AI Drafter 
TaxTMI 
TaxTMI 
2022 (9) TMI 1526
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....but for the unavoidable reasons, therefore, the learned AR for the assessee prayed that delay may be condoned in the interest of advancement of substantial justice. 3. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee do not come within the ambit of reasonable and bonafide reasons, which can be considered for condonation of delay and hence, appeal filed by the assessee may be dismissed as not maintainable. 4. Having heard both the sides and considered petition filed by the assessee for condonation of delay, I am of the considered view that reasons given by the assessee for not filing the appeal within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of appeal is condoned and appeal filed by the assessee is admitted for adjudication. 5. The assessee has raised following grounds of appeal:- 1) The Learned CIT(A) erred in not considering the written submissions submitted by the appellant in proper perspective. 2) The Learned CIT(A) erred in sustaining the disallowance ....
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....ary Agricultural Co-op.Credit Society Vs. ITO in ITA No. 282/Chny/2021, where the Tribunal by considering relevant facts, including by following decision of the Hon'ble High Court of Madras in the case of The Salem Agricultural Producers Co-operative Marketing Society Ltd. Vs ITO in TCA No. 5 of 2015 dated 10.08.2016 and deleted additions made by the Assessing Officer. 9. The learned DR, on the other hand, supporting order of the learned CIT(A) submitted that as per decision of the Hon'ble Supreme Court in the case of M/s. The Totgars Cooperative Sales Society Ltd. in Civil Appeal No. 1622 of 2010 interest income on fixed deposits earned from banks is assessable under the head 'income from other sources' and thus, the assessee cannot claim benefit of deduction under section 80P(2) (d) of the Income Tax Act, 1961. 10. I have heard both the parties, perused material available on record and gone through orders of the authorities below. I find that an identical issue had been considered by the ITAT., Chennai, in the case of Varathappam Palayam Primary Agricultural Co-op. Credit Society Vs. ITO in ITA No. 282/Chny/2021 dated 29.06.2022 and by following decision of the Hon&....
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....ough the bye-laws of the Assessee Society which are placed at page 92. The relevant objects of the Assessee are mentioned at pages 93 and 94 of the Assessee's paper-book and the relevant reads as under: "Objects : 3. The object of the Bank shall be primarily to finance Primary Land Development Banks. 4. In order to fulfil 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 D....
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....ks, like any other Bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies [PACS] and Primary Co-operative Agricultural and Rural Development Banks [PCARDb] stand on a special footing and will continue to be exempt for tax under section 80P of the Income Tax Act. However, I propose to exclude 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. W....
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.... that the Assessee never gave the list of "B" category members or Associate members, as they were general public and whole of their accounts were in the banks. It was the argument of the learned CIT-DR that "B" category members were general public derived the facilities of the Assessee Bank without having any voting right in the Bank and moreover, they only gave the maximum business support to the Assessee Bank. We have considered this argument and noted that the Assessee has two categories of members, as under: a) Members - State Government and Primary Cooperative 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 Cooperative Societies Act, 1983 and the Tamil Nadu Cooperative 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 liabilitie....
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....sociate members and not to the general public as alleged by the learned CIT-DR. According to us, the Assessee cannot be construed to carry the business of Banking as defined u/s. 5(b) of the Banking Regulation Act, 1949. Thus, if the Banking Regulation Act, 1949 is now to be seen, what is clear from Section 3, read with Section 56 of the Banking Regulation Act, 1949 is that, a Primary Co-operative Bank cannot be a Primary Agriculture Credit Society as such a Co-operative Bank must be engaged in the business of banking, as defined by Section 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....
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....rimary co-operative bank cannot be a primary agricultural credit society, as such co-operative bank must be engaged in the business of banking as defined by section 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. Likewise, under section 22(1)(b) of the Banking Regulation Act, 1949 as applicable to co-operative societies, no co-operative society shall carry on banking business in India, unless it is a cooperative bank and holds a license issued in that behalf by the RBI. As opposed 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 applicati....
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....er the Kerala Act. This Court in U.P. Cooperative Cane Unions' Federation Limited vs. Commissioner of Income Tax [1997] 11 SCC 287 referred to section 80P of the Income Tax Act and then held: "8. The expression "members" is not defined in the Act. Since a co-operative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in section 80P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the Co-operative Society claiming exemption has been formed. It is therefore, necessary 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 posse....
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....activity and it is not registered as a Bank and it does not hold any license issued by the Reserve Bank of India. The Assessee being a Primary Agriculture Credit Society is a Co-operative Society. The primary object of which is to provide financial accommodation to its members, i.e. members as well as Associate members for agriculture purposes or for purpose connected with the agricultural activities. Further, we are of the view that the provision of Section 80P(4) of the Act is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies 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 Cooperative Society has admitted....
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....erials on record and gone through the orders of authorities below. The case of the assessee is that the income by way of interest and dividend earned by the assessee society are from investments made in Salem District Central Cooperative Bank, which is also admittedly, a co-operative society and are allowable deduction. The Assessing Officer has held that the assessee has made only with Salem District Central Cooperative Bank and therefore, the income from investment with the Bank is not entitled for deduction under section 80P(2)(d) of the Act. On appeal, the ld. CIT(Appeals confirmed the order passed by the ld. CIT(Appeals). We find that in the case of CIT v. Kangra Co-operative Bank Ltd. [2009] 309 ITR 106 (HP), the Hon'ble Himachal Pradesh High Court has considered section 80P(2)(d) of the Act. The interest earned by the assessee co-operative bank on fixed deposits with Himachal Pradesh State Co-operative Bank in compliance with the provisions of section 57 of the Himachal Pradesh Co-operative Societies Act, 1968, the income derived from banking business is eligible for deduction under section 80P(2)(a)(i) of the Act. Exemption is also available under section 80P(2)(d) of the A....