2016 (5) TMI 1164 - HC - Income Tax

Appellant Cooperative Bank qualifies under Income-tax Act but not as primary agricultural credit society. Appeal dismissed.

Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. Versus Commissioner of Income-Tax and another

The court concluded that the appellant, a cooperative bank registered under the Kerala State Cooperative (Agricultural and Rural Development Banks) Act, ... Applicability of provisions of section 80P - whether the appellant is a 'co- operative bank' which is a 'primary agricultural credit society'? - Are the provisions of section 80P of the Income-tax Act excluded in terms of sub-section (4) of that section ; from application in relation to the Kerala State Co-operative Agricultural and Rural Development Bank Limited ; governed by the provisions of the Kerala State Co-operative (Agricultural and Rural Development Banks) Act, 1984 ; hereinafter, the 'CARDB Act' ? - Held that:- The condition in sub-clause (2) of clause (cciv) of section 5 of the Banking Regulation Act is to the effect that a primary co-operative society should not be one which permits admission of any other co-operative society as member, to be a 'primary agricultural credit society'. The provisions of the Kerala Co-operative Land Mortgage Banks Act, 1960 and of the CARDB Act show that the appellant Kerala State Co-operative Agricultural and Rural Development Bank Limited may admit a primary bank as its member. 'Primary bank' as defined in section 2(h) of the CARDB Act means, among other things, a co-operative society. Therefore, the appellant does not satisfy the condition prescribed in sub-clause (2) of clause (cciv) of section 5 of the Banking Regulation Act and hence, it is not a co- operative bank which is a primary agricultural credit society. In view of the aforesaid conclusion, we answer the question formulated above holding that the assessee does not fall within sub-section (4) of section 80P of the Income-tax Act for the assessment year in question. Hence, the impugned decision of the Tribunal does not warrant interference - Decided against assessee Issues:Interpretation of section 80P of the Income-tax Act, 1961 concerning co-operative banks and primary agricultural credit societies.Analysis:The judgment revolves around the interpretation of section 80P of the Income-tax Act, specifically focusing on whether the provisions of this section are excluded in relation to a particular co-operative bank governed by the Kerala State Co-operative (Agricultural and Rural Development Banks) Act, 1984. The court deliberates on the impact of the insertion of sub-section (4) of section 80P, effective from April 1, 2007, for the assessment year 2007-08 and thereafter.The appellant argued that as per the CARDB Act and related legislations, section 80P does not apply to them as they are not a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Conversely, the Revenue's advocate contended that the Tribunal's findings align with relevant statutory provisions.The court extensively analyzed the definitions of 'co-operative bank' and 'primary agricultural credit society' as per the Banking Regulation Act, incorporating definitions from the NABARD Act and the KCS Act. It was established that the appellant, being a society registered under the KCS Act, qualifies as a co-operative bank under section 80P.However, the court determined that the appellant does not meet the criteria to be classified as a primary agricultural credit society due to its ability to admit a primary bank as a member. This finding was supported by references to relevant acts and definitions within the Banking Regulation Act.The judgment also referenced Karnataka High Court decisions to distinguish the case at hand from credit co-operative societies, emphasizing that the appellant's structure does not align with the requirements of a primary agricultural credit society under section 80P.Ultimately, the court concluded that the appellant does not fall within the scope of section 80P(4) of the Income-tax Act for the relevant assessment year, leading to the dismissal of the appeal. The Tribunal's decision was upheld, and the appeal by the assessee was deemed unsuccessful.