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TMI Blog2018 (7) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... rary 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 in favour of assessee. - ITA No.542/Coch/2017, ITA No.543/Coch/2017, ITA No.544/Coch/2017, ITA No.545/Coch/2017, ITA No.546/Coch/2017, CO No.14/Coch/2018 , CO No.15/Coch/2018 , CO No.16/Coch/2018 , CO No.17/Coch/2018 , CO No.18/Coch/2018 And ITA No.389/Coch/2017 - - - Dated:- 3-7-2018 - Shri Chandra Poojari, AM And Shri George George K, JM ITA No.390/Coch/2017, CO No.01/Coch/2018, CO No.02/Coch/2018 And ITA No.645/Coch/2017 For The Revenue : Sri. A.Dhanaraj, Sr.DR For The Assessee : Sri.Subrahmania Bhat ORDER Per Bench These appeals at the instance of the Revenue and the cross objections and cross appeal are directed against orders of the CIT(A). Since common issue is raised in these appeals, cross objections / cross appeal, they were heard together and are being disposed off by this consolidated order. 2. The brief facts of the case are as follows:- The assessees in these cases are primary agricultural credit societies registered under the Kerala Co-operative Societies Act, 1969. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of law that differentiates between de jure and de facto positions and which permits the principle of penetration of the corporate veil to determine the true nature of the activities of the cooperative society? 3. Whether on the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeals) is right in law in holding that the assessee is eligible for 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 not be treated as a cooperative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit, appeal is being filed as the tax effect exceeds the prescribed limit for filing further appeal in the other assessment year in the combined order. 5. The learned Departmental Representative relied on the grounds raised. The learned AR, on the other hand, submitted that the issue in question is covered in favour of the assessee by the judgment of the Hon ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others (supra). 6. We have heard the learned DR and perused the material on record. We find that an identical issue was considered in the case of ITO v. The Chengala Service Co-operative Bank Limited [ITA No.434/Coch/2017 Ors. order dated 05th April, 2018] . In that case, identical grounds have been raised to that of the grounds raised in the present appeals. The Tribunal after considering the judicial pronouncements, held that the assessee is entitled to deduction u/s 80P(2) of the I.T.Act. The relevant finding of the Tribunal reads as follows:- 7. We have heard the rival submission and perused the material on record. The undisputed facts are that the assessees in these cases are primary agricultural credit s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive 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 admission of any other co-operative society as member, except may be, in accordance with the proviso to sub-clause 2 of section 5(cciv) of the BR Act. The different orders of the Tribunal which are impeached in these appeals do not contain any finding of fact to the effect that the bye- laws of any of the appellant or its classification by the competent authority under the KCS Act is anything different from what we have stated herein above. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 80P 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 80P of the Act. 8.1 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 as the operations of the assessee had increased manifold and were spread over states of Erstwhile, Andhra Pradesh, Mahrashtra and Karnataka, the assessee-society got itself registered on 26.07.2005 under the Multi State Co-operative Societies Act, 2002 (MACSA) 8.2 The Hon ble Apex Court in the aforementioned case specifically took note of the factual findings of the Assessing Officer (which was stated in para 15 of the judgment) referring to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 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. 8.6 In this context, it is relevant to mention that the Hon ble Supreme Court in the case of U.P.Cooperative Cane Union v. Commissioner of Income-tax (1999) 237 ITR 574 (SC)-para 8 of the judgment has observed as under:- 8. The expression members is not defined in the Act. Since a co-operative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression members in section 80P(2)(a)(i) must, therefore, be construed in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act, 1949. The explanation provided after clause (ccvi) of section 5 r.w.s 56 of the Banking Regulation Act specifically provides that if any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final. The Reserve Bank of India, which is the competent authority as per the Banking Regulation Act, treats assessee society and similar societies as only Primary Agricultural Credit Society not falling within the ambit of Banking Regulation Act. The Reserve Bank of India has gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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