary object or principal business of each of the appellants. It is also clear from the materials on record that the bye-laws of each of the appellants do not permit admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 8OP 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 Income-tax 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. 9.1 The assessee society in the case considered by the Hon'ble Supreme Court was established on 31-5-1997 and was registered under section 5 of the Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995. Thereafter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 'nominal 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; 9.5 Therefore, in the present cases, the nominal members are members as provided in law and deposits from such nominal members cannot be considered or treated as from the non-members or from public as was noted by the Apex Court judgment cited supra. 9.6 In this cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aharashtra 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 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 Act, 1949. The explanation provided after clause (ccvi) of section 5 r.w.s 56 of the Banking Regulation Act specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acilities to its members for agriculture and agriculture allied activities. The competent authority of Co- operative Department of Government of Kerala having been satisfied with the activities of the assessee, has classified the assessee as PACS (primary agricultural credit society). The Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Limited , Ors. (supra) has elaborately considered the issue and has categorically held that the certificate issued by the competent authority in this regard is binding and the income tax authorities have no right to probe further. 7.3. In Ground Nos. 4, 5 6 of the Memorandum of Appeal, it is mentioned that the CIT(A) has erred in not placing reliance on the judgment of the Hon ble Jurisdictional High Court in the case of M/s. Perinthalmana Service Co-operative Bank Ltd. vs. CIT reported in 363 ITR 268. The Hon ble High Court in the above mentioned case was disposing of the appeal filed by the assessee, challenging the order passed by the ITAT upholding the validity of the order passed by the Commissioner u/s 263 of the Act. In the said judgment, the Hon ble High Court upheld the order of the ITAT, after directing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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