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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Sanjay Arora & Ms. Kavitha Rajagopal
Appellant by: Shri C.A. Sabu, CA Respondent by: Smt. J.M. Jamuna Devi, Sr. DR Date of Hearing: 07.02.2024 Date of Pronouncement: 29.04.2024 O R D E R Per Bench This is a set of eight Appeals by Assessee agitating the denial of deduction under section 80P(1) of the Income Tax Act, 1961 (the Act), claimed on the entirety of its profits and gains of business, in assessments under section 143(3) of the Act for Assessment Years (AYs.) 2011-12 to 2018-19, since confirmed in first appeal by the Commissioner of Income Tax (Appeals), Income Tax Department [CIT(A)], vide his separate orders dated 13.03.2023.
2.1 At the outset, it was claimed by Shri Sabu, the learned counsel for the assessee, that the assessee’s claim is fully covered by the decision by the Hon'ble Apex Court in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC). He would, on a query by the Bench during hearing, take us to the bye-laws, translated (in english 1 | P a g e to 351/Coch/2023 (AY : 2011-12 to 2018-19) Pattathanam Service Co-op. Bank Ltd. v. ITO by him) copy of a part of which, to emphasize that the assessee-society is confined in it’s operations to a particular area (as specified in Cl. 4 of the byelaws), only residents of which could become it’s members, even if nominal, duly permitted by it’s governing Act, i.e., the Kerala Co-operative Societies Act, 1969 (the Kerala Act), under which the assessee is registered as a Primary Agricultural Credit Society (PACS). This assumes relevance as this restriction by way of an amendment to s. 2(oa) of the Kerala Act by the Amendment Act of 1999, is applicable only to societies registered on or after the date of the commencement of the said Act, i.e., 01/01/2000.
We have heard the parties, and perused the material on record. 3.1 This Tribunal has per a series of decisions, beginning Sivapuram Service Co- operative Bank Ltd. & Ors v. ITO (ITA Nos. 61 & 62/Coch/2023, dated 13.12.2023), wherein the matter stands discussed at length, viz. Mundakkayam Service Co-operative Bank Ltd. v. ITO (ITA No. 73/Coch/2023, dated 28.12.2023); Koyyode SCB Ltd. vs. ITO (ITA No. 682/Coch/2022, dated 31.01.2024; Vallapuzha SCB Ltd. v. ITO (ITA No. 327 & 328/Coch/2023, dated 26/3/2024); and Panthalur Service Co-op. Bank Ltd. v. Asst. CIT (in ITA 113/Coch/2023, dtd. 03/4/2024), clarified that inasmuch as the Kerala Act permits a co-operative society to, through it’s byelaws, accept deposits from, as well as to lend to, non-members (ss. 58 to 60), the assessee-society, even though registered as a PACS, may yet be in the business of banking, satisfying the conditions of banking as specified in section 5(b) of the Banking Regulation Act, 1949 (BRA). Two, given it’s lending profile, whereby admittedly the advances are predominantly for non-agricultural purposes, violating the defining terms of PACS, i.e., under the BRA, adopted for the purpose of s. 80P (which is further in complete agreement with that under the Kerala Act), the appellant is not a PACS. So, however, as explained in Mavilayi SCB Ltd. (supra), that would have no bearing on it’s claim for deduction u/s. 80P(2)(a)(i), i.e., as long as it is not a ‘co-operative bank’, a term again defined in BRA, precluding thus section 80P(4). As 2 | P a g e to 351/Coch/2023 (AY : 2011-12 to 2018-19) Pattathanam Service Co-op. Bank Ltd. v. ITO further explained by the Tribunal per it’s orders afore-referred, banking being an eligible activity u/s. 80P(2)(a)(i), the assessee being in the said business would again matter little; rather, entitle it for the deduction on the entirety of it’s profit, i.e., including that referable to business with non-members. Further still, the assessee/s, satisfying the primary condition of s. 2(19) of the Act defining a society, is, thus, a cooperative society, a pre-requisite for deduction u/s. 80P(1). The resolution of the dispute as to whether the assessee is therefore eligible for deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) and, where so, its extent, thus rests solely on the assessee being, or not being, a co-operative bank, a term again defined under BRA, which stands adopted for the purpose of s. 80P, determining the issue.
3.2 The copy of the bye-laws, only a certified translated copy of which, in full, can be taken cognizance of and regarded as a part of the record, is not on record. As also noted by the Tribunal in it’s orders afore-referred, what value the restriction on the area for it’s members, if the assessee-society is otherwise eligible to accept deposits from non-members as well! Under the circumstances, we, for the reasons afore- noted, as also the cases referred to, set aside the orders by the Revenue authorities, and restore the matter back to the file of the Assessing Officer (AO) to determine the assessee’s eligibility for deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) on the basis of it being or, as the case may be, not being, a co-operative bank, i.e., on the basis of it’s bye-laws read with the Kerala Act and the BRA, as well as the quantum of the deduction there-under, which we clarify would be in full where the assessee is a co- operative bank, with it’s entire income arising from the business of banking.
3.3 We decide accordingly.