9911796707
TMI Blog2019 (10) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Year 2016-17. 2. The grounds raised by the assessee are as under :- "Issue no.1 - Disallowing the Deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 on Interest Received on Loans given to Nominal Members (Disallowance of ₹ 14,94,258 u/s 80P(2)(a)(i) of the Income Tax Act, 1961) 1. The learned Commissioner of Income Tax (Appeals)-1, Kolhapur (hereinafter referred to as "learned CIT(A)") erred in law and on facts in confirming the disallowance of deduction of ₹ 14,94,258 made by Income Tax Officer, Ward 2(3), Sangli (hereinafter referred to as "learned AO") u/s 80P(2)(a)(i) of the Income Tax Act, 1961 by treating the same as "Income from Other Sources" 2. The learned CIT(A) and learned AO erred in law and on facts in not appreciating the facts that Nominal Members is one of the category of members of the Co-operative Society as defined in State Legislature governing the appellant. 3. The learned CIT(A) and learned AO erred in law and on facts in not appreciating the difference between category of members as defined in applicable State Legislature governing the appellant society that from the State Legislature which was applicable to The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the above settled nature on the issue at the level of the Tribunal. 7. On the other hand, ld. DR for the Revenue relied heavily on the orders of the revenue authorities. 8. Heard both the sides. On perusing the order of the Tribunal in the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit dated 03.07.2019 (supra), I find identical issue came up for adjudication before this Tribunal and the Tribunal, as per discussion given in para 3 to 11 of its order, decided the issue in favour of the assessee. For the sake of completeness, the contents of para 3 to 10 of the said order of the Tribunal (supra) are extracted hereunder :- "3. The relevant facts as culled out from the material on record are as under :- Assessee is a Co-operative Society registered under Maharashtra Cooperative Credit Societies Act, 1960 and is stated to be engaged in providing credit facilities to its Members and accepts deposits from its members. Assessee filed its return of income for A.Y. 2015-16 on 29.09.2015 declaring total income at Rs.Nil after claiming deduction of ₹ 18,38,878/- u/s 80P of the Act. The case was selected for scrutiny and thereafter assessment was fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -members and the aggregate loan disbursed to these new non-members was ₹ 9,14,500/- and on which assessee had received interest of ₹ 46,901/-. AO also noticed that assessee had also provided credits facilities to 9 nominal members to whom the aggregate loan disbursed was ₹ 4,50,500/- and has received interest at ₹ 37,652/-. AO also noticed that assessee had invested surplus funds with PDCC Banks and other Banks and from which assessee had received interest aggregating to ₹ 12,79,098/-. AO was of the view that as per the provisions of Sec.80P(2)(d) of the Act, the assessee Society has to invest the surplus funds with Co-operative Society and not with Co-operative Banks. AO noted that no details for justification were furnished by the assessee. AO noted that though assessee had provided credit facilities to the new non-members and nominal members but had failed to submit any evidence of approval from the Managing Committee for being taken the new non-members or nominal members and had submitted only registration numbers and hence, according to AO, assessee had violated the bye-laws of the Society. AO was of the view that since the assessee had neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troduction of Sec.80P(4), by Finance Act 2006 w.e.f. A.Y. 07-08, the benefit of Sec.80P has been removed for co-operative banks which were hitherto enjoying the benefit of deduction under this section. The relevant Sec.80P(4) reads as : "The provision of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation - For the purpose of this sub-section : a. 'Co-operative bank' and 'primary agricultural credit society' shall have the meaning respectively assigned to them in Part V of the Banking Regulation Act 1949 (10 of 1949). b. 'Primary Co-operative agricultural and rural development bank means a society having its area of operation confined to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities". 6.1 Subsequent to the introduction of Sec.80P(4), controversy arose as to whether all the credit cooperative societies fall within the definition of cooperative bank mentioned in sec.80P(4). This issue was examined by the various Tribunals in the country and also by the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a representative of the society on any other society. It is also seen that the Maharashtra Co-operative Society Act 1960 provides for open membership as per Sec.23 of the Act. The society cannot refuse membership to any person duly qualified under the Act and its by-laws. The appellant's society by its very nature is not restricted to any class of persons or people from any specified area. As brought by the AO, the appellant has been admitting new members who are in need of loans. Thus, the activity of the appellant is more in the nature of business of finance. The Supreme Court in the case of Citizen Co-operative Society cited above, on similar grounds held that such societies would not be entitled to deduction u/s.80P(2)(a)(i) on the ground that it is not involved in co-operative activities. The borrowers and the depositors are quite distinct. As the facts of the appellant case are similar to that of the case decided by the Supreme Court, the decision of Supreme Court is also applicable to the appellant. Therefore, the action of the AO in disallowing the deduction u/s.80P(2)(a) is upheld. 7.1 As the society has been held to be not involved in co-operative activity, the dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has observed that the definition of "Member" given in Sec.2(19) of Maharashtra Cooperative Societies Act takes within its sweep even a nominal member, associate members and sympathizer members and has further observed that there is no distinction made between duly registered member, nominal and associate member and sympathizer member. He further submitted that the other reason for denying the claim of deduction u/s 80P was that since the assessee has deposited surplus funds with Co-operative Credit Society, it is not eligible for deduction. He submitted that the Co-ordinate Bench of the Tribunal on identical issue in the case of ITO Vs. Jankalyan Nagri Sahakari Pat Sanshta Ltd., (ITA No.598/PN/2011 order dt.26.06.2012) has decided the issue in favour of the assessee. He placed on record the copy of the aforesaid decision. He therefore submitted that following the decision of Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra), the issue be decided in assessee's favour. Similar arguments were raised by other Authorized Representatives also. Ld. D.R. on the other hand, supported the order of lower authorities. 9. I have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions' that the same are to be strictly construed and there is n room for any intendment. There is no presumption as to tax.Nothing is to be read or nothing is to be implied. One has to fairly look into language used by the Parliament. The Parliament has adopted the definition of the Co-operative Bank by referring the same as given in the Banking Regulation Act, 1949. It is called Legislation by reference and we have to give the strict interpretation while interpreting the effect of Sub-sec. (4) to Sec. 80 P. In our opinion, Co-operative Credit Society is distinct and separate from the Co-operative Bank nor it can be said as a Primary Co-operative Bank within the meaning of Banking Regulation Act, 1949. Hence, the assessee being a Co-operative Credit Society is entitled for deduction u/s. 80 P(2)(a)(i) of the Act. We accordingly uphold the order of the Ld CIT(A)." 10. Before me, it is assessee's contention that the facts in the year under consideration are similar to the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra). The aforesaid contention of the assessee has not been controverted by Revenue. Revenue has also not placed any contrary binding decision in its support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly, the benefit of Section 80P of the Act would stand attracted subject to the provisions contained in Sub-Section (2) of Section 80P of the Act. 14. Further, it is to be pointed out that in terms of Sub-Section (4) of Section 80P of the Act, which was inserted vide the Finance Act, 2006 with effect from 01.4.2007 i.e from the assessment year 2007- 08, the 'primary cooperative agricultural and rural development bank' means 'a society having its area of operation confined to a taluk, the principal object of which is to provide for long term credit for agricultural and rural development activities'. What was excluded was the 'cooperative banks' and admittedly, the assessee society is a primary agricultural cooperative credit society and therefore, would be entitled to the benefit of Section 80P of the Act. 15. Further, for the assessment year 2014-15, the decision in the case of Citizen Cooperative Society Limited was relied upon by the Revenue before the Tribunal, which, in paragraph 6.1 of its order dated 28.2.2018 for the assessment year 2014-15, extracted the operative portion of that judgment. In that case, the Hon'ble Supreme Court found that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct Co-operative Central Cooperative Bank Ltd. (supra) has held that the definition of 'member' given in section 2(19) of the Maharashtra Co-operative Societies Act takes within its sweep even a nominal member, associate member and sympathizer member and there is no distinction made between duly registered member and nominal, associate and sympathizer member. I therefore, following the decision of Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra) and following the same hold that the assessee is eligible for deduction of ₹ 18,38,878/- u/s 80P(2)(d) of the Act in respect of the amount invested in PDCC i.e., Cooperative Banks and other Banks. I am further of the view that in the present case, the ratio of decision of the High Court in the case of M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. (supra) would be applicable. I therefore following the ratio of the decisions cited herein above and the decision of Hon'ble Bombay High Court hold that assessee is eligible for deduction u/s 80P of the Act. Thus, the grounds of allowed. the assessee are 9. Considering the facts of the case and the above settled nature of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
