TaxTMI 
TaxTMI 
2014 (10) TMI 350
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.... 3. The assessee were given deduction u/s. 80P in respect of the earlier assessment year and there is no reason why the deduction is denied for the assessment year 2009-10 without any fresh reason for disallowance. 4. The assessee is giving agricultural loan to the members of the society and hence the income of the society is exempted under Mutuality. 5. The Commissioner of Income Tax (Appeals) has gone wrong in concluding the agricultural loans is only 31.81% of the loan. The gold loan are for agricultural purposes and the other loans are for related matters of agriculture. For the purpose of the percentage of utilization of loan, the fixed deposit loan of Rs. 1,67,88,656/- at 5.43% of the total loans, day deposit loan Rs. 15,62,025/- and employee's overdraft Rs. 41,10,338/- should not be considered. The loans are given only to members of the society. 6. The assessee society is filing return under the Act every year and the assessment is completed u/s. 143(3) of the Act and....
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....icate as to the classification/registration as Primary Agricultural Credit Societies. But, by virtue of the amendment of Section 2(oa) of the Kerala Co-operative Societies Act, if the Society does not continue to fulfil the obligation, it will lose the colour and characteristics of a Primary Agricultural Credit Society, except for thepurpose of staff strength. Thus, it is very much obligatory for the petitioners societies, who claim the status and the benefits of Primary Agricultural Credit Societies to substantiate that their main object of incorporation is being continued to be fulfilled as well..... 17. As held already, it is for the petitioners to establish their status as Primary Agricultural Credit Societies by obtaining and producing the relevant certificate from the competent authority, as mentioned hereinbefore. It is also open for the petitioners to opt to produce the relevant records before the Income Tax authorities as well, to establish their status and credentials, that there is no lapse in fulfilling the objective as Primary Agricultural Credit Societies so as to absolve from further proceedings at....
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....nk but a credit co-operative society. Exclusion clause of sub-section (4) of section 80P, therefore , would not apply. In the result, Tax Appeals are dismissed." 6. The Ld. AR further submitted that even on applying the concept of mutuality, the assessee's claim is to be allowed. For this, he relied on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Talangang Co-op Group Housing Society Ltd., (2010) 44 DTR (Del) 58 and the decision of the Hon'ble Supreme Court in the case of Chelmsford Club vs. CIT, (2000) 243 ITR 89 (SC). 7. On the other hand, the Ld. DR submitted that this is a covered matter wherein the Tribunal consistently held that when the assessee is carrying on the operation in the field of banking, the assessee cannot be granted deduction u/s. 80P of the Act. He submitted that the question of applying the concept of mutuality also does not arise. 8. We have heard both the parties and perused the material on record. In this case, the assessee's contention is that it is lending money primarily for the purpose of agricultural activities and its member agriculturists. Being so, the assessee is entitled for deduction u/s. 80P of the Act. We h....
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.... which the co-operative society must be engaged to be eligible for deduction under sub-clause (i). These two activities are not alternate ones because the section allows deduction to the co-operative society on the whole of profits and gains of business attributable to any one or more of such activities. This pre-supposes that eligible co-operative society can carry on either one of these two businesses or can carry both these businesses for the members. If the Assessee co-operative society carries on one or both of the activities, it will be eligible for deduction. These two activities are (a) co-operative society engaged in carrying on business of banking facilities to its members or (b) co-operative society engaged in providing credit facilities to its members. Both the activities must be carried on by the co-operative society for its members. If a co-operative society is engaged in carrying on these activities/facilities for the persons other than its members, the co-operative society, in our opinion, will not be eligible for deduction u/s 80P(2)(a)(i) on the income which it derives from carrying on the activities not relating to its members. Therefore, where a co-operative soc....
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....p share capital and reserve of which are 1 lakh or more and thirdly, by laws of the co-operative society do not permit admission of any other co-operative society as a member, it will be regarded to be primary co-operative bank. If co-operative society does not fulfill any of the conditions, it cannot be regarded to be a primary cooperative bank. Therefore, in the case of the Assessee we have to examine on the basis of the facts and materials on record whether the Assessee co-operative society complies with all the three conditions. In case, it does not comply with all the three conditions, it cannot be regarded to be a co-operative bank and the provisions of Sec. 80P(4), in our opinion, will not be applicable in the case of the Assessee. Once, the Assessee will not fall within the provisions of Sec. 80P(4), the Assessee, in our opinion, will be eligible to get deduction u/s 80P(2)(a)(i) in respect of whole of the income which the Assessee derives from carrying on the business of banking or providing credit facilities to its members. 8.6 Whether condition no. 1 is applicable in the case of the Assessee, for this we have to look into the bye-laws of the Assessee. The objects of t....
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....l business of the Assessee is transaction of banking business? Banking business has been defined u/s 5(b) of the Banking Regulation Act in the following manner : " banking" means the accepting, for the purpose of lending or in vestment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise." From the said definition it is clear that banking means accepting deposit of money from the public which is repayable on demand or otherwise and withdrawal of these deposits by cheque, draft, order or otherwise and these deposits are accepted for the purpose of lending or investment. These deposits must be accepted from the public, not only from the members. These deposits must be repayable on demand or otherwise and could be withdrawn by the depositor by cheque, draft or otherwise. We notice that the CIT(A) has given a categorical finding that the Assessee has carried on banking activities on the basis of findings in the assessment order. The relevant portion of the assessment order is as under : &....
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....rned, there is no dispute that the paid up share capital and reserves in the case of the Assessee is more than Rs. 1 lac. Therefore, the Assessee satisfies the second condition. 8.9 Thus, we notice that all the three conditions in the case of the assessee for becoming primary cooperative bank stand complied with. 8.10 We have gone through the decision of the Hyderabad bench of this Tribunal in the case of The Citizen Cooperative Society vs. Addl. CIT, 41 305 (Hyd). We notice that this decision is applicable to the facts of the case before us. In that decision, under para 23 the Tribunal has given a finding that the Assessee is carrying on banking business and for all practical purposes it acts like a co-operative bank. The Society is governed by the Banking Regulations Act. Therefore, the society being a cooperative bank providing banking facilities to members is not eligible to claim deduction u/s 80P(2)(a)(i) after the introduction of sub-section (4) to section 80P. In view of this finding, the Assessee was denied deduction u/s 80P(2)(a)(i). We have also gone through the decision of the Bangalore Bench of the Tribunal in the case of ITO vs. Divyajyothi Credit Cooperative So....
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....cieties are not established for the purpose of doing "banking" as defined in section 5(b) of the Banking Regulation Act, 1949." This decision, in our opinion, is not applicable to the case before us because the provisions of Sec. 80P(2)(a)(i), as we have already held in the preceding paragraphs, are applicable to a co-operative society which is engaged in carrying on banking business facilities to its members if it is not a co-operative bank. We have also gone through the decision of this Bench in the case of DCIT vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. in ITA No. 1 to 3/PNJ/2012 dt. 30.3.2012 (supra). While discussing this issue, after analysing the aims and objects of the cooperative society under para 12 of its order, this Tribunal has held as under : "12.From the aforesaid objects, it is apparent that none of the aims and objects allows the assessee cooperative society to accept deposits of moneyfrom public for the purpose of lending or investment. In our opinion until and unless that condition is satisfied, it cannot be said that the prime object or principal business of ....
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....TR 673 (AP) and CIT vs. Bhavnagar Trust Corporation (P) Ltd., 69 ITR 278. Further, the Hon'ble Kerala High Court in the case of Kottayam Co-operative Land Mortgage Bank Ltd. vs. CIT, 172 ITR 443(Ker.) where it was held as under: "The Income-tax Officer held the view that the assessee is not entitled to claim any further exemption under clause (c) as the assessee is entitled to exemption u/s. clause (a) in respect of the banking activities. The Appellate Assistant Commissioner, in allowing the assessee's appeal, held that exemption under clause (c) is in addition to the exemption allowable under clauses (a) and (b) and directed the Income-tax Officer to allow a deduction of Rs. 20,000 separately, taking into consideration the property income earned by the assessee. The Revenue carried the matter in appeal before the Appellate Tribunal. The Tribunal held that the rule of construction of ejusdem generis applies to the construction of clause (c), which results in profits and gains, that the income from house property has been dealt with in sections 22 to 27 as income and not as profits and gains and that the as....