TaxTMI 
TaxTMI 
2017 (11) TMI 449
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....eals would be required to be preferred in-as-much as the impugned order decides two separate appeals (by the assessee), qua separate assessments, the Revenue has filed a separate appeal. A condonation petition dated 30.01.2017, accompanying the subsequent appeal, enumerates the same, praying for condonation of the delay under the circumstances. We find the delay as satisfactorily explained even as the ld. counsel for the assessee did not fairly raise any objection. The Revenue's appeal (in ITA No.295 of 2017) was accordingly admitted, and the hearing in the matter proceeded with. We shall take up both the appeals separately. ITA No.634/Mds/2016 3. The only issue arising in this appeal is the sustainability in law, and in the facts and circumstances of the case, of the impugned order. The bone of contention between the assessee and the Revenue is the assessee's eligibility for deduction u/s. 80P of the Act, which in its relevant part reads as under: 'Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be ....
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....eletion in full. Aggrieved, the Revenue is in appeal. The ld. CIT(A) vide the impugned order issues two findings in the matter: a) the assessee is not a primary co-operative agricultural and rural development bank, which is for the reason that its principal object is not the provision of, as Explanation (b) to s. 80P(4) stipulates, provision of long term credit for agricultural and rural development activities, and for which he refers to provision 6(2) of the bye-laws, reproducing the same, and which provides for provision of short/medium term loans for agricultural and allied purposes. (emphasis, by underlining, ours) b) the assessee is a primary agricultural credit society in-as-much as it satisfies the condition of the defining provision - s.5 (cciv) r/w. s. 56(c) of the Bank Regulation Act, 1949 ('the BR Act' hereinafter), reading as under: '5(cciv) "primary agricultural credit society" means a Co-operative Society,- (1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of c....
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....scale Industry Loan:- Issue of short/medium terms loans to class 'A' members of the society for starting/expansion of small scale industries with in the area of operation of the society. (10) Providing the services required for the welfare of the members and to achieve the aforesaid objectives.' On that basis the ld. CIT(A) has issued a finding that the assessee is providing financial accommodation to it's members for agricultural purposes only (para 6.5.5/pg.11 of the impugned order). We are clearly unable to agree with the said finding by the ld. CIT(A). The objects under reference are the main objects of the assessee-society, so that all of them qualify as it's principal objects for which it is formed. There is nothing to suggest that any one object is more basic or predominant than the other. Further, sub-clauses (4), (5), (6), (7) & (9) of Q.6, i.e., 5 out of 9 objects, relate to non-agricultural purposes. On being confronted with this during hearing, the ld. counsel for the assessee would submit that 'jewellery loans' could be for agricultural purposes/ activities as well, as the nomenclature does not indicate their end-use, i.e., the purpose for which th....
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....resumably be only in pursuance and furtherance of its' objects. The question in fact does not arise in the present case, again for the reason that there is no inconsistency between the assessee's objects and the corresponding powers. The assessee, as a part of its' regular business, accepts deposits as well as grants loans. While the former is from the members of the public at large, the latter is restricted to its' members. The different purposes for which loans could be granted are listed separately in its charter under the head 'Main Objects'. The same is clearly only in exercise of the power to grant loans for various purposes, i.e., as long as it is to, firstly, members and, two, confined to the area of operation as specified under Clause-4 'area of operation' of Chapter-1 of it's bye-laws. Where, then, is the distinction, i.e., between objects and powers, in the instant case; the two being in complete harmony. Rather, the very fact that the assessee has the power, and which is only in pursuance of its' objects, to lend for non agricultural purposes, is itself sufficient, and it is not necessary, to regard it as set up/formed equally for non agricultural purposes, that non agr....
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....credit society (s. 5 (cciv) r/w s. 56 (c) of the BR Act) includes 'or the principal business', i.e., apart from 'the primary object', so that it may well be that even a co-operative society with mixed objects, as the assessee, could engage principally in the business of providing loans (to its members) for agricultural and related purposes. That is, though empowered by it's objects to lend for non-agricultural purposes to any extent, the society yet lends principally for agricultural and related activities. The matter is thus essential factual, i.e., whether the assessee's principal business during the relevant year/s - inasmuch the same could vary from year to year, is provision of financial accommodation to it's members for agricultural purposes, including purposes connected thereto, would require being determined (refer object clauses 6(2) and 6(8) of the Main Objects). And for which therefore the matter shall require being restored to the file of the assessing authority. The ld. AR would, upon this, express concern, stating that this would put the assessee to harassment. We are afraid to say that this is, with respect, unfortunate. The burden to prove its' return, and the claim....
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.... its' miscellaneous incomes include a number of charges (refer pg. 2 of the assessment order). It, accordingly, is engaged in the business of 'banking', as defined in s. 5(b) of the Banking Regulation Act, 1949, as under: "(b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise." It is clear that the ld. CIT(A) has omitted to peruse the assessee's stated stand before him, i.e., by way of 'statement of facts', filed along with the memo of appeal before him, and which corresponds with the material on record. It is therefore the assessee who has taken an inconsistent and ambivalent stand in the matter, with the ld. CIT(A) in fact issuing a finding contradictory to the assessee's own stated decision. So however, it could also be that its' principal business is restricted to providing financial accommodation to it's members for agricultural and related purposes. We say so as the said activity also is a sub set of activity of lending, a business the assessee is definitely engaged in. The matter would therefore require being exam....
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....st on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: (3) The provisions of sub-section (1) shall not apply- (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 cooperative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking;' We've, setting aside the impugned order, already restored the matter back to the file of the AO for factual determination as to whether the assessee could, in view of its' principal business, where so, be regarded as a 'primary agricultural credit society'. This thus has a direct bearing on the application or otherwise of section 194A and, thus, section 40(a)(ia), to the assessee for the relevant....
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....ent case, is that it's paid-up capital is not less than one lakh of rupees and, further, that its bye-laws do not permit admission of any other co-operative society as a member. At this stage, it may be clarified that in view of the Banking Laws (Application to Cooperative Societies) Act, 1965, the BR Act, to the extent specified there-under, applies to co-operative societies. Sec. 56 (falling under Part-V) of the BR Act, is relevant in this regard and is extracted as under in its relevant part: 'PART V OF BANKING REGULATION ACT, 1949: APPLICATION OF THE ACT TO CO-OPERATIVE BANKS Act to apply to co-operative societies subject to modifications. 56. The provisions of this Act, as in force for the time being, shall apply to, or in relation to, Co-operative Societies as they apply to, or in relation to, banking companies subject to the following modifications, namely :- (a) throughout this Act, unless the context otherwise requires,- (i) references to a "banking company" or "the company" or "such company" shall be construed as references to a Co-operative Bank, (ii) references to "commencement of this Act" shall be construed as references to....
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....ong others, providing short-term and medium-term credit for agricultural purposes. The assessee, however, was found by him to be a primary agricultural credit society, i.e., a co-operative society whose primary object or principal business is to provide financial accommodation to its members for agricultural and allied purposes, excepted u/s. 80-P(4). In further appeal by the Revenue, while it challenges the finding on the basis of which the assessee stands allowed relief, the assessee supports the impugned order. Without doubt, upon amendment by Finance Act, 2006, a co-operative society engaged in the business of banking or provision of credit facilities to its members, which (businesses) are thus regarded at par (also refer s. 2(24)(viia)), only societies excepted u/s. 80-P(4) would qualify for deduction u/s. 80-P(1). The law in the matter is amply clear, with the Hon'ble jurisdictional High Court in CIT v. Madras Autorickshaw Driver's Cooperative Society Ltd. [1983] 143 ITR 981 (Mad) (affirmed in [2001] 249 ITR 330 (SC)), clarifying that deduction u/s. 80-P is assessee specific, so that the same shall extend to eligible societies only. Taxing statutes, it is well settled, are to....
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....n opportunity to exhibit its' case in the matter, with reference to its principal or dominant business. We are conscious that the assessee has at no stage claimed to be so, i.e., to be a primary agricultural credit society; rather, stating of its' claim to have been erroneously so regarded by the AO (refer 'statement of facts' forming part of the Memo of Appeal before the ld. CIT(A)). And, further, of the claim by its' counsel before us as without reference to and de hors any material on record; nay, contrary thereto. The question, however, is one of fact, on which we find no examination at any stage, so that the claim may well be true and, in any case, remains to be determined. It needs to be appreciated that it is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter (CIT v. C. Parakh & Co. (India ) Ltd. [1956] 29 ITR 661 (SC); Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC)). Finally, even where the assessee succeeds, it being only on the basis of its' 'principal business', which, could vary in it's composition from year to year, i.e., in response to the market (supply and demand) forces, the assessee-....