TaxTMI 
TaxTMI 
TaxTMI 
2011 (2) TMI 1422
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....P of the Act by insertion of sub-section (4) there-to by Finance Act, 2006, w.e.f. 1.4.2007, which reads as under:- '(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation - for the purposes of this sub-section, - (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.' 3.1 The assessee is, admittedly, neither a 'primary agricultural credit society' nor a 'primary cooperative agricultural and rural development bank'. As such, it is not covered by the exceptions to s. 80P(4), as provided by the said sub-section itself, denying deduction u/s. 80P to all cooperative banks. The Legislature in its wisdom restricted the exemption, which extends to the ....
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....tent it is relevant, reads as under:- '(2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in case of a cooperative society engaged in - (i) carrying on the business of banking or providing credit facilities to its members, or ... (vii) fishing or allied activities, ... the whole of amount of profits and gains of business attributable to any one or more of such activities:.....'. 4.2 The assessee's claim is that it is not a 'cooperative bank', so that it would not be hit by the provision of section 80P (4). In fact, it is not a bank, inasmuch as it is not in the business of banking. It would be incorrect to be guided by the presence of the word 'bank' in its name, which is not determinative of its character. It is in fact a land mortgage bank (now called Agricultural and Rural Development Bank), to which the provisions of Banking Regulation Act, by virtue of section 3 thereof, do not apply, even as being a cooperative society providing credit facilities to its members, its income continues to enjoy exemption u/s. 80P(2)(a)(i) of the Act . 4.3 The Revenue's case, on the other hand, is that the assessee is a federal cooperative society, engaged ....
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....6 dated 19.10.2010) wherein the apex court held that the use of the word 'means' in a definition signifies a hard-and-fast definition. Adverting back to the definition, the assessee is clearly not a primary, the defining feature of which is that its bye-laws do not permit the admission of a cooperative society as its member, but a federated institution. As such, it is not a primary co-operative bank. Section 5 (ccvii) of the BR Act assigns the same meaning to the expression 'central cooperative bank' and 'state co-operative bank' (besides, primary rural credit society) as thereto by the National Bank for Agricultural and Rural Development Act, 1981 ('the NBARD Act'). Section 2(u) of the NBARD Act reads as under:- '(u) "State co-operative bank" means the principal co-operative society in a State, the primary object of which is the financing of other co-operative societies in the State: Provided that in addition to such principal society in a State, or where there is no such principal society in a state, the State Government may declare any one or more cooperative societies carrying on business in that State to be also or to be a State cooperative bank or State co-operative bank....
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....cipal co-operative society in a State which has, as its primary object, the providing of long-term finance for agricultural development. The Notes on Clauses to Finance Bill, 2006, vide clause 19 thereof, clarifies that the deduction u/s. 80P, which is qua the income of co-operative societies engaged in, inter alia, carrying on the business of banking or providing credit facilities to its members (s. 80P(2)(a)(i)), is withdrawn for all co-operative banks except primary agricultural credit society and primary co-operative agricultural and rural development bank. As such, but for these two primary units, all the co-operative societies, as covered u/s. 80P(2)(a)(i), shall no longer (effective A.Y. 2007-08) be eligible for deduction u/s. 80P. 4.6 Continuing further, as would be self-evident, the definition of a 'cooperative bank' does not enlist the condition of the conduct of the 'business of banking' as the criterion for a cooperative society to be a cooperative bank. In fact, it is not even stated as one of the qualifying activities; the sole and defining activity that qualifies a cooperative society to be a cooperative bank, be it at the primary, district or state level, is the fi....
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.... with the consideration that the expression 'member' was used in section 80P(2)(a)(i) in the normal sense (of a member of a co-operative society), and that the intention was to extend exemption to co-operative societies directly extending credit facilities to their members. In Kerala State Co-operative Agricultural Federation Ltd vs. CIT (supra), the apex court was concerned with section 80P(2)(a)(iii), which specifies the activity of marketing of agricultural produce of its members by a cooperative society. It opined that 'marketing' is an expression of wide import involving a number of activities, which could be carried on by an apex society rather than a primary society. As such, as long as the agricultural produce being marketed by a co-operative society was of its members, i.e., belonged to them, whether it came by them as a product of their own agricultural activities or acquired through purchase from other cultivators was of no consequence. We are unable to see as to how the assessee can derive any assistance from the said decision in the instant case. In fact, the reliance by the Revenue on the decision in U.P. Co-operative Cane Union Federation Ltd. vs. CIT (supra) is mis....
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.... life of the country in pursuance of the declared policy of the Government, as well as like interpretation by several high courts. Why would the Legislature, it observed, if it so intended, not restrict the exemption to the primary societies by making it evident, as in the case of clause (f) (as it then stood, being akin to the present clause (b), which provides for exemption to primary co-operative societies supplying milk, oilseeds, etc., raised by its members to among others, the federal society) (pg. 820). Adverting again to the said provision (s. 80P(f)) it observed as: "That clause also shows that if the Legislature wanted an exemption to be given only to a primary society, it specifically said so." [at pg. 823 of the report]. In other words, there was no scope for placing an indirect restriction, not warranted by the plain and natural meaning of the words employed, as was done by the apex court in the case of Assam Co-operative Apex Marketing Society Ltd. vs. CIT (Addl.) (1993) 201 ITR 338 (SC), which stood overruled by it. We may add that, interestingly, the relevant clause stands since modified, substituting the word 'of' with the words 'grown by', and now reads as under:-....
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....ate or District as the case may be. In other words, the reference to 'bank' or 'banking business' is absent, and not a condition to qualify as a 'co-operative bank', i.e., for a central or state cooperative bank. Consequently, the BR Act, being applicable thereto, albeit to a limited extent and manner (as provided in Part V), the same (banking business) is not a condition for its applicability, even as we find it to be an extraneous consideration. In fact, as clarified by several decisions, including CIT vs. Sirohi S.B.V. Bank Ltd. (supra), which further bears reference to a number of decisions, the 'business of banking' is to be given a wider meaning by adopting a liberal approach, and is not required to be construed very strictly. Almost uniformly, giving of loans and advances as a business is considered as a 'banking activity'. Reference may also be drawn to s. 2(24)(viia) of the Act, discussed at para 4.6 above. Section 7 of BRA, which stipulates the condition for the use of the word 'bank' (or 'banker' or 'banking') in the name, or in connection with the business, stands since amended vide clause (f) of s. 56 (which prescribes for the application of BRA to co-operative banks),....
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....redit facilities to its members) and not the first limb (i.e., the business of banking). As such, of what value or significance is the argument that it is not in the business of banking; the exclusion of section 80P(4) would apply only to, or in relation to the exemption category under which the assessee falls and or seeks exemption? Also, as afore-noted, the two activities are pari materia as far as the cooperative societies are concerned (also refer para 4.6 above). 4.10 Before concluding, however, we wish to highlight one important aspect of the matter, even as we are handicapped for want of the bye-laws of the assessee-bank as well as the KSARDB Act, to adjudicate the same conclusively. The assessee contends of it being a 'land mortgage bank'. Just as in the case of co-operative banks, land mortgage banks would also be constituted as and operate at the primary level or as federal units. As far as we have been able to see, the term 'land mortgage bank' or 'co-operative land mortgage bank' is not defined in the BR Act. The only reference thereto is in the definition of 'co-operative credit society' which is defined to mean a co-operative society with the primary object of provid....
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....ent bank, is defined as one, the primary object of which is to provide long term credit facilities for agricultural and rural development activities (Explanation to s. 80P(4)), so that it does appear incongruent and inconsistent (with the scheme of things) that a distinction is drawn or envisaged on that basis at the state level, i.e., for the federal units. However, once the two entities stand defined separately, and there is nothing to indicate that the 'state land development bank' is a sub-set of the 'state cooperative bank'; on the contrary, a separate/distinct entity, the distinction (between the two) is to be maintained and respected, i.e., given full effect. The difference, in actual terms, would be required to be determined on the basis of the definition of the words 'agriculture' and 'rural development' under the NBARD Act (refer ss. 2(a) & 2(q)), so that activities in relation to the former only would qualify to be 'agricultural development' activities, and where involving long-term finance, would be eligible to be categorized as for or to 'state land development bank', and to which the prescription of s. 80P(4) would not apply. In other words, though at the primary leve....
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....in the absence of any legitimate claim by the appellant. The assessee in second appeal relies on the decision in the case of Union Coal Co. Ltd. vs. CIT (1968) 70 ITR 45 (Cal.), besides by the apex court in Jute Corporation of India Ltd. vs. CIT (1991) 187 ITR 688 (SC) and National Thermal Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC). 7. We have heard the parties, and perused the material on record as well as the case law cited. 7.1 The case of the assessee is that even though it may not have made a claim per its return of income or during the assessment stage, it is not precluded from doing so before a higher appellate authority or at least the first appellate authority, whose powers are coterminus with that of the assessing authority, citing the afore-mentioned decisions in support. The Revenue's case, on the other hand, is that the assessee having not made any legitimate claim, i.e., per its original or even revised return of income, the same is not admissible, and for which legal proposition we may refer to the decision in the case of Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC). 7.2 We have given our careful consideration to the matter. The first thing, therefore, that n....
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.... jurisdiction in considering the question so raised in all its aspects. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. While permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason.' The apex court in the case of Gurjargravures P. Ltd. (supra) had earlier held as:- 'Held, reversing the decision of the High Court, that, as neither was any claim made before the Income-tax Officer regarding the relief u/s. 84 nor was there any material on record in support thereof, and from the mere fact that such a claim had been allowed in subsequent years it could not be assumed that the prescribed conditions justifying a claim for exemption u/s. 84 were also fulfilled, the Tribunal was not competent to hold that the Appellate Assistant Commissioner should have entertained the question of relief u/s. 84 or to direct the Income-tax Officer to allow the relief. Merely because the Income-tax Officer brings an item to tax he cannot be deemed to have considered its non-taxability though no such claim was made before him ....
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....rity being co-terminus with that of the assessing authority, he could in such circumstances admit the claim not raised earlier, and adjudicate the same after hearing the AO, and which may also include calling for remand report from him where considered necessary. Each case shall have to be considered on its own merits. The two decisions (or set of decisions), thus, operate in different fields; the decision qua the admissibility of a claim by an appellate authority (or for that matter even the assessing authority) carving out exceptions to the generally obtaining statutory position that any claim by the assessee could only be per a return of income, as confirmed by the apex court in the case of Goetze India Ltd. (supra), and it cannot be said that either the position in law is not clear or there is an inconsistency between the two sets of decisions; in fact, the latter ones having been rendered after considering and distinguishing the earlier ones. 7.5 We may now advert to the facts of the case to see if these can be said to fall within the exceptions as laid down. The return in the instant case was filed on 27.10.2007 and the assessment order passed on 22.12.2009, so that it could....
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....y, has been informed to us or is borne by any material on record. Under the circumstances, it is difficult to see as to how the claim is admissible or became so subsequently in the present case. 7.7 The decision in the case of NTPC Ltd. (supra), i.e., the second decision by the apex court relied upon by the assessee, relates to the power of the appellate tribunal u/s. 254 of the Act. The same, it was clarified, is not limited to the ground/s arising from the order of the first appellate authority but extends to any question of law arising from the assessment on the basis of undisputed facts on record. In fact, the decision in the case of Jute Corporation of India Ltd. (supra) is qua the power of the appellate authority, so that it applies to the jurisdiction of the tribunal, the second appellate authority, as well, even as noted by the apex court itself in the said later decision. We are unable to see, and neither has it been shown to us, as to how the said decision is applicable in the facts of the case. Firstly, there is no claim for the first time before the tribunal, and it is only the rejection of such claim by the first appellate authority that stands agitated before us. Sec....