TaxTMI 
TaxTMI 
2024 (1) TMI 27
X X X X Extracts X X X X
X X X X Extracts X X X X
....sing Officer u/s. 143(3) r.w.s 143(3A) & 143(3B) of the Act dated 02.03.2021 on the reasoning that the Assessing Officer has erroneously allowed the deduction u/s. 80P(2)(a)(i) of the Act in respect of interest income of Rs.2,34,56,365/- earned from Co-operative banks and hence it is prejudicial to the interest of Revenue. For this, assessee has raised various grounds which are argumentative and exhaustive, hence need not be reproduced. 3. Brief facts of the case are that assessee is a Co-operative Society extending credit facilities to its employees as well as to its members. Assessee filed return of income for the relevant assessment year 2018-19 on 26.10.2018 and accordingly assessee's case was selected for scrutiny under CASS to verify the following issues:- (i) Verification of investments/ Advances/ Loans. (ii) Verification of deduction from total income claimed u/s. Chapter VIA The Assessing Officer during the course of assessment proceedings noted that assessee has earned interest to the tune of Rs.2,69,98,705/-and out of which a sum of Rs.35,42,340/- is earned on deposits made with Central Bank of India, Kolathur Branch and balance sum of Rs.2,34,56,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-operative Bank & Tamil Nadu State Apex Co-operative Bank are governed by Tamil Nadu State Co-operative Act and registered under Tamil Nadu State Co-operative Act only. According to the Ld. Counsel for the assessee they are not holding license from Reserve Bank of India and not governed under Banking Regulation Act, 1949. Ld Counsel for the assessee submitted that assessee's case is squarely covered by the decision of Hon'ble Madras High Court in the case of S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd., filed by in T.C.A Nos.484 to 487 and 490 of 2016 order dated 02.08.2016, wherein the Hon'ble High Court has held in favour of assessees and the relevant reads as under:- 7....... 3. This issue has been considered by Income Tax Appellate Tribunal, Chennai '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 Cooperative Credit Society Ltd. in I.T.A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of which is to provide for long-term credit for agricultural and rural development activities. It is seen that the primary object of the society is to provide financial accommodation to its members to meet all the agricultural requirements and to provide credit facilities to the members, as per the bye-laws and as laid down in Section 5 (cciv) of the Banking Regulation Act, 1949. Further, from the CPT Circular dated 12.03.2008, it is evident that a credit co-operative society is not a co-operative bank, as defined in Part V of the Banking Regulation Act, 1949. The object of a 'Co-operative bank' is to accept deposits from the public, for lending or investment of money. On perusal of the findings of the Appellate Authority as well as the Appellate Tribunal, it is categorically 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rally. In our considered opinion, the objections of the revenue that the 'members' defined in sub clause (i) of Section 80P should only include voting members would amount to a classification within classification which is beyond the purview of tax statute; unless provided specifically by the legislature. Moreover, we find that the case law of Hon'ble Punjab and Haryana High Court (Supra) also supports the assessee's case wherein it has been held under the very provision that for the purpose of impugned deduction, it is irrelevant so far as classification of the members in 'A' or 'B' category is concerned. Following the decision of the Punjab and Haryana High Court, the appellate authority as well as the Income Tax Appellate Tribunal, has passed the order impugned. 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, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ety shall carry on in banking business in India, unless it is a Co-operative Bank and holds license issued on this behalf by the Reserve Bank of India. In the present case also, there is no banking 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 Cooperative 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 S....