KANGAYAM PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY,KANGAYAM vs. ITO, WARD-1(4), , TIRUPUR

आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT:

2016-17 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 24.12.2018.

2. The Assessing Officer as well as the learned CIT(A) erred in not considering the submissions filed by the appellant in proper perspective, more particularly the factum of interest income from the investments in co- operative banks, which are also co-operative societies. Relying on (i) TCA No.5 of 2015 by Madras High Court, dated 10/08/2016 (ii) dated 08/06/2022 (iii) ITA No.282/CHNY/2021 dated 29/06/2022 and (iv) ITA No.632/CHNY/2022 dated 15/09/2022

Aggrieved, now assessee is in appeal before the Tribunal.

6. We noted that there are interest income from Chennai Central Co- operative Bank, gratuity interest from Chennai Central Co-operative Bank, dividend from shares of CC Cooperative Bank, BDR interest from Chennai Co-operative Bank, RF interest from CC Co-operative Bank , SRF interest from Cooperative Bank and BF interest from CC Co-operative Bank in aggregate amounting to Rs.29,68,672/-. Admittedly, Chennai Central Co- operative Bank is a co-operative society and registered under Co-operative Society’s Act of Tamil Nadu. This issue has been settled by the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., & Ors. Vs. CIT, 123 Taxmann.com 161 (SC). A similar issue has been considered by this Tribunal in the case of ITO vs. The Tiruchengode Agricultural Producers Co-operative Marketing Society Ltd., in to 2956/Chny/2027, vide order dated 13.07.2022, wherein, the Tribunal considered the decision of Hon’ble Madras High Court decision in the case of S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd.,in T.C.A Nos.882 and 891 of 2018 and held as under:-

“5.1 Further, this issue is now covered by the Coordinate Bench decision in the case of Tamilnadu Co- 5 & 112/Chny/2023 operative State Agriculture and Rural Development Bank Limited, in ITA Nos.31 to 33/Chny/2021, order dated 29.04.2022, wherein we have already considered the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. CIT, Calicut reported in [2021] 123 Taxmann.com 161 (SC) and held as under:- 30. In view of the above facts discussed and the case-laws of the Hon’ble Supreme Court in the case of Mavilayi Service Co- operative Bank Limited vs. Commissioner of Income Tax, Calicut (supra), we are of the view that the Assessee is a Co-operative Society under the name and style as “Tamil Nadu Co-operative State Agricultural and Rural Development Bank Limited” and it is not engaged in the banking activities. It is also clear that in view of Section 3 read with Section 56 of the Banking Regulation Act, 1949, the Assessee cannot be considered as a Primary Co- operative Bank but it is a Primary Agricultural Credit Society because Co-operative Bank must be engaged in the business of Banking as defined in the Section 5(b) of the Banking Regulation Act, which means accepting, for the purpose of lending or investment of deposits of money from the public. Similarly, u/s.22(1)(b) of the Banking Regulation Act, as applicable to Cooperative Societies, no Co-operative Society shall carry on 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 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 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 Co-operative 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 Co-ordinate Bench decision in the case of Tamilnadu Co-operative State Agriculture and Rural Development Bank Limited, supra, we dismiss the appeal of Revenue. Consequently, all the three appeals of Revenue are dismissed.

7. The facts being identical, respectfully taking this issue as covered, we direct the Assessing Officer to allow the claim of deduction u/s.80P of the Act and allow both the appeals of assessee accordingly.

The ld. Senior DR also filed the list of District Central Co-operative Banks which includes the present assessee at page 31 as under:- “7. The Erode District Central Co-operative Bank Ltd. No.1, Bhavani Main Road Erode – 638 003”

Rural Development Bank Ltd., in Civil Appeal No.10069 of 2016, order dated 14.09.2023, wherein the Hon’ble Supreme Court has stated that the Central Co-operative Bank is a Co-operative Society which is registered under the Kerala State Co-operative Societies Act, then it is not a bank per se governed by RBI. Similarly in the present case before us, the Erode District Central Co-operative Bank also governed by TamilNadu Co-operative Societies Act and once it is governed by Co-operative Societies Act, the assessee is eligible for claim of deduction u/s.80P(2)(d) of the Act. Hence, we are of the view that assessee’s case is squarely covered in favour of assessee by the decision of Hon’ble Supreme Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd., supra and hence, we allow the claim of assessee.