2024 (1) TMI 766

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... 25.11.2022. 2. The facts of the case in brief are that the assessee, registered as a primary agricultural credit society (PACS) under the Kerala Co-operative Societies Act, 1969 (Kerala Act), returned it's income for the year on 25.10.2018 at nil income, claiming deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) of the Act in the sum of Rs. 1,21,95,123. The same was found inadmissible by the Revenue inasmuch as it included interest and dividend income on investments with co-operative banks; commercial banks; and financial institutions, as well as commission income (GDCS Thalayal commission), besides dividend from unlisted equities. Reliance for the purpose was placed by it on the decision in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 3....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s. The next question is if it is in the business of banking, which in fact is again an admitted position, with either side relying thereon. Section 59 r/ws. 60 of the Kerala Act makes it abundantly clear that the transactions with, including acceptance of deposits from, non-members, is not proscribed, but only regulated under the Kerala Act. The assessee thus satisfies the test of undertaking the business of banking as defined u/s. 5(b) of the Banking Regulation Act, 1949 (BRA). In fact, the Kerala Act provides for admission of nominal members, i.e., who have no rights and privileges of a regular member, viz., voting rights; participation in surplus, etc. Any member of the public can, therefore, become a 'member' on paying a nominal sum, wh....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the banking business. True, the decisions are with reference to cooperative banks, and the investment in the instant case is not out of statutory reserves, but the same is only for the reason that the provisions of BRA have not been invoked. They shall apply in principle, i.e., where an entity, otherwise eligible, is undertaking banking business. The investment of funds would in any case only be in terms of it's bye-laws read with the Kerala Act; it's accounts being subject to statutory audit there-under. The commission income, being in respect of credit to it's members, again falls to be considered as part of its main activity, i.e., business of banking, and, in any case, from provision of credit to it's members. The impugned income, incl....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ts, i.e., reading it in consistence therewith; that prevailed with the Hon'ble Court in Perroorkada SCB Ltd. (supra) in construing the mandate of s. 80P(2)(d) thus, even as the prescription of s. 80P(4) is applicable for the entire provision. The said decision is even otherwise binding on this Tribunal. 4.3 As regards dividend income on unlisted securities, the same is not shown by the assessee to be forming an integral part of the business of banking, only whereupon would it stand to be covered u/s. 80P(2)(a)(i), as explained in Totgar's Co operative Sale Society Ltd. (supra), confining the benefit there-under to operational income, and not on investment of funds deemed surplus for the time being. The said income, or any other income fall....