TaxTMI 
TaxTMI 
TaxTMI 
2018 (2) TMI 590
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.... entitled to deduction u/s. 80P of the Act for the assessment year 2013-14. 3. Aggrieved by the order of the assessments, denying the benefit of deduction u/s. 80P(2) of the Act, the assessee preferred appeals before the first appellate authority. The CIT(A), following the judgment of the Hon'ble High Court of Kerala in the case of Chirakkal Service Co-operative Bank Ltd. reported in 384 ITR 490 held that primary agricultural credit society registered under the Kerala Co-operative Societies Act, 1969 is entitled to deduction u/s. 80P(2) of the I.T. Act. 4. Aggrieved by the order of the CIT(A) in allowing the claim of deduction u/s. 80P(2)of the Act, the Revenue has filed the present appeals before the Tribunal. The grounds are raised by the Revenue read as follows: 1. In view of the recent decision of the Hon'ble Supreme Court in the case of The Citizens Co-Operative Society Limited vs Assistant Commissioner of Income Tax, Circle- 9(1), Hyderabad dated 8th August 2017, is not the order of the learned Commissioner of Income Tax (Appeals) against law and the facts and circumstances of the case? 2. The Commissioner of Income Tax (Appeals) had in the instant placing reliance....
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....bles disallowance of such claim. In view of this, is not the decision of the CIT(A) without merits? 5. The learned CIT(Appeals) ought to have seen that the Honourable Supreme Court in the case of Sabarkantha Zilla Kharid Vechan Sangh Ltd Vs CIT reported in 203 ITR1027 (SC) had held that the eligible deduction under Section 8OP of the Income Tax Act, 1961 in respect of Co-operative societies/banks doing both agricultural and non agricultural activities should not be 100% of the gross profits of such societies etc. but should be limited to the profits generated from agricultural activities alone performed by such assessees. 6. The learned CIT(Appeals) ought to have seen that the above Apex Court's decision is in sharp contrast to the decision of the Kerala High Court in the case of M/s Chirakkal Service Co-operative Bank & others in ITA 212 of 2013 that held that the authorities under the Income Tax Act cannot probe into the question of whether the assessee Cooperative society is a primary agricultural credit society once it is registered and classified as primary agricultural credit society by the competent authorities under the provisions of the Kerala Co operative Societ....
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...., 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 entitlement for exemption under section 8OP, ignoring the fact that the assessee is a primary agricultural credit society?" 8.1 In considering the above question of law, the Hon'ble High Court rendered the following findings: "15. Appellants in these different appeals are indisputably societies registered under the Kerala Cooperative societies Act 1969, for short, KCS Act and the bye-laws of each of them, as made available to this court as part of the paper books, clearly show that they have been classified as primary agricultural credit societies by the competent authority under the provisions of that Act The parliament, having defined the term 'co- operative society' for the purposes of the BR Act with reference to, among other thing the registration of a society under any State law relating to co-operative societies for t....
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.... issue regarding the entitlement of exemption under section 8OP 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 agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon'ble High Court, in the case cited supra, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, going by the judgment of the Hon'ble jurisdictions! High Court, assessee is entitled to deduction u/s 80P(2). However, the Revenue's contention is that the Hon'ble Apex Court in the case of Citizens Cooperative Society Ltd. (supra) categorically decided when deposits are received fro....
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....n 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'ble Apex Court held that the Credit Co-operative Society was not entitled for deduction u/s 8OP of the Act for the reason of categorical finding of the A.O. that the activities of the assessee are in violation of the Provisions of the MACSA under which it is formed as the substantial deposits were from 'nominal members' who are actually non-members as per the provisions of law referred. The Hon'ble Apex Court specifically took note of the fact that the assessee therein has carved out a category of 'nominal members' who are infact not the members in the real-sense. Therefore the deposits received from the carved out category viz nominal members who are not the members as per the provisions of the law referred to therein and without the permission of the Registrar of Societies was held to be violative of the provisions and were treated/ proceeded with as deposits from the Public. In other words, in the case before the Hon'ble Supreme Court, the finding on the principle of mutuality was arrived at interalia....
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....ombay High Court ih 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 SOP. [Para 17 to 20 of the judgment], as under:- "17. In case of M/s U. P. Co-op. Cane Union Federation Ltd., Lucknow (cited supra), the Supreme Court has held that the expression "Member" is not defined in the Income Tax Act. Since the Co-operative Society has to be established under the provisions of law made by the State Legislature in that regard, the expression "Member" in Section 80P(2)(a)(i) must, therefore, be construed in the context of the provisions of law enacted by the State Legislature under which the co-operative society claiming exemption has been formed. The Supreme Court has further observed that it is necessary to construe the expression "Member" in Section 80P(2)(a)(i) of the Act in the light of the definition of "Member" given under Section 2(n) of the U.P. Co-operative Societies Act, 1965. 18. The definition of "Member" given in Section 2(19) of the Maharashtra Co-operative Societies Act, 1960 takes ....