TaxTMI 
TaxTMI 
2018 (4) TMI 884
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....ficer concluded that since the assessee was doing the business of banking it was not entitled to deduction u/s 80P(2) of the I.T.Act, in view of the insertion of section 80P(4) of the I.T.Act with effect from 01.04.2007. 3. Aggrieved by the assessment completed by denying deduction u/s 80P(2) of the I.T.Act, the assessee preferred an appeal to the first appellate authority. The CIT(A) following the judgment of the Hon'ble Kerala High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others vs. CIT [(2016) 384 ITR 490 (Ker.)] held that the assessees is entitled to the benefit of deduction u/s 80P(2) of the I.T.Act. 4. Aggrieved by the order of the CIT(A), the Revenue has filed the present appeal raising the following grounds:- "2. The learned Commissioner of Income-tax (Appeals) has erred in deleting the disallowance of deduction of Rs. 1,01,62,056/- claimed by the assessee under section 80P(2)(a)(i) of the Act. 2. The Ld.CIT(A) ought to have considered the decision of the jurisdictional High Court in the case of Perinthalmanna Service Co-operative Bank (363 ITR 268) wherein it has been held that with the introduction of section 80P(4) of the Act, deductio....
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....o 433/Coch/2017 & others, order dated 10.01.2018. (ii) The ITO v. M/s.Nannambra Service Co-operative Bank Ltd. in ITA No.436 to 438/Coch/2016, order dated 08.02.2018. 8.1 The above orders of the Tribunal followed the dictum laid down by the Hon'ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others v. CIT (supra). The relevant finding of the Tribunal in the case of M/s.Nannambra Service Co-operative Bank Ltd. in ITA No.436 to 438/Coch/2016, reads as follow:- "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 & others dated 10/01/2018. The Tribunal followed the judgment of the Hon'ble High Court of Kerala in the case of Chirakkal Service Co-operative Bank Ltd. (supra). The Tribunal held that the judgment of the Hon'ble Apex Court in the case of The Citizens Co-Operative Society Limited vs Assistant Commissioner of Income Tax, reported in 397 ITR 1 (SC) is not applicable to the facts of the case. The relevant finding of the Tribunal dated 10/01/2018 is r....
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....icultural 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 (cciv) of section 5 of the BR Act having regard to the primary object or principal business of each of the appellants. It is also clear from the materials on record that the bye-laws of each of 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 th....
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....ction 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 Act. 9.1 The assessee society in the case considered by the Hon'ble Supreme Court was established on 31-5-1997 and was registered under section 5 of the Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995. Thereafter as the operations of the assessee had increased manifold and spread over states of Erstwhile, Andhra Pradesh, Maharashtra 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 H....
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....ection 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 Therefore, in the present cases, the nominal members are members as provided in law and deposits from such nominal members cannot be considered or treated as from the nonmembers or from public as was noted by the Apex Court judgment cited supra. 9.6 In this context, it is relevant to mention that the Hon'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 cooperative s....
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....ction 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 section 80P(4) states that 'Primary Agricultural Credit Society' and 'Co-operative Bank' will have the same meaning as provided in Part V of the Banking Regulation Act, 1949. The explanation provided after clause (ccvi) of section 5 r.w.s 56 of the Banking Regulation Act specifically provides that if any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final. The Reserve Bank of India, which is the competent authority as per the Banking Regul....
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....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 Court in the above mentioned case was disposing of the appeal filed by the assessee, challenging the order passed by the ITAT upholding the validity of the order passed by the Commissioner u/s 263 of the Act. In the said judgment, the Hon'ble High Court upheld the order of the ITAT, after directing the Assessing Officer to pass a fresh assessment order untrammeled by any of the views expressed by the revisionary authority. Whereas the judgment of the Hon'ble Jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd. (supra) was in respect of the assessment order passed by the Assessing Off....