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TMI Blog2018 (12) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the Revenue. 3.This Appeal has been admitted on 22.11.2011, on the following Substantial Question of Law: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from the sale of Public Distribution System sales as directed by the Government of Tamil Nadu is not capable of deduction under Section 80-P(2) and 80- P(2)(c)(ii) of the Income Tax Act, 1961?" 4.The above referred Substantial Question of Law was considered by the Division Bench of this Court in the assessee's own case for the Assessment Year 2005-06 in T.C.A.No.1453 of 2008, dated 31.10.2018 (M/s.AA 713 the Kodumudi Growers Cooperative Bank Ltd., Kodumudi vs. The Income Tax Officer, Ward-II(1), Erode), and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in terms of the provisions of Sections 2(22) and 2(13) of the TNCS Act, 1983. However, the CIT (A) rejected the contention of the assessee and confirmed the order of assessment. 6.Aggrieved by the same, the assessee again preferred an appeal to the Tribunal. The Tribunal, by the impugned order, concurred with the view taken by the CIT (A) and pointed out that nothing was placed before it to demonstrate as to how the income earned from the fair price shops could be treated as income from banking activities. Hence, the assessee is before us. 7.Thus, we are called upon to decide as to whether the assessee is entitled for deduction under Section 80P(2) of the IT Act in respect of the income earned from the sale under the PDS. 8.It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification, specify in this behalf. Thus, a credit society as defined under the provisions of the TNCS Act, 1983 is not only confined to extending loans to its members, but also to such other members as the Government may, by Notification, specify. 11.The assessee placed materials before the CIT (A) to show that the fair price shops for sale of fertilizers to the members were opened based on the directives issued by the Government of Tamil Nadu. Therefore, the activity done by the assessee in the sale of items under the PDS to its members would definitely fall within the ambit of a 'credit society' defined under Section 2(13) of the TNCS Act, 1983. 12.The learned Senior Standing Counsel for the Revenue would contend that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced sample sales bills to prove that they had sold fertilizers only to the members. Thus, we are fully convinced that the activity done by the appellant cannot be said to be an activity, which was not authorized to be done by the society. 16.Our view is strengthened by the decision of the Division Bench of the Bombay High Court in the case of CIT, Nasik Vs. Ahmednagar District Central Cooperative Bank Limited [reported in 2004 (1) Mh. LJ 853]. In the said case, the assessee was a cooperative bank carrying business of banking. Whole amount of profit and gains attributable to the business of banking was not included by the assessee in its income under Section 80P(1) read with Section 80P(2)(a)(i) of the IT Act. During the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e customers for the purpose of lending, that the word 'banking' has been interpreted by the Hon'ble Supreme Court to cover even the rent charged by the banks for hiring out safe deposit vaults to its customers and that in the circumstances, income earned by the assessee bank by way of commission/fees from its customers, being public sector undertakings, would be exempt under Section 80P(2)(a)(i) of the IT Act. Further, the Division Bench pointed out that such view was supported by Section 6(1)(b) of the Banking Regulation Act, 1949, which stated that in addition to the business of banking, a banking company may engage itself as agent for Government or Local Authority or any other person for giving receipts and discharges that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its members and accordingly, would not be entitled to claim the benefit under Section 80P of the IT Act. This decision can, in no manner, advance the case of the Revenue, as factually we found that the assessee herein is entitled to distribute the items under the PDS, as it is one of the allied activities of the society and is bound by the directives of the Government. 20.Apart from that, the definition of 'credit society' is wider in import to include any activity that the Government may, by Notification, specify. Further, we find from By-law No.12(a) that if the society carries on an activity, which is not authorized under the By-laws or with the approval of the Registrar, the society is liable to strike off the Rules and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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