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TMI Blog2022 (11) TMI 1528X X X X Extracts X X X X X X X X Extracts X X X X ..... a of operation is limited to a place in the State or within the State or in the latter, the area of operation can be expanded to Multi-states. All the attributes weighed with the Apex Court for interpreting Co-operative Societies etc., in Mavilayi Service Cooperative Bank Ltd [ 2021 (1) TMI 488 - SUPREME COURT ] are available and attracted to the case on hand. The MSCS Act is an Act of the Parliament, and restricting the deduction under Section 80P to an Act of parliament and extending it to the bodies coming into existence under an enactment of the State could again defeat not only the contemporaneous definition applicable to Section 2(19) read with Section 80P of the Act. Thus, we are holding that the assessee is a Society registered under MSCS Act, comes within the definition of Section 2(19) of the Act, hence entitled to the benefit of Section 80P of the Act. The question is answered in favour of the assessee. Correct head of income - interest from surplus fund is Income from business or Income from other sources - HELD THAT:- As argued that the assessee, after satisfying the test of being a Cooperative society and falling within the range of the Mavilayi Service Cooperative Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on judgment. ITA No.68/2017 has been treated as the lead case by the counsel appearing for the parties. ITA 68/2017 4. The assessee is a multi-state Co-operative Society registered under Section 7 of the Mult-State Co-operative Societies Act, 2002 (for short, 'MSCS Act'). The assessee extended its operation to the States of Kerala and Tamil Nadu. The assessee, on 20.09.2012, filed the return of income for the assessment year 2012- 13. The assessee claimed a deduction under Section 80P of the Income Tax Act, 1961 (for short, 'the Act') of Rs. 1,42,23,305/- and return of income at Rs.1,62,080/-. 5. The Assessing Officer first disallowed the deduction claimed under Section 80P of the Act. Further, the Assessing Officer concludes that the assessee earned income from interest on deposits from members and deposits made in scheduled Banks from trading commodities and interest from call money depositors. In view of the view taken by the Assessing Officer, the said income has been treated as income from other sources (vide order dated 11.03.2015). 6. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) (for short, 'CIT (Appeals)'), and the First Appellate Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax v. Surya Herbal Ltd. "Liberty is given to the Department to move the High Court pointing out that the Circular dated February 9, 2011, should not be applied ipso facto, particularly, when the matter has a cascading effect. There are cases under the Income-tax Act, 1961, in which a common principle may be involved in subsequent group of matters or a large number of matters. In our view, in such cases if attention of the High Court is drawn, the High Court will not apply the Circular ipso facto. For that purpose, liberty is granted to the Department to move the High Court in two weeks. The special leave petition is, accordingly, disposed of. (2) Commissioner of Income Tax v. Tarun R. Tahliani "In these appeals, the tax effect is less than Rs. 1 Crore and are covered by Circular No. 3/2018 dated 11.07.2018 of the Central Board of Direct Taxes. These appeals are, accordingly, dismissed. However, it shall be open to the Income-Tax Department to seek review in any of these matters, if it is pointed out that the tax effect is more than Rs. 1 Crore. Pending applications, if any, stand disposed of. (3) S.C. Naregal v. Commissioner of Income Tax "Similar quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous Circulars issued by the CBDT in the subsequent years to the subject assessment year as well for one available reason or not, the assessee would continue to avail the benefit of Section 80P(2) of the Act. Assuming that the Commissioner accepts the view of the assessee both on the standing of the assessee and eligible deductions available on this behalf, in that particular year, if the monetary limit is less than One crore, the remedies of appeal before the Tribunal and in this Court are precluded. Therefore, the principal issue is considered, and thereafter, the entitlement of deductions of interest earned from other deposits could be considered and decided as held by this Court in Principal Commissioner of Income Tax (Appeals) v. Peroorkada Service Co-operative Bank Ltd [2022] 442 ITR 141 (Ker.) 10. We have considered the preliminary objection on the continuation of the appeal and the Revenue's reply. Upon due consideration of the extant Circulars issued by the CBDT on the monetary limit, we do not doubt that the exception stated by the Hon'ble Supreme Court in the reported judgments is not applicable, which would have been a straight case for following the Circulars and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Mavilayi Service Co-operative Bank Ltd, the assessee is not entitled to the benefit under Section 80P of the Act. It is stated there is no binding precedent on the question urged by the Revenue, and from a plain reading of Section 2(19) and 80P of the Act, the assessee is a society registered under MSCS Act, is beyond the scope of Section 80P. He prays for answering the questions in favour of the Revenue and against the assessee. In such favourable consideration by this Court, other questions need not be considered. Alternatively, other questions, it is argued, are covered by the judgment of this Court in Peroorkada Service Cooperative Bank Ltd (Supra). 12. Mr A Kumar argues that the definition of 'Co-operative Society' has contemporaneous and contextual meaning. In the case on hand, the assessee is a Cooperative society registered under the MSCS Act. The nomenclature of the MSCS Act sets out that a society registered under this Act can operate in more than one State. In other words, the Co-operative society registered under the Kerala Co-operative Societies Act, 1969, can operate only within the territorial limit of the State of Kerala. Except for the said distinction, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety or have any interest in the management thereof including right to vote, elect as a director of the board or participate in the general body meetings Section 16 deals with persons who may become members Section 25 deals with persons who may become members Cooperative principle is defined under section 2(eccc) Cooperative principle is defined under Section 3(g) ● Both - Co-operative societies registered under the State Act and Multi State Cooperative Societies registered under the Multi State Cooperative Societies Act work on the same cooperative principles and its Bye-laws are to provide for social and economic betterment of its members through self-help and mutual aid in accordance with the co-operative principles as specified in the Objects of the respective Acts. ● Administrative and financial control of these societies are with the Registrars appointed under the Act. ● The provisions relating to membership, "nominal and associate members are identical. ● Nominal and associate members are not eligible for any share in the assets and profits of the Society and have no voting rights. ● As per Sections 2(19) of the Income Tax Act Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to encourage and promote growth of cooperative sector in the economic life of the country. It was done pursuant to the declared policy of the Government. Therefore, such a provision has to be read liberally, reasonably and in favour of the assessee (see Bajaj Tempo Ltd. v. CIT [(1992) 3 SCC 78]). It is also trite that such a provision has to be construed as to effectuate the object of the legislature and not to defeat it (see CIT v. Mahindra and Mahindra Ltd. [(1983) 4 SCC 392]). Therefore, it hardly needs to be emphasised that all those cooperative societies which fall within the purview of Section 80-P of the Act are entitled to deduction in respect of any income referred to in sub-section (2) thereof. Clause (a) of sub-section (2) gives exemption of whole of the amount of profits and gains of business attributable to any one or more of such activities which are mentioned in sub-section (2). Therefore, the definition is in the Income Tax Act from the inception of the Act, and the definition has to be contemporaneously applied to an Act made by the Parliament as the MSCS Act. The denial of Section 80P benefit to the Society and its members would again defeat the very pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as construed Section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; (IV) This is for the reason that when the legislature wanted to restrict the deduction to a particular type of co-operative society, such as is evident from Section 80P(2)(b) qua milk cooperative societies, the Legislature expressly says so - which is not the case with Section 80P(2)(a)(i); (V) That Section 80P(4) is in the nature of a proviso to the main provision contained in Section 80P(1) and (2). This proviso specifically excludes only co-operative banks, which are cooperative societies who must possess a licence from the RBI to do banking business. Given the fact that the assessee in that case was not so licenced, the assessee would not fall within the mischief of Section 80P(4)." 13.1 All the attributes weighed with the Apex Court for interpreting Co-operative Societies etc., in Mavilayi Service Cooperative Bank Ltd are available and attracted to the case on hand. The MSCS Act is an Act of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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