TaxTMI 
TaxTMI 
2018 (1) TMI 848
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....sees are entitled to the benefit of section 80P deduction. The CIT(A) had allowed the claim of deduction u/s 80P(2) of the Income-tax Act by following the judgment of the Hon'ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Limited & Ors. [(2016) 384 ITR 490 (Ker.)]. Since common issue is raised in these appeals, they are heard together and are being disposed off by this consolidated order. 3. I shall first adjudicate the Revenue's appeal in the case of M/s.Kakkodi Service Co-operative Bank Limited, concerning assessment years 2007-2008 to 2009-2010 in ITA Nos.525 to 527/Coch/2017. The decision rendered therein would have application in other cases as well. ITA Nos.525 to 527/Coch/2017 4. The brief facts in relation to the above cases are as follow:- 4.1 The assessee is a co-operative society registered under the Kerala Co-operative Societies Act, 1969. For the assessment years 2007-2008, 2008-2009 and 2009-2010, the details of returns filed by the assessee-society are as follow:- Asst. Year Date of issue of notice u/s 148 Date of filing of return Income from business Income from other sources Gross total income D....
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....ibunal are as follow:- (i) In view of the judgment of the Hon'ble Supreme Court dated 8th August, 2017 in the case of Citizens Co-operative Society Ltd. whether the order of the learned Commissioner (Appeals) is against law and facts of the present case? (Para 1 of the grounds of the department) (ii) The Commissioner of Income Tax (Appeals) relying on the decision of the Hon'ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. had held that the assessee is eligible for deduction u/s 80P solely on the basis that it has been registered and classified as Primary Agricultural Credit Society by the Competent Authority under the Kerala Co-operative Societies Act, whereas the Hon'ble Supreme Court in the case of Citizens Co-operative Society had taken into consideration the activities of the assessee society and not relied only on the Certificate of registration. (Para 2 of the grounds of department) (iii) Whether the CIT(Appeals) is right in law taking to consideration the facts and circumstances of the case, especially pursuant to the judgment of the Hon'ble Supreme Court in Citizens Co-operative Society holding that the as....
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....iding agricultural loans to the Co-operative Society members are not fulfilled, such societies would loose all characteristics of a primary agricultural credit society. The learned DR has also referred to the Vaidyanathan Committee and had enclosed relevant pages of the report of Committee to content that Cooperative Societies was accepting deposits from non-members and were acting like any other normal banks under the Reserve Bank of India regulations. In conclusion, it was submitted by the learned DR that the assessee-banks in view of the provisions of section 80P(4) of the Income-tax Act and the amendment to section 2(iv) of the Kerala Co-operative Societies Act, 2010, is not entitled to the benefit of claim of deduction u/s 80P(2) of the Act. It was further contended by the learned DR that the Hon'ble Apex Court in the case of Citizens Co-operative Society Limited reported in 397 ITR 1 had categorically held when the assessee is accepting deposits and disbursing loans to general public, such Societies are not entitled to the benefit of section 80P(2) of the Income-tax Act. It was further submitted by the learned DR that the Hon'ble Supreme Court had held accepting FD's from 'no....
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....es not accept money from the public for the purpose of lending or investment. The acceptance of money is only from members. It was contended that as such the activity of the society does not fall within the purview of Co-operative Bank and the society cannot be categorized as a Co-operative Bank. 8. I have heard the rival submission and perused the material on record. The undisputed facts are that the assessees in these cases are all primary agricultural credit society and they are registered as such under the Kerala Cooperative Societies Act. The Hon'ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Limited & Ors. (supra) had categorically held in para 17 page 14 of the judgment that when a primary agricultural credit Society is registered as such under the Kerala Co-operative Societies Act, 1969, such society is entitled to the benefit of deduction u/s 80P(2) of the Income-tax Act. The Hon'ble High Court was considering the following substantial question of law: "a) Whether on the facts and in the circumstances of the case under consideration/ the Tribunal is correct in law in deciding against the assessee/ the issue regarding entitl....
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....f the appellants do not permit admission of any other co-operative society as member, except may be, in accordance with the proviso to sub-clause 2 of section 5(cciv) of the BR Act. The different orders of the Tribunal which are impeached in these appeals do not contain any finding of fact to the effect that the bye- laws of any of the appellant or its classification by the competent authority under the KCS Act is anything different from what we have stated herein above. For this reason, it cannot but be held that the appellants are entitled to exemption from the provisions of section 8OP of the IT Act by virtue of subsection 4 of that sect; on. In this view of the matter, the appeals succeed. 17. In the light of the aforesaid, we answer substantial question: 'A' in favour of the appellants and hold that the Tribunal erred in law in deciding the issue regarding the entitlement of exemption under section BOP against the appellants. We hold that the primary agricultural credit societies, registered as such under the KCS Act; and classified so, under that Act including the appellants are entitled to such exemption." 8.2 In the instant case, the assessee's are all primary a....
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..... Thereafter as the operations of the assessee had increased manifold and spread over states of Erstwhile, Andhra Pradesh, Mahrashtra and Karnataka, the assessee-society got itself registered on 26.07.2005 under the Multi State Co-operative Societies Act, 2002 (MACSA) 9.2 The Hon'ble Apex Court in the aforementioned case specifically took note of the factual findings of the assessing officer (which was stated in para 15 of the judgment) referring to the bye laws and the provisions of Mutually Aided Cooperative Societies Act, 1995. The assessing officer was of the view that the assessee therein cannot admit 'nominal members' and most of the deposits were taken from such category of person (as they were not members as per the provisions referred). The Apex Court in para 25 of the Judgment has pointed out that the main reason for disentitling the assessee from getting the deduction provided under section 80 P of the Act is not sub-section (4) of the Act. On the contrary, the Hon'vble Apex Court held that the Credit Co-operative Society was not entitled for deduction u/s 80P of the Act for the reason of categorical finding of the A.O. that the activities of the assessee are in viola....
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....ble Supreme Court in the case of U.P.Co-operative Cane Union v. Commissioner of Income-tax (1999) 237 ITR 574 (SC)-para 8 of the judgment has observed as under:- "8. The expression "members" is not defined in the Act. Since a co-operative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in section 80P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption, has been formed. It is, therefore, necessary to construe the expression "members" in Section80P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Co-operative Societies Act." 9.7 The Bombay High Court in Jalgaon District Central v. UOI (2004) 265 ITR 423 (Bom) in the light of the above Supreme Court judgment had held that nominal member is also member under the Maharashtra Co-operative Societies Act and entitled for benefits under section 80P. [Para 17 to 20 of the judgment], as under:- "17. In case of M/s U.P.Co-op. Cane Union Federation Ltd., Lucknow (cite....