TaxTMI 
TaxTMI 
2020 (2) TMI 1150
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....1 of 2020: 3. I have had an occasion to consider an identical issue in a batch of writ petitions filed by several Primary Agricultural Co-operative Societies, and in the case of K.2058, Saravanmpatti Primary Agricultural Co-operative Credit Society Ltd., Vs. The Income Tax Officer (W.P.Nos.17 of 2020 etc. batch dated 31.01.2020), while dealing with a claim of deduction under Section 80P of the Income Tax Act by the Co-operative Societies, I have stated as follows: 23. The issue that arises in W.P.Nos.1124, 1123, 1127, 1131, 1133, 1136, 1138, 1141, 1143, 1145, 1149, 1293, 1299 and 1420 of 2020 also involves the entitlement of the petitioners that claim to be Primary Agricultural Co-operative Credit Societies, to deduction under Section 80P. The petitioners were called upon to produce various details in support of their claims and a specific question raised for their response was as follows: '4. Is the society having associate/nominal member. If yes, whether the society is carrying on business with them? If so, please show cause why the deduction u/s.80P cannot be denied in view of the decision of the Jurisdictional ITAT in the case of M/s S1234 Udya....
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....at the business of the appellant does not amount to that of a co-operative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80P.' 27. Thus, though categorised as A and B, there are vital distinctions that were drawn between the members of the two classes and hence the principle of mutuality that was relied upon by the petitioners was rejected as being inapplicable to its case. 28. A Division Bench of this Court has, on identical facts as in the present case, in the case of The Principal Commissioner of Income Tax, Salem V. M/s.S-1303 Ammapet Primary Agricultural Cooperative Bank Ltd., Ammapet, Salem (T.C.(A)Nos.882 and 891 of 2018 dated 06.12.2018) held that the assessee would be entitled to deduction under Section 80P. The reasoning was that under the TNCS Act, a member and an associate member are one and the same and an associate member has also been held to be holding the character of a member. The Division Bench has taken the view that as far as the State of Tamil Nadu is concerned, the TNCS Act equates both members and associate members and places them on par. Thus, the distinction carved out by the Supreme ....
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....on (4) of Section 80P of the Act, which was inserted vide the Finance Act, 2006 with effect from 01.4.2007 i.e from the assessment year 2007-08, the 'primary cooperative agricultural and rural development bank' means 'a society having its area of operation confined to a taluk, the principal object of which is to provide for long term credit for agricultural and rural development activities'. What was excluded was the 'cooperative banks' and admittedly, the assessee society is a primary agricultural cooperative credit society and therefore, would be entitled to the benefit of Section 80P of the Act. 15. Further, for the assessment year 2014-15, the decision in the case of Citizen Cooperative Society Limited was relied upon by the Revenue before the Tribunal, which, in paragraph 6.1 of its order dated 28.2.2018 for the assessment year 2014-15, extracted the operative portion of that judgment. In that case, the Hon'ble Supreme Court found that the society carried on certain activities, which were contrary to the provisions of the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995 and that they accepted deposits from third parties, who we....
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....ve Marketing Societies that the Revenue has carried/intends to carry to the Supreme Court where the stakes involved are significantly higher, such as, Tiruchengode Agricultural Producers Cooperative Marketing Society Ltd. and Veerakeralam Primary Agricultural Cooperative Credit Society, Coimbatore. In such a case, the questions of law would be decided in those cases. 32. In the light of the fact that the questions of law in this regard are still at large, the petitioners are directed to file a statutory appeal before the Commissioner of Income Tax (Appeals) within a period of three(3) weeks from today. However, let no recovery of the demand relating to this issue be enforced till the disposal of the appeals. 4. In view of the identity of facts and legal position in the present matter as well, the aforesaid order is followed in this case also. The petitioners are permitted to file statutory appeals before the Commissioner of Income Tax (Appeals) within a period of three (3) weeks from today. There shall be an order of interim stay of recovery in relation to this issue only till such time the appeal is disposed by the first appellate authority. 5. W.P.Nos.3761, 3763 an....
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....f Rs. 12,57,23,490/- had been borrowed from the Coimbatore District Central Cooperative Bank. It is not elaborated as to why this borrowal was effected. Perhaps, it was the mandate of the statutory reserve that compelled the petitioner to effect the borrowing to maintain such reserve. 7. It was also the contention of the petitioners before the Assessing Officer that if at all interest earned was to be brought to tax, then, alternatively, interest paid on the loan should be deducted from interest received or in other words, there should be a netting of the interest paid and received and only the resultant figure be brought to tax. 8. The Assessing Authority however rejected the submissions cursorily stating in a single line that 'statutory reserve can also be considered as surplus funds of the assessee'. The judgement of the Supreme Court in the case of Nawanshahar (supra) has not been considered or discussed and neither has the plea of the petitioner for netting of interest paid and earned. 9. In Nawanshahar (supra), the Supreme Court considered the question of whether investments made by a banking concern are part of the business of banking. The conclusi....
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....e respondent officer has relied on a more recent judgment of the Supreme Court in Totgars' (supra), where the Bench was concerned with surplus funds which the assessee had invested in short term deposits with banks and Government facilities. The question referred for decision was as follows: 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income by way of interest on deposits held with scheduled banks, bonds and other securities was chargeable to tax under section 56 under the head `Income from other sources' without allowing any deduction in respect of cost of funds and proportionate administrative and other expenses under section 57?' 15. Thus the issue before the Court in Totgars (supra) was on the classification of interest generated by deposits held with scheduled banks, bonds and other securities without providing for a deduction in respect of cost of funds and proportionate administrative and other expenses under Section 57. The question of interest generated from deposits made by reason of a statutory mandate was raised and finds reference in the narration of the petitioners'....
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.... 17. However, the petitioners have responded to the show cause notice issued by the officer raising this issue and their response has been extracted in the orders of assessment, as follows: W.P.No.17 of 2020: 'The Supreme Court judgment in Togars Cooperative Sale Society Ltd no applicable to our society as the above society is a sale society and ours is Primary Agricultural Co-operative Credit Society. The former is dealing sale of goods and ours is dealing in credit facility extended to the members. Also, as per section 80P2a, profits and gains attributable to the business of the society and the word attributable is having elaborate meaning as derived in Commissioner of Income-tax vs. Nawanshahar Central Co-operative bank Ltd. Civil Appeal Nos.2499, 2500 of 2005 8th April 2005. So, the funds deposited is not a surplus fund as decided in Totgars Co-operative Sale Society Ltd., but a statutory reserve maintained as decided in Commissioner of Income tax Vs. Nanshahar Central Cooperative Bank Ltd. The amount in investments is Rs. 15,51,18,027/- out of this Rs. 12,57,23,490/0 was borrowed from Coimbatore District Central Co-operative B....
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....ecurities, subsidies received from the Government and dividend business income of the assesse entitled to deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961 ?" 2. The very question was considered by this court in CIT v. Karnataka State Co-operative Apex Bank [2001] 251 ITR 194 and the conclusion was reiterated in Mehsana District Central Co-operative Bank Ltd. v. ITO . 3. It is now contended on behalf of the Revenue that the decision of this court in United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 was not considered. 4. We do not think that it is open to the Revenue to urge, through different counsel, the same thing again and again. We are satisfied that the answer to the question has been correctly given in the decisions aforementioned and in the order under appeal. 5. The civil appeals are dismissed with costs. Also the jurisdictional Madras High Court also looking into the Totgars case and allowed the interest received is allowed under section 80P in case of Madras High Court The Commissioner Of Income Tax vs M/S. Veerakeralam Primary ... on 5 July, 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS ....