TaxTMI 
TaxTMI 
2018 (2) TMI 866
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....of the case, the Commissioner of Income Tax(Appeals) is right in law in holding that the assessee is eligible for claiming deduction under section 8OP of the Income Tax Act when the assessee failed to fulfil the principal objective of providing agricultural credits to members? 3. The Kerala Co-operative Societies Act(Amendment) Act, 2010, Act 7 of 2010 stipulates that if the principal objective of providing agricultural credits to members is not fulfilled, such society shall lose all characteristics of a Primary Agricultural Credit Society. In view of this, is not the decision of the CIT(A) is against law? 4. The Hon'ble High Court of Kerala had in the case of M/s Perinthalmanna Service Co-operative Bank Vs CIT in ITA No 4 of 2014 held that "an enquiry has to be conducted into the factual situation whether cooperative bank is conducting the business as Primary Agricultural Credit Society or a Primary Co-operative agricultural and rural development bank and depending upon the transactions, the Assessing Officer has to extend the benefits available and not merely looking at the registration certificate by the Kerala Co-operative Societies Act or the nomenclature....
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....of the Honourable High Court in the case of Perinthalmanna Service Co-operative Bank Ltd. reported in (2014) 363 ITR 268 (Kerala) wherein it was held that 'with introduction of section 80P(4) necessarily, an enquiry has to be conducted into factual situation whether co-operative bank is conducting business as a primary agricultural credit society or primary co-operative agricultural and rural development Bank and depending upon transactions, Assessing officer has to extend benefits available, and he would not merely look at the registration certificate issued under the relevant Cooperative Societies Act or at nomenclature of Co-operative Bank. 4. The learned CIT(Appeals) ought to have seen that the Apex court has admitted the SLPs filed by the Department against the decisions of (1) the Honourable Kerala High Court in the case of M/s Karakulam Service Cooperative Bank and (2) the Honourable Karnataka High Court in the case of CIT V. Lokmanya Multipurpose Cooperative Society Ltd. Reported in Part 4 of 394 ITR (ST.) 4. Briefly stated the facts of the case are as follows: The assessee is a primary agricultural credit society registered under the Kerala Co-operative ....
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.... Act 7 of 2010, order of A.O & CIT (A) be upheld and appeal filed by assessee be dismissed. 3. As may be seen from para 1 above, appellant assessee has filed return of income for the A.Y. 2007-08 to 2010-11 beyond limit given u/s 139(1). In view of the judgement reported in 266 ITR 1 (SC) - Prakashnath Khanna & Another vs. CIT, order of the AO & CIT (A) be upheld. 6.1 Apart from the written submission, the Ld. DR has also relied on the judgment of the Hon'ble Apex Court in the case of Citizen Service Co-operative Bank Ltd. vs. ACIT reported in 397 ITR 1. 6.2 The Ld. AR has filed paper book comprising of 163 pages enclosing, argument notes for the assessment years 2009-10, 2010-11 and 2011-12, byelaws of the assessee-Society, certificate of registration certifying that the assessee is a primary agricultural credit society etc. The Ld. AR reiterated the submissions made before the CIT(A) and strongly relied on the findings of the CIT(A). 7. We have heard the rival submissions and perused the material on record. An identical issue was considered by this Tribunal in the case of Edanad-Kannur Service Co-operative Bank Ltd. and others in I.T.A. Nos. 431 to 433/Coch/2017....
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.... have been approved by the competent authority under such State law. This, we visualize as due reciprocative legislative exercise by the Parliament recognizing the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural credit societies by the competent authority under the KCS Act it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes; the rate of interest on such loans and advances to be at the rate fixed by the Registrar of cooperative societies under the KCS Act and having its area of operation confined to a village, panchayat or a municipality. This is the consequence of the definition clause in section 2(oaa) of the KCS Act. The authorities under the IT Act cannot probe into any issue or such matter relating to such applicants. 16. The position of law being as above with reference to the statutory provisions, the appellants had shown to the authorities and the Tribunal that they are primary agricultural credit societies in terms of clause (cci....
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....anking and therefore, would not be entitled to deduction u/s 80P(2) of the Income-tax Act. In the context of the submission made by the Revenue let me examine whether the judgment of the Hon'ble Apex Court in the case of Citizens Co-operative Society Ltd. (supra) has application to the facts of the present case. 9. The Hon'ble Apex Court judgment in the case of Citizen Co-operative Society (supra) Ltd. was rendered in the context of eligibility of a Credit Co-operative Society for deduction under section 80 P of the Act. The Apex Court, referring to the specific facts of the case held that the assessee therein is not entitled for deduction under section 8OP of the Income-tax Act. In the aforesaid case, the Hon'ble Apex Court was not dealing with a case of eligibility of a Primary Agricultural Credit Society for deduction under section 80P of the Income-tax Act. The Hon'ble Supreme Court at Para 23 of the aforesaid judgment had emphasized that even after the amendment made to the provisions of section 80 P of the Act by insertion of section 80P(4) of the Income-tax Act, the Primary Agricultural Credit Society is eligible for deduction under section 80 P of the A....
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....39;nominal member' who are not members as per the provisions of law referred,, and that most of the business of the assessee therein was with this carved out category of person and also granting loans to public and without the approval from the Registrar of the Societies. 9.3 As far as the Kerala Co-operative Societies Act which is applicable to the present cases are concerned, the definition of a 'member' as provided in Section 2(1) of the Kerala Cooperative Societies Act includes a nominal member. Section 2 (1) of the said Act is as follows: "Member" means a person joining in the application for the registration of a co-operative society or a person admitted to membership after such registration in accordance with this Act, the Rules and the Bye law and includes a nominal or associate member" 9.4 The 'nominal member' is defined under 2(M) of the Kerala Cooperative Societies Act, 1969, which reads as follow: - "(m) nominal or associate member' means a member who possesses only such privileges and rights of a member and who is subject only to such liabilities of a member as may be specified in the bye-laws;" 9.5 T....
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....r and sympathizer member. There is no distinction made between duly registered member and nominal, associate and sympathizer member. 19. In the case of K.K.Adhikari (cited supra), Division Bench of this Court has held that the definition of a Member under Section 2(19) of the Maharashtra Co-operative Societies Act, 1960 includes a nominal member or a sympathizer member. It is further held that notwithstanding the fact that a nominal member does not enjoy all the rights and privileges which are available to an ordinary member, his status is that of a member as defined in Section 2(19) of the Act. 20. Division Bench of this Court in the case of The Commissioner of Income Tax, Nasik (cited supra) has also taken a similar view that the definition of "Member" under section 2(19)(a) of the Maharashtra Co-operative Societies Act, 1960 includes a nominal member. It is further held by the Division Bench that there is nothing in Section 80P(2)(iii) of the Income Tax Act to the contrary." 9.8 As per section 3 of the Banking Regulation Act, 1949 the provisions of Banking Regulation Act shall not apply to Primary Agricultural Credit Societies. The explanation to secti....
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....ction u/s. 80P(2) of the Act. 7.2 Before concluding, it has to be mentioned that the case law relied on by the Revenue in the grounds, additional grounds are not applicable to the facts of the present case. Undisputedly, the assessee is a primary agricultural credit society and is providing credit facilities to its members for agriculture and agriculture allied activities. The competent authority of Co-operative Department of Government of Kerala having been satisfied with the activities of the assessee, has classified the assessee as PACS (primary agricultural credit society). The Hon'ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Limited &, Ors. (supra) has elaborately considered the issue and has categorically held that the certificate issued by the competent authority in this regard is binding and the income tax authorities have no right to probe further. 7.3. In Ground Nos. 4, 5 & 6 of the Memorandum of Appeal, it is mentioned that the CIT(A) has erred in not placing reliance on the judgment of the Hon'ble Jurisdictional High Court in the case of M/s. Perinthalmana Service Co-operative Bank Ltd. vs. CIT reported in 363 ITR 268. The Hon'ble High ....