PERINGOTTUKARA SERVICE CO-OPERATRIVE BANK LTD NO 110,THRISSUR vs. ITO, WARD-2(1), THRISSUR

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 28/11/2023 in respect of the A.Y. 2017-18.

The brief facts of the case are that the assessee is a primary agricultural credit society registered under the provisions of the Kerala Co- operative Societies Act. During the year, the assessee filed their return of income declaring a Nil income after claiming deduction u/s. 80P(2)(a)(i) of Page 2 of 5 S.P. No. 12/Coch/2024 & the Act. Thereafter, the case was selected for scrutiny under CASS and assessment has been made by disallowing the deduction u/s. 80P(2)(a)(i) of the Act for the reason that the assessee had lent loans to non-agricultural purposes also and also dealt with nominal or associate members and also the assessee is acting like a co-operative bank. The said order was challenged by the assessee before the Ld.CIT(A) and contended that the assessee is a primary agricultural co-operative society registered under the provisions of the Kerala Co-operative Societies Act and contended that the loans given to non-agricultural purpose would not be a reason for disallowing the deduction claimed u/s. 80P(2)(a)(i) of the Act. The Ld.CIT(A) also without considering the issue in detail, had confirmed the orders of the AO and dismissed the appeal. As against the said order, the assessee is in appeal before this Tribunal with the following grounds: “

We have heard the arguments of both sides and perused the materials available on record.

We have perused the assessment order in which the AO had elaborately discussed the issue by relying on various judgments as well as orders and came to the conclusion that the assessee had offered loans for non-agricultural activities and also loans are given on deposits received from ‘C’ class members and the assessee is also acting as non-banking financial organisation in the garb of PACS. We find that the main reason for denying

As rightly argued by the Ld.AR, this issue was already dealt with by the Hon’ble Supreme Court in the above cited judgment and the Hon’ble Supreme Court had held that the purpose of loan given is not a criteria for allowing deduction u/s. 80P(2)(a)(i) of the Act. Admittedly, in this case, all the loans were given to the members only and not to any other public and therefore the loans were offered only for the benefit of the members. Further, the Hon’ble Supreme Court also held that the member whether a nominal or associate member would not be a reason for disallowing the deduction u/s. 80P(2)(a)(i) of the Act. Further, it is a fact that the assessee is a registered society under the Kerala Co-operative Societies Act and they are under the control of the Registrar of Co-operative Societies and their accounts were audited every year and necessary reports were also forwarded to the authorities. In such circumstances the AO has no other evidence to show that the assessee is a bank except the word bank has been mentioned in its name. The mere mentioning of the bank in its name would not be a reason to treat the assessee as a co-operative bank and also a non-financial banking organisation. In order to treat an assessee as a bank or NBFC, it is necessary that they are in possession of the license issued by the Reserve Bank of India under the Banking Regulation Act and in this case, no such license is available with the assessee and it is also not the case of the AO that the assessee has got such license from the Reserve Bank of India in order to treat the assessee as a Co-operative Bank or a Non Banking Financial Corporation. In such circumstances, we have no other option except to follow the principles laid down by the Hon’ble Supreme Court in the above cited judgment and on that basis, we are allowing the appeal filed by the assessee. Since the main appeal is allowed, the stay petition becomes infructuous.