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TMI Blog2021 (5) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... 782 - SC ORDER] the enunciation of law is emphatic: the authorities under the IT Act cannot go behind the certificate. Here, indisputably, all the Assessee have been registered as cooperative credit societies. Banking, as understood by the Revenue, has never been its core activity. Their accepting deposits from non-members does not disqualify them from claiming benefits under section 80P of the IT Act. - Decided in favour of assessee. - TAX APPEALS No.2,9, 23, AND 26 of 2018 - - - Dated:- 7-5-2021 - M.S. SONAK DAMA SESHADRI NAIDU, JJ. Ms. Amira Razaq, Standing Counsel for the Appellant. Mr. D.J. Pangam with Mr. P. Sawant, Advocates for the Respondent. JUDGMENT: (Per Dama Seshadri Naidu, J.) Introduction: A cooperative credit society, registered under the Goa Cooperative Societies Act, 2001, claims deductions under section 80P(2)(a) (i) of the Income-Tax Act, 1961 ( IT Act ). It is in the face of section 80P(4) of the same Act, effective from 01.04.2007. The question is, with its lending and borrowing involving non-members, whether the society still retains its character as cooperative society or whether it should be treated as a cooperative bank, dise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue appealed under section 253 of the IT Act to the Income Tax Appellate Tribunal (Tribunal). The Tribunal by Order, dated 10.07.2017, dismissed the Revenue s appeal. Further aggrieved, in November 2017, the Revenue has preferred this appeal under section 260A of the IT Act, 1961. 7. On 26 February 2018, this Court admitted the appeal after framing these substantial questions of law: Substantial Questions of Law: I. Is the Income Tax Appellate Tribunal right in not appreciating the fact that the assessee is a co-operative society which fulfills all the three conditions of being held a Primary Co-operative Bank, as given in Section 5(ccv) of Banking Regulation Act, 1949? II. Is the Tribunal right in not appreciating the definition of a cooperative bank, which, as per explanation below Section 80P(4) The Co-operative bank , shall have the meaning assigned to it in part-V of the Banking Regulation Act, 1949? III. Is the Tribunal right in not appreciating the facts that the assessee Society being a credit cooperative society engaged in banking business is a Primary Co-operative Bank within the definition of Section 5(ccv) of the Banking Regulation Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,864/- is liable to be disallowed for the Assessee's failure to comply with section 194A of the IT Act. Besides, The AO is disallowed the audit fee of over ₹2 lakh for the assessee's failure to comply with section 194J of the IT Act. Thus, the AO assessed to tax a total income of ₹3,69, 82,101/-. 12. To put the issue in perspective, we must appreciate the previous litigation involving the same Assessee. Indisputably, the appellant is Cooperative society registered under the Goa Co-operative Societies Act, 2001 ('Cooperative Act'). Earlier, there was a common order, dated 26 November 2014, passed by the Tribunal relating to assessment years 2008-09, 2009-10 and 2011-12. The Quepem Urban Co-operative Credit Society Ltd. (2015): 13. First, the AO disallowed the Assessee s claim for deduction under Section 80P(2)(a)(i) of the IT Act. This was on the ground that the Assessee was a primary Co-operative Bank and, therefore, was hit by section 80P(4) of the IT Act, which excludes the benefit of section 80P of the IT Act to cooperative banks. 14. On appeal, the Commissioner of Income Tax (Appeals) ( CIT(A) ) accepted the Assessee s contention and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banking; (2) Its paid up share capital and reserves should not be less that rupees one lakh. (3) Its bye-laws do not permit admission of any other cooperative society as its member. 19. It is an accepted position that condition No.(2) is satisfied as the share capital is in excess of one lakh rupees. But, as the Assessee has contended, the conditions Nos. (1) and (3) have not been satisfied. 20. That apart, the fact remains that the Assessee does deal with non-members in a few cases; it accepts deposits from them. This activity, taken with its Bye law 43, allowed the Revenue to conclude that the Assessee is carrying on banking business. Before the Tribunal also the Assessee did not dispute that in a few cases it had dealt with non-membes That said, the Assessee contended that the Bye-law 43 only permits the society to accept deposits from its members. In other words, Bye-law 43 does not permit deposits from persons other then members; the word any person , the Assessee asserted, is a gloss the Tribunal added in the impugned order, though it is not found in Bye-law 43. 21. Then, this Court has held that indisputably the transactions with non-members are insigni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the contrary, permits an inquiry by the IT authorities into the factual situation: whether a society is in fact conducting business as a co-operative bank but not as a primary agricultural credit society. 27. In fact, these divergent views compelled the Kerala High Court to refer the matter to a Full Bench. Then, in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut, 2019 (2) KHC 287, ( Mavilayi HC ) the Full Bench has endorsed Perinthalmanna Service Cooperative Bank s view: that the IT Authority can go behind the certificate granted by the Registrar of Co-operative Societies. To hold thus, the Full Bench has relied on the Supreme Court s Citizen Cooperative Society Ltd. v. Asst. CIT, Hyderabad (2017) 9 SCC 364. The Full Bench decision taken in further appeal, the Supreme Court, finally, in Mavilayi SC considered the controversy threadbare and reversed the Kerala High Court s Full Bench decision. It has, thus, endorsed Chirakkal Service Co-operative Bank s view. 28. Here, before us, an identical question of law has arisen. It will suffice if we examine the case holding of Mavilayi SC and see whether it applies on all four. For here, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it or what logically follows from the various observations made in it. 31. Then, Mavilayi SC turns to the proper interpretation of Section 80P of the IT Act. In interpreting that provision, it refers, among other things, to (a) the marginal note to Section 80P to ascertain the general drift of the provision; to the Finance Minister s speech, dated 28.02.2006, on the floor of Parliament; to a Circular dated 28.12.2006, explaining the provision as found in the Finance Act, 2006. Eventually, Mavilayi SC holds that to earn eligibility for deduction, the assessee must be a co-operative society ; it is unnecessary to probe any further whether the co-operative society is classified as X or Y. Besides, the gross total income must include income that is referred to in sub-section (2) of section 80P of IT Act. 32. Mavilayi (SC) has referred to sub-section (4) of section 80P, which, according to it, is in the nature of a proviso to that section. This sub-section clarifies that no deduction shall be admissible for a cooperative bank. But, if it is a primary agricultural credit society or a primary cooperative agricultural and rural development bank, the deduction will still be provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) observes: Nor can it be said that it would logically follow from the finding on facts that the assessing officer can go behind the registration of a society and arrive at a conclusion that the society in question is carrying on illegal activities. * * * Secondly, for purposes of eligibility for deduction, the assessee must be a co-operative society . A co-operative society is defined in Section 2(19) of the IT Act, as being a co-operative society registered either under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of co-operative societies. This, therefore, refers only to the factum of a co-operative society being registered under the 1912 Act or under the State law. For purposes of eligibility, it is unnecessary to probe any further as to whether the co-operative society is classified as X or Y. (Italics supplied) 37. Section 80P being a beneficial provision, according to Mavilayi (SC), must be construed with the object of furthering the co-operative movement generally. And section 80P(2)(a) (i) must be contrasted with section 80P(2)(a)(iii) to (v), which expressly speaks of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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