M/S PANTHALUR SERVICE CO-OP BANK,MALAPPURAM vs. ACIT CIRCLE 1, TIRUR

At the outset, opening the arguments for and on behalf of the assessee, it was submitted by Shri Rishal, the learned counsel for the assessee, that the assessee, registered as a Primary Agricultural Credit Society (PACS) under the Kerala Cooperative Societies Act, 1969 (Kerala Act), is admittedly in the business of banking. Though, however, it is not a ‘co-operative bank’, i.e., within the meaning of the term u/s. 80P(4) of the Act, only which would operate to exclude it from the purview of s. 80P of the Act. The Revenue authorities have, however, denied (AY : 2014-15) Panthalur Service Co-op. Bank Ltd. v. ACIT deduction u/s. 80P(1) r/w s. 80P(2)(a)(i), claimed on the entirety of it’s profit, on the ground of the assessee being, in substance, not a PACS inasmuch as the bulk of it’s lending is not for agriculture and allied purposes, the defining attribute of a PACS, which though is irrelevant for the purpose of eligibility for deduction u/s. 80P(1) r/w s. 80P(20(a)(i), even as explained in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC). Smt. Devi, the Sr. DR, would, on the other hand, rely on the orders by the Revenue authorities.

We have heard the parties, and perused the material on record. 3.1 As regards the assessee’s contentions, as advanced by Shri Rishal, we could not agree more. The same distills the decision by the Hon'ble Apex Court in Mavilayi SCB Ltd. (supra) and, in fact, is in substance what stands reiterated per it’s several orders by this Bench of the Tribunal, viz., Sivapuram Service Co-operative Bank Ltd. and Ors v. ITO (ITA Nos. 61 & 62/Coch/2023, dated 13.12.2023); 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; and Vallapuzha SCB Ltd. v. ITO (ITA No. 327 & 328/Coch/2023, dated 26/3/2024). As explained therein, where and to the extent the assessee-society accepts deposits from non-members; rather, is entitled to, being permitted by it’s bye-laws, it is in the business of banking notwithstanding the area restrictions for it’s operations inasmuch as the same are applicable only qua it’s members. Rather, in such a case, being in the business of banking, even income on provision of credit to non-members would stand to be deductible u/s. 80P(2)(a)(i). The bye-laws of the assessee-society are not on record, neither stand referred to in their orders by the Revenue authorities. It is only with reference thereto would it stand to be determined as to if: (a) the assessee is a co-operative bank; and (b) the assessee is in the business of banking. 2 | P a g e