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TMI Blog2024 (1) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is indeed a cooperative society u/s. 2(19) of the Act, an aspect we advert to later. Assessee is in the business of banking - Any member of the public can, as explained therein, become a member on paying a nominal sum, which in fact is insisted upon as a practice, making co-operative societies, as the assessee, essentially public institutions. The legal basis for the same is found in sections 58 to 60 of the Kerala Act. Further, by providing membership to all on payment of a nominal fee, without extending them the rights and privileges of a member, there is thus, clearly, acceptance of deposits from and, equally, lending to, the members of the public, i.e., for all practical purposes, even as explained in The Karannur Service Co-op. Bank Ltd. [ 2023 (12) TMI 1254 - ITAT COCHIN] - So, however, again, nothing turns thereon inasmuch as the same is not an inhibiting factor; the income there-from being equally eligible, i.e., as on provision of credit to it s members, for deduction u/s. 80P(1) inasmuch as s. 80P(2)(a)(i) treats the two activities at par, being, rather, more beneficial to the assessee as it extends deduction to income from non-members also. If the assessee, osten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CS) (under the Kerala Co-operative Societies Act, 1969 Kerala Act) claim for deduction, made for the entirety of it s business profit at Rs.48.19 lakhs, u/s. 80P(1) r/w s. 80P(2)(a)(i) of the Act, denied in view of section 80P(4), i.e., as it stands after its amendment by Finance Act, 2006, w.e.f. 01.04.2007. 3. The basis for the said denial by the Revenue, as a perusal of their orders by the assessing and first appellate authority, shows, is as under: (a) the lending to the agricultural sector being at a negligible 0.38% of it s total lending, so that it cannot be regarded as a PACS, i.e., by definition; (b) acceptance of deposits by the assessee-society from, besides it s members, nonmembers. 4. We have heard the parties, and perused the material on record. 4.1 We agree with the Assessing Officer (AO) that the assessee is not a PACS for the purposes of section 80P inasmuch as what is relevant is it s definition under the Banking Regulation Act, 1949 (BRA), which stands co-opted u/s. 80P of the Act. The same, together with s. 80-P in its relevant part, reads as under: Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provisions of this Act, as in force for the time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to the following modifications, namely : (a) throughout this Act, unless the context otherwise requires, (i) references to a 'banking company' or 'the company' or 'such company' shall be construed as references to a co-operative bank, (ii) references to 'commencement of this Act' shall be construed as references to commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965); (b) in section 2, the words and figures 'the Companies Act, 1956 (1 of 1956), and' shall be omitted; (c) in section 5, (i) after clause (cc), the following clauses shall be inserted namely: (cci) (cciii) (cciv) 'primary agricultural credit society' means a 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 activities (including the marketing of crops) ; and (2) the bye-laws of which do not permit admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g membership to all on payment of a nominal fee, without extending them the rights and privileges of a member, there is thus, clearly, acceptance of deposits from and, equally, lending to, the members of the public, i.e., for all practical purposes, even as explained in The Karannur Service Co-op. Bank Ltd. v. ITO (in ITA Nos. 248-249/Coch/2020, dated 16/11/2023). Reference, with profit, may also be made to the decision in Mohammed Usman v. Registrar of Co-operative Societies, AIR 2003 (Ker) 299/[2003] 116 Company Cases 505 (Ker) /2003 (1) KLT (69). So, however, again, nothing turns thereon inasmuch as the same is not an inhibiting factor; the income there-from being equally eligible, i.e., as on provision of credit to it s members, for deduction u/s. 80P(1) inasmuch as s. 80P(2)(a)(i) treats the two activities at par, being, rather, more beneficial to the assessee as it extends deduction to income from non-members also. 4.3 The question that, however, needs to be considered is if the assessee, ostensibly a co-operative society u/s. 2(19) of the Act inasmuch as it is a society registered under the Kerala Act, is a co-operative bank , a term which again stands defined u/s. 80-P with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing. The assessee, sure, has not applied therefor, but that is on the notion of it being a PACS, which claim it does not satisfy on facts. One cannot, after all, take advantage of his wrong to the prejudice of the other side. Why, in Mavilayi SCB Ltd. (supra), as the Tribunal notes, the fact of cooperative societies undertaking banking business without obtaining licence from RBI, i.e., unlicenced, was emphasized by the Revenue, and with reference to a communication by the RBI itself. Further, in the facts of Sivapuram SCB Ltd. (supra), it s bye-laws bore no restriction for the admission of another cooperative society as a member. The same was thus a cooperative-society in terms of s. 2(19) of the Act read with s. 2(oaa) of the Kerala Act, satisfying the basic condition of s. 80P(1) for deduction thereunder. This aspect needs to be verified. Further still, the restriction as to area of operation, relevant in view of s. 2(oaa) of the Kerala Act, inasmuch as, where so, it is inconsistent with the Revenue s claim of the assessee being a public institution, undertaking banking business, implying that any member of the public, irrespective of his place of residence or, as the case may b ..... 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