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TMI Blog2016 (10) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... Reopening of assessment u/s 147 - HELD THAT:- CIT(A) has not adjudicated this legal issue of reopening of assessment and proceeded to decide the disallowance made under section 80P(4) of the Act. Under these facts and circumstances, we set aside the order passed by the CIT(A) and remit the matter back to the file of the ld. CIT(A) to decide the legal issue after giving sufficient opportunities of hearing to the assessee. - I.T.A. Nos. 475/Mds/2012 & 2830/Mds/2014 - - - Dated:- 26-10-2016 - Shri Chandra Poojari, Accountant Member AND Shri Duvvuru RL Reddy, Judicial Member For the Appellant : Shri A.S. Sriraman, Advocate For the Respondent : Shri Durai Pandian, JCIT ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: Both the appeals filed by the assessee are directed against different orders of the ld. Commissioner of Income Tax (Appeals) I, Coimbatore dated 19.12.2011 for the assessment year 2008-09 and dated 08.09.2014 for the assessment year 2007-08. 2. The assessee has raised the following effective grounds: (i) The ld. CIT(A) has erred in sustaining the disallowance of the claim of deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee at ₹.3,44,31,305/- after making various additions/disallowances. 5. The assessee carried the matter in appeal before the ld. CIT(A) and raised various grounds. After considering the submissions of the assessee, the ld. CIT(A) dismissed the appeal filed by the assessee. 6. On being aggrieved, the assessee is in appeal before the Tribunal. With regard to the disallowance of the claim of deduction under section 80P(4) of the Act, by relying on the decision of the Hon ble Jurisdictional High Court in the case of CIT v. M/s. Veerakeralam Primary Agricultural Cooperative Credit Society in T.C.A. Nos. 735, 755 of 2014 and 460 of 2015, the ld. Counsel for the assessee has submitted the issue is squarely covered in favour of the assessee and pleaded that the disallowance made by the Assessing Officer should be deleted. 7. On the other hand, the ld. DR supported the order passed by the authorities below. 8. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The assessee is registered as a Cooperative Society under the Tamil Nadu Cooperative Societies Act, 1983. This society was forma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Public Distribution Division. The aforesaid assessee invested its funds in CDCC Bank etc., to comply with the statutory obligations and received interest from such investments, which has been headed under Income from other sources . Therefore, the interest income and dividend income have come under the taxable income under Section 80P(2)(a)(i) (d) of the Income Tax Act, 1961. The Assessing Officer has observed that the assessee by nomenclature is a Primary Agricultural Co-operative Credit Society and with the insertion of Section 80P (4), all the cooperative banks other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, become ineligible for exemption under Section 80P. 3. It is further stated that the meaning of Primary Agricultural Credit Society as defined in Section 5 (cciv) of the Banking Regulation Act, 1949, reads as follows :- (cciv) Primary Agricultural Credit Society means Co-operative Society :- (1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorised Representative at the time of assessment proceedings. 4. In the aforesaid circumstances, it is earnestly prayed that the deduction u/s 80P may be restored in toto in the assessment and the tax demand raised may be nullified. 4. The appellant has submitted before the Commissioner of Income Tax that Section 80P was amended vide Finance Act, 2006, with effect from 01.04.2007 i.e., from the Assessment year 2008-09 onwards. Sub section (4) was introduced under Section 80P. This subsection denied the deduction to a cooperative bank. Till the amendment of introducing subsection (4) under Section 80P, there was no requirement to analyse and understand the various terms, namely, banking business, agricultural credit society, primary cooperative society, the nature of head of income under which the income should be categorized etc.. The assessee is a primary agricultural credit society within the meaning of Bank Regulation Act, 1949. Subsection (cciv) which has been modified by Section 56 of the said Act, defines 'the Primary Agricultural Credit Society'. In view of the above definition, the assessee society provides financial assistance only to its mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, the revenue has filed the instant Appeals. 8. Learned counsel for the appellant would submit that revenue has filed the instant appeals mainly on the ground that allowing a claim for deduction, on the income arisen through banking business by the assessee society, is contrary to the provisions of law, when the deduction is allowable only for Primary Agricultural Credit Society and Primary Co-operative Agricultural and Rural Development Bank . And that the deduction is not allowable to a Primary Agricultural Credit Society, carrying on the business of banking. The appellant Revenue has raised such substantial questions of law, in the above appeals. 9. Learned counsel for the respondent submitted that they are a Primary Agricultural Co-operative Credit Society, within the meaning of Section 5 of Banking Regulation Act, 1949. Subsection (cciv) of the said Section, defines the Primary Agricultural Credit Society. The society provides funds only to its members and its bye-laws do not admit any other co-operative society as a member. The sub section (4) of Section 80P, provides that deduction under the said section shall not be extended to any Co-operative B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Primary Agricultural Co-operative Credit Society . The assessee claims to be a primary agricultural credit society , engaged primarily in the principle business of providing financial assistance to its members, during the assessment years 2008-2009, 2009- 2010 and 2010-2011. The members of the society are agriculturists and are governed by the Tamil Nadu Co-operative Societies Act, 1964. A Cooperative Bank, as defined in Section 5(cci) of the Banking Regulation Act 1949 means a primary co-operative bank. A primary co-operative Bank is a co-operative society other than a primary agricultural credit society. Therefore, a primary agricultural credit society need not be treated as a Primary Co-operative Bank. The terms co-operative bank and primary agricultural credit society for the purpose of subsection (4) of Section 80P Act, shall have the meanings, as assigned to them in part V of the Banking Regulation Act, 1949; going by Explanation (a) occurring after section 80P(4). For the purpose of that sub-section, primary cooperative agricultural and rural development bank is defined to mean what is stated in Explanation (b) to Section 80P(4) of the Income Tax Act. Therefore, prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Ltd. in ITA No.174/Mds/2013 decided on 23.08.2013, and also the recent judgment of the Gujarat High Court in the case of CIT vs. Jafari Momin Vikas Co-op. Credit Society Ltd. decided on 15.01.2014 reported as 2014 (2) TMI 28, were relied upon by the assessee society before the Tribunal. By considering the aforesaid decisions, the appeal was rejected by the Tribunal and held that the subsection 4 of Section 80P of the Income Tax Act, will not be applicable to the assessee society, since it is not a Co-operative bank. Therefore, it is made clear that the assessee society is admittedly not a co-operative bank but a credit co-operative society. 15. In the recent decision of the Kerala High Court, in the case of Chirakkal Service Co-operative Bank Ltd., Kannur vs. the Commissioner of Income Tax, reported in (2016) 68 taxmann.com.298 (Kerala), the High Court considered similar substantial questions of law (Issue No.A) raised by the assessee, regarding the entitlement for exemption under sub section (4) of Section 80P. By considering the fact that the assessee is a primary agricultural society, the Kerala High Court has answered the substantial question of law in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrecoverable in the accounts of the assessee during the previous year: From the above provisions of section 36(1)(vii) of the Act, it is very clear that the bad debt is allowable only if it is written off as irrecoverable in the books of the assessee. Therefore, the disallowance made by the Assessing Officer was rightly confirmed by the ld. CIT(A) and we find no reason to interfere with the above findings of the ld. CIT(A). Thus, the ground raised by the assessee is dismissed. I.T.A. No. 2830/Mds/2014 [A.Y. 2007-08] 11. The assessee has raised following effective grounds: (i) The ld. CIT(A) has erred in sustaining the disallowance of the claim of deduction under section 80P(4) of the Income Tax Act. (ii) The ld. CIT(A) has erred in confirming the disallowance of provision for bonus and ex-gratia as well as the provision for gratuity for the purpose of computation of taxable income. (iii) The ld. CIT(A) has erred in confirming the disallowance of provision for bad and doubtful debts under section 36(1)(vii) of the Act. (iv) The ld. CIT(A) has failed to appreciate that the order of reassessment under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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