TaxTMI 
TaxTMI 
2022 (4) TMI 1414
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....year 2011-12, one more issue of reopening of assessment, the ld.counsel for the assessee at the first stage stated that she is not interested in prosecuting these two grounds and hence, the same are dismissed as not-pressed. 3. The only common issue on merits in these two appeals of assessee, is as regards to disallowance of claim of deduction u/s.80P of the Act in regard to income received from associate members i.e., interest received from Class B members. For this, assessee has raised identically worded grounds in both the years and facts and circumstances are also exactly identical. Hence, we will take grounds from ITA No.600/CHNY/2021 for assessment year 2011-12. The relevant Ground Nos. 6 to 10 reads as under:- 6. The CIT(A) ought to have seen that the Appellant is a Primary Agricultural Cooperative Society registered under the Tamil Nadu Cooperative Societies Act, 1983 and provides providing agricultural loans to its members (Class A and Class B) 7. The CIT(A) ought to have seen that there is no definition of members under the Income Tax Act, 1961 and all the members have to renew their membership once in three years. 8. The CIT(A) failed to see that the concept of me....
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....ources of interest received by the appellant, considered it as income from other sources and hence not eligible for deduction u/s 80P of the Income Tax Act." 6. Before us, ld.counsel for the assessee argued on merits that the assessee is a primary agricultural cooperative society registered under the Tamil Nadu Co-operative Societies Act, 1983 and the assessee society accepts deposit, advancing loans and providing credit facilities to its regular members i.e., A Class members with voting powers, etc., as well as to associate members. The details are given by CIT(A) in his order and accordingly, it is engaged in carrying on the business of providing credit facilities to its members and therefore eligible for claim of deduction u/s.80P(2)(a)(i) of the Act. The ld.counsel argued that the AO as well as CIT(A) has gone into the issue of concept of members i.e., providing agricultural loan to its members i.e., Class A & Class B, but there is no distinction between the members. The ld.counsel for the assessee stated that the case law relied on by the Revenue in the case of Citizens Cooperative Society Limited vs. ACIT, (2017) 94 taxman 114(SC) was explained further by the Hon'ble Supreme....
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.... object of the Bank shall be primarily to finance Primary Land Development Banks. 4. In order to fulfill such object, it shall have power: a) To float debentures on the security / of its assets and of land mortgages, other assets transferred or deemed under the provisions of section 23A of the Act to have been transferred to it by Primary Land Development Banks or against the guarantee of Government of Tamil Nadu for repayment in full of principal and payment of interest in respect of loans granted by Tamil Nadu Co-operative State Land Development Bank to any institution approved by the Government by general or special order in writing, for such period and on such conditions as may be laid down by the provisions of the Act and the regulations made there under by the Board.[R.D. is 938/90C, dated 14.05.1990] (aa) TO OBTAIN LOANS WITH GOVERNMENT GUARANTEE FROM ANY FINANCING AGENCIES OR FROM GOVERNMENT WITHOUT FLOATATION OF DEBENTURE ON SUCH CONDITIOONS AS MAY BE LAID DOWN BY THE GOVERNMENT. (1) Enbloc amendments from 1 to 35 and 43 to 54 registered by the DR of CS(c) vide his letter No.Rc.4673/71-k, dated 21.05.1971 (2) Enbloc amendments from 36 to 42 registered by the DR o....
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....all other co-operative banks from the scope of that section." From the above, it is clear that the provisions of Section 80P(4) of the Act was brought under the statute book, is to exclude the co-operative banks out from the ambit of Section 80P of the Act because, they have functions of any normal bank. In the present case, before us, although the Assessee by nomenclature, the name is "Tamil Nadu Co-operative Society, Agriculture and Rural Development Bank Limited", but it is a co-operative Society registered under the Tamil Nadu Co-operative Societies Act, 1983. 22. We noted that the learned CIT-DR heavily relied on the decision of the Hon'ble Supreme Court in the case of Citizen Cooperative Society Limited (supra); wherein the Hon'ble Supreme Court has upheld the disallowance of the claim of deduction u/s.80P of the Act. We noted the facts that the Hon'ble Supreme Court has discussed the following crucial aspects: I. The Society was originally formed under the mutually aided co-operative Societies Act, 1995 [MACSA] and subsequently had got registered under the Multi-State Cooperative Societies Act 2002 and their activities were in violations of the provisions of the Multi-....
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....and noted that the Assessee has two categories of members, as under: a) Members - State Government and Primary Co-operative Agriculture and Rural Development Banks. b) Associate Members - Individuals and other Institutions. 25. We noted that the Assessee had filed before us, the extracts of the provisions of the Tamil Nadu Co-operative Societies Act, 1983 and the Tamil Nadu Co-operative Societies Rules. The Rule relating to the Associate Member as provided in Section 2(6) and in Section 2(16) reads as under: a. "Definitions as in the Act: I. Section 2(6) of the Act defines "Associate Member" as 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 this Act and the bye-laws. II. Section 2(16) of the Act defines a "Member" as a person joining in the application for the registration of a Society and a person admitted to membership after registration in accordance with the provisions of this Act, the Rules and Bye-laws and includes an Associate Member." We also noted that the Section 22 of the Tamil Nadu Co-operative Societies Act, 1983 and Rule - 32 of the Tamil Nadu Co-operative S....
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....n 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment of deposits of money from the public. Even the provisions of Section 22(1)(b) of the Banking Regulation Act, which is also applicable to the Co-operative Societies, but no Co-operative Society shall carry on Banking business in India, unless it is a Co-operative Bank and holds a license issued on it's behalf by the Reserve Bank of India [RBI]. The Assessee in the present case does not hold any license from the Reserve Bank of India or it is neither registered as a Banker under the Banking Regulation Act and as such, the Assessee is not allowed cheque or withdrawal facility and not allowed to issue Demand Draft and finally the deposits are only from the members or Associate members but not from non-members. 27. Before us, the learned Counsel for the Assessee has categorically made statement at the bar and produced evidences that the Assessee has records of the names and addresses of the members and all the members are identifiable and available. Further, it was contended that the Assessee has always submitted all relevant documents as and when sought for and it is not th....
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.... to this, a primary agricultural credit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 40. As a matter of fact, some primary agricultural credit societies applied for a banking license to the RBI, as their byelaws also contain as one of the objects of the Society the carrying on of the business of banking,. This was turned down by the RBI in a letter dated 25.10.2013 as follows: "Application for license Please refer to your application dated April 10, 2013 requesting for a banking license. On a scrutiny of the application, we observe that you are registered as a Primary Agricultural Credit Society [PACS]. In this connection, we have advised RCS vide letter dated UBD (T) No.401/10.00/16A/2013-14 dated October 18, 2013 that in terms of Section 3 of the Banking Regulation Act, 1949 [AACS], PACS are not entitled for obtaining a banking license. Hence, your society does not come under the purview of the Reserve Bank of India, RCS will issue the necessary guidelines in this regard." After considering these, the Hon'ble Supr....
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....essary to construe the expression "members" in Section 80-P(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. The said provision reads as under: "2.(n). 'Member' means a person who joined in the application for registration of a Society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the byelaws for the time being force but a reference to 'members' anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power have no such liability or duty;"" Considering the definition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i)." 29. Another aspect highlighted by the learned Counsel for the Assessee is that the Revenue while framing the assessment u/s.143(3) of the Act for the Assessment Year 2017 - 2018, vide order dated 25.12.2019 ha....