TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1287
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....e. 3. We note that the impugned Order was passed by NFAC on 27/09/2024. The specified period for filing appeal expired on 26/11/2024. The present appeal was filed after a delay of around 8 months. We have heard both the sides of application seeking condonation of delay and after considering the same, we are inclined the condonation of delay in filing the appeal. On perusal of the impugned Order we find that at Page No. 1 of the said order bears the expression "Draft order". The Assessee has explained that delay in filing the present appeal occurred as the Assessee was under the apprehension that the Final Order shall be received. Since, final order was not received after passing the reasonable time the Assessee preferred the present appeal. Given the facts and circumstances of the present appeal, we have no reasons to doubt the bonafides of the explanation offered by the Assessee which is also supported by an affidavit sworn by Secretary of the Assessee/Co-operative Society. Accordingly, we condone the delay in filing the present appeal and proceeded to adjudicated the following grounds of appeal raised by the Assessee: "1. This is an Appeal by the assessee against the ....
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....t extending credit facilities alone. In fact, we are instrumental in procuring fertilizers, manures, pesticides, seeds and other agricultural instruments at economic prices and distributing the same to our members for a very nominal rate. We are also distributing plants, sourcing the agricultural produces by our members and enabling a trade platform also. The same can be verified from our trading account and sales tax registration certificates and returns. Also, Panchayath licenses for the same is available. 6. The order passed by the CIT(A) is erroneous, arbitrary, and contrary to established legal principles. The CIT(A) dismissed the appeal disallowing the deduction under Section 80P. 7. That the Ld. AO has primarily disallowed deduction by taking in to the proportion of agri-loans loans out of the total loans disbursed, which constitute to less than 1% of the total loans. Hence, it may be reasonably inferred that the Ld. AO had admitted that the loans advanced were only to the members of the Appellant. In this regard the Appellant wishes to rely on the Judgment by the Hon'ble Supreme Court of India (Hon'ble SC) in the Civil Appeal Nos. 7343-7350 of 2019....
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....he aforesaid issue is no longer res integra and stands decided in favour of the Assessee by the judgment of the Hon'ble Supreme Court in the case of Mavilayi Services Co-operative Bank Limited Vs. CIT, Calicut: [2021] 431 ITR 1 (SC) [12/01/2021]. In that case, the Hon'ble Supreme Court had rejected identical stand/contentions of the Revenue and held, inter alia, as under: (a) Section 80P(4) of the Act is to be read as a proviso to Section 80P(2)(a)(i) of the Act which specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public and have a licence in this behalf issued by Reserve Bank of India. In absence of such license, the provisions of Section 80P(4) of the Act would not be attracted in case of co-operative society classified by the Registrar of Co-operative Societies as being a primary agricultural credit society. (b) The expression "providing credit facilities to its members" does not necessarily mean agricultural credit alone. Once Section 80P(4) of the Act is out of harm's way, assessee would be entitled to the benefit of the deduction contained in Section 80....
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.... Court in Chirakkal Service Co-operative Bank Ltd. v. CIT [2016] 68 taxmann.com 298/239 Taxman 417/384 ITR 490, where in a batch of appeals challenging assessments completed under section 147 read with 143(3)/144 of the Income-tax Act, the High Court, after considering section 80P(4) of the Income-tax Act, various provisions of the Kerala Act, the Banking Regulation Act, 1949, the byelaws of the Societies, etc., held that once a co-operative society is classified by the Registrar of Co-operative Societies under the Kerala Act as being a primary agricultural credit society, the authorities under the Income-tax Act cannot probe into whether agricultural credits were in fact being given by such societies to its members, thereby going behind the certificate so granted. This being the case, the High Court in Chirakkal Service co-operative Bank Ltd. (supra) held that since all the assessee's were registered as primary agricultural credit societies, they would be entitled to the deductions under section 80P(2)(a)(i) read with section 80P(4) of the Income-tax Act. 4. However, the Department contended that the judgment in Chirakkal Service Co-operative Bank Ltd. (supra) was rendere....
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.... 6. Being aggrieved by the Full Bench judgment, the Appellant assessee's are now before us. xx xx 15. It is important to note that though the main object of the primary agricultural society in question is to provide financial assistance in the form of loans to its members for agricultural and related purposes, yet, some of the objects go well beyond, and include performing of banking operations "as per rules prevailing from time to time", opening of medical stores, running of showrooms and providing loans to members for purposes other than agriculture. xx xx 20. We now come to the judgment of this Court in Citizen Cooperative Society Ltd. (supra). This judgment was concerned with an assessee who was established initially as a mutually aided cooperative credit society, having been registered under section 5 of the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995. As operations of the assessee began to spread over States outside the State of Andhra Pradesh, the assessee got registered under the Multi-State Cooperative Societies Act, 2002 as well. The question that the Court posed to itself was as to whether the appellant was barr....
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.... xx xx 26. Applying the aforesaid decisions, it is clear that the ratio decidendi in Citizen Cooperative Society Ltd. (supra) would not depend upon the conclusion arrived at on facts in that case, the case being an authority for what it actually decides in law and not for what may seem to logically follow from it. Thus, the statement of the principles of law applicable to the legal problems disclosed by the facts alone is the binding ratio of the case, which as has been stated hereinabove, is contained in paragraphs 18 to 23 of the judgment. Paragraphs 24 to 26, being the judgment based on the combined effect of the statements of the principle of law applicable to the material facts of the case cannot be described as the ratio decidendi of the judgment. Nor can it be said that it would logically follow from the finding on facts that the assessing officer can go behind the registration of a society and arrive at a conclusion that the society in question is carrying on illegal activities. On this score alone, the Full Bench's understanding of this judgment has to be faulted and is set aside. 27. However, this does not conclude the issue in the present case. W....
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....td. v. CIT [2009] 8 SCC 393 at paragraph 23, the burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under section 80P. Therefore, the assessing officer under the Income-tax Act cannot be said to be going behind any registration certificate when he engages in a fact-finding enquiry as to whether the co-operative society concerned is in fact providing credit facilities to its members. Such fact finding enquiry (see section 133(6) of the Income tax Act) would entail examining all relevant facts of the co-operative society in question to find out whether it is, as a matter of fact, providing credit facilities to its members, whatever be its nomenclature. Once this task is fulfilled by the assessee, by placing reliance on such facts as would show that it is engaged in providing credit facilities to its members, the assessing officer must then scrutinize the same, and arrive at a conclusion as to whether this is, in fact, so 33. Sixthly, what is important to note is that, as has been held in Kerala State Cooperative Marketing Federation Ltd. (supra) the expression "providing credit facilities to its members" does not necessarily mean....
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....ially carried out, and the society conducts any other legitimate type of activity, such co-operative society would only be entitled to a maximum deduction of Rs. 50,000/- under sub-clause (c). 35. Eighthly, sub-clause (d) also points in the same direction, in that interest or dividend income derived by a cooperative society from investments with other cooperative societies, are also entitled to deduct the whole of such income, the object of the provision being furtherance of the cooperative movement as a whole. 36. Coming to the provisions of section 80P(4), it is important to advert to speech of the Finance Minister dated 28-2-2006, which reflects the need for introducing section 80P(4). Shri P. Chidambaram specifically stated: "166. Cooperative Banks, like any other bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Banks (PCARDB) stand on a special footing and will continue to be exempt from tax under section 80P of the Income-tax Act. However, I propose to exclude all other cooperative banks from the scope of that section." ....
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....the Banking Regulation Act, 1949 is now to be seen, what is clear from section 3 read with section 56 is that a primary 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 co-operative bank and holds a licence issued in that behalf by the RBI. As opposed to this, a primary agricultural credit society is a cooperative 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 licence to the RBI, as their bye-laws 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 ....
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....s Court in U.P. Cooperative Cane Unions' Federation Ltd. v. CIT [1997] 11 SCC 287 referred to section 80P of the IT Act and then held: "8. The expression "members" is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in Section 80-P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative 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 Cooperative 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 bye-laws for the time being in force but a reference to 'members' anywhere in this Act in connection with the possession or exercise of any right or ....