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TMI Blog2024 (12) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... e had not deducted the TDS u/s. 194A of the Act. The AO also disallowed deduction claimed on the interest received from the deposits made with the banks. The assessee challenged the said order before the Ld.CIT(A) and contended that the assessee is a cooperative society registered under the provisions of Kerala Co-operative Societies Act and its primary object is to provide financial assistance to its members for agricultural purposes or for rural development activities and therefore eligible for deduction u/s. 80P of the Act. The assessee also contended that the interest income was received from the Kerala State Cooperative Agricultural and Rural Development Bank Ltd. which is a cooperative society and therefore the interest income is eligible for deduction u/s. 80P(2)(d) of the Act. The assessee further contended that the interest was paid to the Kerala State Co-operative Agricultural and Rural Development Bank Ltd. for the loans availed by the assessee and the said bank being a co-operative society, are not liable to deduct the TDS u/s. 194A(3)(iii) of the Act. Insofar as the payment of interest to the members are concerned, the assessee contended that as per section 194A(3)(v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tocks or other articles intended for agriculture for purpose of supplying them to its members. Society is also engaged in long term loan to rural development activities and accepts deposits from the members to facilitate the main objects. The deposit from the members is the main source of funds and which form the corpus for providing credit facilities to the members. 4. For the AY 2018-2019, the appellant has filed their return on income on 31.10.2018 declaring the total income as NIL after claiming deductions under Section 80P of the Income Tax Act. Thereafter the return was processed under Section 143(1) if the Income Tax Act based on which a notice under Section 143(2) was issued to the appellant. In response to the said notice, the appellant submitted their replies along with statement of total income, copy of P & L account, balance sheet, audit report, and other relevant documents. Ignoring the submissions and the averments made by the appellant, the assessing authority on 22.9.2021 issued as assessment order under Section 143 of the Income Tax Act making the following additions: (a) Disallowance of Section 80P deduction on income from business to the tune of Rs 2513759/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. In the instant case the appellant earned interest from Kerala State Cooperative Agricultural and Rural Development Bank (KSCARD Bank), the Apex body of the Primary Co-operative Agricultural and Rural Development Banks in the State of Kerala. KSCARD Bank was a cooperative society registered under Section 10 of the erstwhile Travancore-Cochin Co-operative Societies Act, 1951. Presently it is registered under Kerela State Cooperative Societies Act. The functions of which are governed by Kerala State Co-operative Agricultural Development Bank Act, 1984 and thereafter by Kerala State Co-operative Agricultural and Rural Development Bank Act in 1990. Therefore, KSCARD Bank being a cooperative society registered under the Kerala Cooperative Societies Act, the interest earned could be treated as meriting consideration under clause (d) of section 80P(2) of the Act. It is not in dispute that the District/State Cooperative Banks have licence from the Reserve Bank of India under the Banking Regulation Act and are registered Cooperative Societies under the Act. Since Society doing banking business such society will stand on par with a Co-operative Society registered under the Kerala Co-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ............. (iv) ............ (v) to such income credited or paid by a co-operative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a cooperative society to any other co-operative society. Explanation.-For the purposes of this clause, "cooperative bank" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (vi) ............ (vii)............. (viia) to such income credited or paid in respect of- (a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a cooperative land development bank; (b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking; 9. As stated above KSCARD Bank was a cooperative society registered under Section 10 of the erstwhile Travancore-Cochin Co-operative Societies Act, 1951 and presently it is registered under Kerela State Cooperative Societies Act and therefore by opertation of the provision of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rural Development Bank Ltd. and hence not eligible for deduction u/s. 80P(2)(d) of the Act. Insofar as the non-deduction of TDS, the Ld.DR submitted that no details were furnished before the Ld.CIT(A) and therefore prayed to dismiss the appeal. 7. We have heard the arguments of both sides and perused the materials available on record. 8. In this appeal, there are 2 disputes, one relates to the disallowance of interest income received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. on the premise that the interest income received from the co-operative banks are not eligible for deduction. 9. The next dispute is with regard to the disallowance of 30% of the interest payment made to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. on the ground that no TDS was deducted by the assessee while making the interest payment. 10. We will take up the first issue i.e. the disallowance of interest income received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. u/s. 80P(2)(a)(i) of the Act, the authorities below had held that the interest income received from the banks are not eligible for deduction b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities : Provided that in the case of a co-operative society falling under subclause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:- (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government; (b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to- (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e up for hearing before the Hon'ble Supreme Court and the Hon'ble Supreme Court after elaborately discussing the provisions, had categorically held that The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. is a co-operative society and not a bank registered under the Banking Regulations Act. The said finding is given by the Hon'ble Supreme Court in its judgment reported in (2023) 154 taxmann.com 305 in the case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. vs. AO. Therefore the status of The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. was decided by the Hon'ble Supreme Court and therefore we are applying the said judgment to the facts of the present case and held that the interest income received from the said The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. is eligible for deduction u/s. 80P(2)(d) of the Act. The AO had given a statement about the interest incomes which is reproduced below. Interest from loan to members as per sheet 9,18,97,020/- FDR interest from Bank 39,607/- Interest on deposit 25,11,732/- Total Interest Income 9,44,48,359/- Dividend 21,88,290/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in carrying on the business of banking. As already discussed, the assessee paid interest to the The Kerala State Cooperative Agricultural and Rural Development Bank Ltd. which is a cooperative society registered under the provisions of the Kerala Co-operative Societies Act and therefore as rightly contended by the Ld.AR they need not deduct the TDS while making the interest payment. Similarly, it is the case of the assessee that they have paid interest of Rs. 16,80,374/- to their members and therefore they need not deduct the TDS as per section 194A(3)(v) & (viia) of the Act. We have perused the provisions and the audit report submitted for the A/Y 2018-19 and we are in agreement with the argument advanced by the Ld.AR and hold that the assessee need not deduct the TDS while making the payment to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. which is a co-operative society as well as to its members. 15. It seems that the assessee had not furnished any details about the payment of interest to the said bank as well as its members while the Ld.CIT(A) had decided the appeal and therefore we are of the opinion that this issue may also be remitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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