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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI SATBEER SINGH GODARA & SHRI AMARJIT SINGH
demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Thus, it is only when a co-operative society is conducting banking business in terms of the definition referred to above that it becomes a co-operative bank and in such a case, require a licence to run a co-operative bank. In other words, if a co-operative society is not conducting the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949, it would not be a co-operative bank and not so within the meanings of a state co-operative bank, a central co-operative bank or a primary co- operative bank in terms of Section 56(c)(i)(cci). Whereas a co- operative bank is in the nature of a banking company which transacts the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949. But if a cooperative society does not transact the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949, it would not be a cooperative bank.
Then the definitions under the NABARD Act, 1981 would not apply. If a co-operative society is not a co-operative bank, then such an entity would be entitled to deduction but on the other hand, if it is a co-operative bank within the meaning of Section 56 of BR Act, 1949 read with the provisions of NABARD Act, 1981 then it would 62 not be entitled to the benefit of deduction under sub-section (4) of Section 80P of the Act. clause which states that notwithstanding anything contained in any other law for the time being in force, the provisions of the said Act, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to certain modifications. The object of Section 56 is to provide a deeming fiction by equating a co-operative society to a banking company if it is a co-operative bank within the meaning of the said provision. This is because Chapter V of the BR Act, 1949, deals with application of the Chapter to co-operative societies which are co-operative banks within the meaning of the said chapter. For the purpose of these cases, what is relevant is that throughout the BR Act, 1949, unless the context otherwise requires, - references to a “banking company” or “the company” or “such company” shall be construed as references to a co- operative bank. Therefore, while considering the meaning of a co- operative bank inherently, such a cooperative society must be a banking company then only it would be construed as a co- 1949 in order to function as such a bank.
15.10. Further, while considering the definition of a co-operative bank under Section 56(cci) of the BR Act, 1949, to mean a state cooperative bank, a central co-operative bank and a primary co- operative 63 bank which is defined in (ccviii) thereof, to have meanings respectively assigned to them in the NABARD Act, 1981 would imply that if a state co-operative bank is within the meaning of NABARD Act, 1981 then it would be excluded from the benefit under Section 80P of the Act. Conversely, if a co- operative society is not a co-operative bank within the meaning of Section 56 of the BR Act, 1949, it would be entitled to the benefit of deduction under Section 80P of the Act.
15.11. Looked at from another angle, a co-operative society which is not a state co-operative bank within the meaning of NABARD Act, 1981 would not be a co-operative bank within the meaning of Section 56 of the BR Act, 1949. In the instant case, as already noted in A.P. Varghese case, the Kerala State Co-operative Bank being declared as a state co-operative bank by the Kerala State society not being so declared, would imply that the appellant society is not a state co-operative bank.
15.12. In fact, in Citizen Co-operative Society Ltd., this Court held that the appellant therein was having both members as well as nominal members who were depositing and availing loan facilities from the appellant therein and therefore, appellant therein was not entitled to the benefit of Section 80P of the Act as it was functioning as a cooperative bank. But, the appellant herein is not a co-operative bank and neither has it been so declared under the provisions of NABARD Act, 1981 or the State Act. On the other hand, under the provisions of State 64 Act, 1969, the Kerala State Co-operative Bank has been so declared by the Government of Kerala as a co-operative bank.
15.13. Further, under the provisions of the State Act, 1984, ‘agricultural and rural development bank’ means the Kerala Cooperative Central Land Mortgage Bank Limited, registered under Section 10 of the Travancore-Cochin Co-operative Societies Act, 1951, which shall be known as Kerala State Co-operative appellant herein. Thus, from a conjoint reading of all the relevant statutory as alluded to hereinabove, it is quite clear that the appellant is not a co-operative bank within the meaning of sub- section (4) of Section 80P of the Act. The appellant is a co- operative credit society under Section 80P(2)(a)(i) of the Act whose primary object is to provide financial accommodation to its members who are all other co-operative societies and not members of the public.
15.14. Therefore, when the definition of “co-operative bank” in Section 56 of BR Act, 1949 is viewed in terms of Sections 2(u) of the NABARD Act, 1981, it is clear that only a state co-operative bank would be within the scope and meaning of a banking company under Section 2(c) of the BR Act, 1949 on obtaining licence under Section 22 of the said Act.
Conclusion:
In the instant case, although the appellant society is an apex cooperative society within the meaning of the State Act, 1984, it is with Section 56 of the BR Act, 1949.
In the result, the appeals filed by the appellant are allowed and the order(s) of the Kerala High Court and other authorities to the contrary are set aside. Consequently, we hold that the appellant is entitled to the benefit of deduction under Section 80P of the Act.
The questions for consideration are answered accordingly.
Parties to bear their respective costs.”
Learned DR next vehemently submits that the assessee had provided loans to it’s members for non-agricultural sector as well.
We find that such a distinction already stands overruled in hon'ble apex court’s foregoing landmark decision in Mavilayi Service Co-operative Bank Ltd., vs. CIT [2021] 431 ITR 1 (SC). We thus conclude in these peculiar facts that the assessee’s impugned sec.80P detailed discussion claim of Rs.1,31,00,399/- indeed deserves to be accepted in very terms. Ordered accordingly. Necessary computation shall follow as per law in very terms.
Order pronounced in the open court on 23rd October, 2024.