ACIT, CHENNAI vs. TAMILNADU COOPERATIVE STATE AGRICULTURAL & RURAL DEVELOPMENT BANK, CHENNAI

आदेश /O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

:-2-: I.T.A. Nos. 1500&1501/Mds/2017

“1. The order of the learned CIT(A) is contrary to law, facts and circumstances of the case. 2.1. The learned CIT(A) erred in holding that the assessee is eligible for deduction u/s. 80(P)(2) of the Act. 2.2 The Learned CIT(A) has not appreciated the fact that the assessee bank may not function as a normal scheduled bank. But it functions as a bank specialized in re-finance. The business of banking cannot be narrowly taken to :-3-: I.T.A. Nos. 1500&1501/Mds/2017 the the definition of banking as per the Banking Regulations Act. The assessee bank gets loans from NABARD, State Governments, raises debuntures and finance its members. 2.3 The learned CIT(A) failed to appreciate that the assessee bank claims that it only lends to its members. The annual report of the bank states that the bank has disbursed jewel loans both directly and also through its member primary banks, but the bank claims that the members of its member banks become associate members and avail loans. Sec. 80P(2 speaks only about lending loans to its member and the scope cannot be widened. 2.4 The learned CIT(A) failed to appreciate that the intention of the legislature is that the provisions of section 80P(2) cannot be applied in relation to any co-operative bank otherner than a primary Agricultural credit society or a primary Co-operative Agricultural and Rural Land Development Bank. 2.5 The CIT(A) failed to appreciate that the Tamil Nadu Co-operative State Agricultural & Rural Development Bank Limited is the Apex bank to all primary Co-operative agricultural and rural development banks in the state. According to explanation (b) to section 80P( 4), the primary co-operative agricultural and rural land development banks can claim this deduction only if its operation is s restricted to a "Taluk". In the instant case the operations are spread all over the state and being the apex bank, the assessee cannot claim the staus of a primary bank. 2.6 The learned CIT(A) erred in holding that the assessee being a co- operative bank is eligible for deduction U/s. 80P of the Act, without appreciating the fact that the assessee bank is entitled to float debentures and to receive deposits as per clause 4 of the bye laws and further entitled to subscription of shares, debentures and other borrowings as per clause 13 of the bye laws, making it clear that the assessee has all characteristics of a bank, and not a primary agricultural credit society.

3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.”

:-4-: I.T.A. Nos. 1500&1501/Mds/2017 in the assessee’s case in dated 01.05.2014 for assessment year 2009-10

“4. In lower appellate proceedings, the CIT(A) treats the assessee to be a ‘credit society’ which offers loans to its members and not engaged in any banking activity. He returns a finding that the assessee is not engaged in ‘banking’ under section 5 of the Banking Regulation Act, 1945. The CIT(A) has examined the assessee’s bye-laws to conclude that since its primary objective is to finance primary land development bank, it is a state land development bank u/s 2(v) of the NABARD Act, 1981. He has also relied upon a comparative chart distinction between a co-operative/commercial bank and a primary credit society to hold the assessee covered by the latter category.

Therefore, the Revenue is in appeal.

5. We have heard both parties and gone through the case file. It is made clear that no paper book or any other material has been filed before us to controvert the findings of the CIT(A) that the assessee is not engaged in any banking activity nor governed by the Banking Regulations Act. A perusal of relevant statutory provision i.e section 80P(4) reveals that this deduction is not available to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. There is no cogent evidence to observe that the assessee is a co-operative bank under the banking regulation law. The Revenue fails to prove the assessee to be covered by explanation (a) and (b) to section 80P(4). In absence of all this, only a factual issue remains. It has also come on record that the assessee had advanced credit to its associate members only. The Revenue has also failed to rebut the findings of fact under challenge. Thus, we do not see any reason to interfere in CIT(A)’s order and uphold the same. The Revenue’s corresponding grounds are rejected.

:-5-: I.T.A. Nos. 1500&1501/Mds/2017

6. The Revenue’s appeal is dismissed.”

Relying on the above decision only the CIT(A) held that “since, the facts situation is similar and in order to maintain consistency and judicial discipline with the ruling of the ITAT, the benefit of deduction u/s. 80P is extended to the Appellant,” with which, on the same facts and law, we do not find any infirmity. Hence, the Revenue’s appeals are dismissed.

Order pronounced on Tuesday, the 23rd day of January, 2018 at Chennai.