TaxTMI 
TaxTMI 
2022 (7) TMI 679
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....(A) reversing the order of AO by holding that the assessee is entitled for claim of deduction u/s.80P(2)(a)(i) of the Act. For this, Revenue has raised identically worded grounds in all the three assessment years and the grounds raised in AY 2009-10 read as under:- 2. The learned Commissioner of Income-tax (Appeals) has erred in holding that the assessee is entitled for deduction u/s.80P(2)(a)(i). 3. The learned Commissioner of Income-tax (Appeals) ought to have considered that the Hon'ble ITAT, Panaji Bench in Shri Chandraprabhu Urban Co. Operative Credit Society Ltd. (2014)(45 taxman 14) clearly brought out the definition of" Banking Business". 4. The learned Commissioner of Income-tax (Appeals) ought to have distinguished the fact that assessee society caters to the needs of "resident members" and Nominal Members" and that the loans to the Nominal Members" and receipt of interest thereof, tantamount to the assessee society conducting business dealings. 5. The Commissioner of Income-tax (Appeals) ought to have considered that in the Tamilnadu Co-operative Societies Act, 1983 the term "Members" is dealt in sections 4,5,6,8,13,14,15,20,21,23,....
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.... Interest from Co-op institutions u/s. 80P(2)(d) - Rs. 11,20,990/- Total deduction u/s 80P - Rs.4,30,30,877/- The AO noted that the assessee's society is not only advancing loans to members but also advancing loans to associated members in contravention of the provisions of section 80P(2)(a)(i) of the Act. According to AO, this provision provides deduction only to the society which is providing credit facilities to its members. According to AO, loan is provided to associated members for jewellery, etc., and rate of interest charged is 14%. According to AO, the assessee co-operative society is doing finance business. Therefore, the AO disallowed the claim of deduction u/s.80P(2)(a)(i) of the Act and assessed the total income at Rs.1,79,09,233/-. The AO computed the gross total income as under:- Gross Total Income - Rs.3,32,07,071 Less: Allowable deduction :- 80P(2)(a)(iii) (as discussed) - Rs.1,41,19,896 80P(2)(C) (as discussed) - Rs. 1,00,000 80P(2)(D) (as discussed) - Rs. 10,77,942 Rs.1,52,97,338 A....
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....B' Bench in the cases of SL(SLP) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd and S 1382 Mullukuruchi Primary Agricultural Co-operative Credit Society Ltd in I.T.A. Nos. 292 & 293/Mds/2014 vide common order dated 17.03.2014 and also the decision of 'C' Bench in the cases of M/s. 1915 Vellalapatty Primary Agricultural Co-operative Credit Society Ltd. in I.T.A. Nos. 385 & 386/Mds/2014, M/s.6648 Attur Mulluvadi Primary Agricultural Co-operative Credit Society Ltd. in I.T.A. No. 387/Mds/2014 vide common order dated 01.05.2014. After perusing the relevant provisions of State Co-operative Societies Act, 1983, governing similar assessees, the Tribunal found that definition of 'members' includes 'associate members', as well. The Tribunal found that such nominal members also enjoy statutory recognition as per the State Co-operative Societies Act. The Tribunal further observed that the objections of the Revenue that 'members' defined in sub-clause (i) of Section 80P(2) should only include voting members, would amount to a classification within classification which is beyond the purview of taxing statute; unless provided specifica....
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.... made clear that the assessee society will not come under the object of the principal business of a co-operative bank, which is a banking business. The benefit of Section 80P is excluded for deductions by co-operative banks, whereas the primary agricultural credit societies are entitled for the said deduction. 14. .... 15. In the recent decision of the Kerala High Court, in the case of Chirakkal Service Co-operative Bank Ltd., Kannur vs. the Commissioner of Income Tax, reported in (2016) 68 taxmann.com.298 (Kerala), the High Court considered similar substantial questions of law (Issue No.A) raised by the assessee, regarding the entitlement for exemption under sub section (4) of Section 80P. By considering the fact that the assessee is a primary agricultural society, the Kerala High Court has answered the substantial question of law in favour of the assessee and held 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. Therefore, the aforesaid decisions is applicable to the instant case. 16. In the light of the aforesaid facts and cir....
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....gned. 10. The appellate authority, namely, the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal has clearly held that the assessees are not co-operative bank and that their activities in the nature of accepting deposits, advancing loans etc., carried on by the assessees are confined to its members only and that too in a particular geographical area. Therefore, the respondent Societies are eligible for deduction under Section 80P (2) (a) (i) of the Act. The contention of the appellants that the members of the assessee societies are not entitled to receive any dividend or having any voting right or no right to participate in the general administration or to attend any meeting etc., because they are admitted as associate members for availing loan only and was also charging a higher rate of interest at the rate of 14%, is not a ground to deny the exemption granted under Section 80P (2)(a) (i) of the Act. 11. The decision rendered by this Court in TCA 735, 755 of 2014 and 460 of 2015 dated 05.07.2016, squarely covers the present facts of the case, so far as it relates to the ineligibility of the respondent societies, under Section 80P (2)(a)(i)....
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....ieties engaged in the banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the Reserve Bank of India. Clearly, therefore, the Assessee's case is out of the provisions of Section 80P(4) of the Act. In relation to the Associate members, we are of the view that the provisions of Section 22 read with Rule 32 of the Tamil Nadu Co-operative Societies Act, 1983 and Tamil Nadu Co-operative Societies Rules clearly determine the procedure to admit Associate members and accordingly in the present case, the Assessee's Co-operative Society has admitted the same. In view of the above finding, we hold that the Assessee is entitled for the claim of deduction u/s.80P(2)(a)(i) of the Act. Thus, we reverse the orders of the lower authorities and allow these three appeals of the Assessee. 5.2 As the issue is squarely covered and the facts are identical to the above referred case laws, respectfully following the Hon'ble Supreme Court decision in the case of Mavilayi Service Cooperative Bank Limited, supra, Hon'ble Madras High Court decision in the assessee's own case & S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd., and the C....