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TMI Blog2020 (10) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the exemption shall not be available to co-operative banks (first part) other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank (PLD Banks). However, the ld. CIT(A) erred in considering that the deduction shall still be available to a co-operative society which is engaged in the business of providing credit facilities to its members. 3. The facts of the case are that the assessee is a Primary Agricultural Co-operative Society duly registered under the Karnataka Co-operative Societies Act, 1959 and is engaged in the business of accepting deposits from members and lending credit facilities to its members. For the assessment yeara 2015-16 and 2016-17, the assessee filed its return of income declaring income after claiming deduction of u/s. 80P(2)(d) of the Act. Thereafter, the assessee's case was selected for scrutiny under CASS and notice u/s. 143(2) was issued by the Assessing Officer. The assessee relied on the following case laws: a) The Totgars' Co-operative Sale Society in Civil Appeal No. 1622 of 2010. b) The Totgars' Co-operative Sale Society in ITA No. 100066 of 2016 dated 16/06/2017. c) M/s. Citizens Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of (i) the memorandum of association, the articles of association, (ii) the byelaws and other documents explaining the rules and regulations of the society is necessary, so as to clearly understand the purpose and the nature of business done by it. An examination of the facts in light of discussion cited by Ld.CIT(A) as well as decision of Hon'ble Karnataka High Court in case of Tumkur (Supra) is to be carried out. 11. We, therefore, remand the issue back to Ld.AO for re adjudicating it afresh on the basis of above direction. 12. Accordingly, appeals filed by assessee stands allowed for statistical purposes." 7. Countering this, the Ld. AR submitted that the issue should be remitted to the file of the Assessing Officer by following the decision of the Co-ordinate Bench in the case of M/s. Kodavoor Vyavasaya Seva Sahakari Sangha Niyamitha vs. ITO in ITA Nos. 707, 762, 765, 942, 1190 & 1191/Bang/2019 dated 26/08/2019 wherein it was held as follows: "4. We heard the rival submissions and perused the material on record. Prima facie, the sole disputed issue being denial of claim of deduction under Section 80P(2)(a)(ii) of the Act. The Assessing Officer has dealt on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 57 of the Act cannot be allowed. In upholding the above conclusions, the CIT(A), inter alia, relied on the decision of the Hon'ble Supreme Court in the case of The Totgar's Co-operative Sales Society Ltd., Vs. ITO 322 ITR 283 (SC) wherein the Hon'ble Supreme Court held that the benefit of deduction under section 80P(2)(a)(i) of the Act is only on income which is assessable under the head "Income from Business". Interest earned on investment of surplus funds not immediately required in short term deposits and securities by a Co-operative Society providing credit facilities to members or marketing agricultural produce to members is not business income but income from other sources and the society is not entitled to special deduction. 5. While learned AR relied on the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Credit Co-operative Ltd., 230 taxman 309 (Karn), the DR relied on a subsequent decision of the Hon'ble Karnataka High Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd., 395 ITR 611 (Karn.). We have carefully gone through the said judgment. The facts of the case before the Hon'ble Karnataka High Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tgars Co-operative Sale Society Ltd. (supra) and of Hon'ble Karnataka high Court rendered in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra)." 5. Similarly, on the issue of definition of the Member where Nominal Members are also eligible for benefits. The Member defined under the co-operative society Act bye-laws includes Nominal Member. We found Ahmedabad Bench of ITAT in ITA No.1328/Ahmd/2018 for Asst. Year 2015-16 in the case of Trapaj Vibhageeya Khet Udyog Mal Rupantar Food Processing Sahakari Mandali Ltd. Vs. DCIT (supra) at para 7 has held as under : " 7. We have heard ld.DR and gone through the record. We have also gone through case laws cited both the sides before ld.CIT(A). We find that fundamental facts which are not disputed by the Revenue authorities are that the assessee is a primary agricultural credit society registered under the Gujarat Cooperative Societies Act, 1961. It is engaged in providing credit facilities to the farmers in the region of Bhavnagar district. As per the AO, members of the assessee-society consisted of two types viz. regular member and nominal members. It is the case of the Revenue that assessee is doing more business wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of the assessee society are of primary agriculture activities. Competent authority has also recognized the assessee as primary agriculture credit society. In the earlier assessment year also, Revenue has accepted this fact and allowed the claim of the assessee. Judgment of Hon'ble Supreme Court in the case of Citizens Co-operative Society Ltd. (supra) is distinguishable on facts. In that case, status of the assessee is that of co-operative bank, whereas assessee in the present case is a primary agriculture credit society and applicability of section 80P(2)(4) of the Act. Considering all these facts, we are not convinced with the reasoning and finding given by the Revenue authority in denying claim of the assessee under section 80P(2). We allow the claim of the assessee and direct the ld.AO to re-compute income of the assessee by allowing claim under section 80P(2)(4) of the Act." Also in Tax Case Appeal No.882 and 891 of 2018 of Hon'ble Madras High Court in the case of The Prin. Commissioner of Income Tax Vs. S-1308 Ammapet Primary Agricultural Cooperative Bank Ltd. held in paras 11 to 18 as under : We found the facts of the present case are similar to the decision r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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