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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 13/06/2024 Date of Order – 19/06/2024
O R D E R PER V. DURGA RAO, J.M.
The present appeal has been filed by the assessee challenging the impugned order dated 13/09/2022, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2018–19.
The assessee has raised following grounds of appeal:–
“1. The order passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre u/s 250 of I.T. Act 1961 is illegal, invalid and bad in law. 2. The A.O. and learned CIT(A) erred in denying deduction u/s 80P of I.T. Act 1961 by invoking provisions of section 80AC of I.T. Act 1961 even though
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 assessee had submitted the original return of income on 31/10/2018 before due date of submission of return of income.
3. The A.O. and learned CIT(A) ought to have allowed the deduction u/s 80P of I.T. Act 1961 as claimed in the return of income.
4. The disallowance of deduction as claimed u/s 80P of I.T. Act 1961 in the case of assessee is unjustified, unwarranted and bad in law.
5. The assessee denies liability to pay interest under section 234A, 234B and 234C of I.T. Act 1961. Without prejudice, levy of interest under section 234A, 234C and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive.
6. Any other ground that shall be prayed at the time of hearing.”
3. Grounds no.1 and 6, being general in nature, hence no separate adjudication is required.
4. Grounds no.2 to 4, relates to disallowance of deduction under section 80P Income Tax Act, 1961 ("the Act")
5. Facts in brief:– In the present case, the assessee is a Co–operative Credit Society, registered under the Maharashtra Co–operative Societies Act, 1960, and is engaged in the business of collecting deposits from Members and gives them interest on such deposits and provide loans to the Members. The assessee claimed deduction under section 80P of the Act and declared nil income. The Assessing Officer considering the revised return of income has disallowed deduction under section 80P of the Act by observing that the return of income has not been filed within the due date and rather filed belatedly. The Assessing Officer further observed that assessee has nominal members and ordinary members and there exist unequal rights among the member and thus assessee is not eligible for deduction under section 80P of Act. A.O. has observed that co-operative society is not eligible for deduction
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 under section 80P of the Act and it does not fulfil test of mutuality. The Assessing Officer, while concluding, relied upon the decision of the Hon’ble Supreme Court in M/s. Citizen Co–operative Society Ltd., and held that the deduction under section 80P of the Act cannot be granted for interest received from the Co–operative Bank as it is not Co–operative Society. Aggrieved, the assessee filed appeal before the first appellate authority.
6. The learned CIT(A) confirmed the order passed by the Assessing Officer by observing as follows:–
“7. I have considered the facts of the case and submissions of the appellant. I have also perused the assessment order passed by the AO. It is observed that even though the AO has discussed the case on merits vis-à-vis interest of Rs.1,00,18,385/- earned by the appellant from deposits made with the co- operative bank, the AO has finally disallowed the appellant's claim of deduction u/s 80P in its entirety amounting to Rs.1,72,19,933/- at the threshold itself in view of provisions of section 80AC of the Act. The appellant has also challenged the legality of the AO's action by raising the first three grounds of appeal
, viz. Ground Nos. 1, 2 and 3. The AO's findings and decision are contained in para 3 of the assessment order as under: "3. As per the recent changes made in Income-tax Act with regard to section 80AC of the IT Act, which says that deductions u/s 80P will be allowed only if the assessee furnishes the return of income within due date as prescribed u/s 139(1) of the IT Act. In the instant case, the assessee filed the return of income on 12.03.2019 which is beyond the due date i.e. 31.10.2018. The ITAT, Bengaluru in the case of Revathi Raju vs. ITO held that filing of return before due date u/s 80AC of the Income-tax Act, 1961 is mandatory provision. The Hon'ble Supreme Court in the case of Prakash Nath Khanna vs. CIT as reported in 266 ITR 01 (SC) has held that filing of return of income within the time allowed u/s 139(4) of the Income-tax Act cannot dilute the infraction in not furnishing the return in due time as per the prescribed date u/s 39(1) of the Income-tax Act. It means that the use of expression 'in due time' would lose its relevance and it cannot be said that the expression was used without any purpose. Therefore, filing of return on or before due date is mandatory in order to claim deduction u/s 80P. Accordingly, the deduction claimed u/s 80P(2)(a) (i) to the extent of Rs.1,72,19,933/- is disallowed."
8. In course of the present appellate proceedings, practically the appellant has not made out a case for relief against belated filing of the return of income. The appellant has submitted through its statement of facts that "Nominal delay in submission of rectum is on account of reasonable cause. The Page | 3
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 provisions of section 80AC of I.T. Act, 1961 as to submission of return before due date of submission of return are directory". Apart from this self-serving 9. There is no dispute that the due date to furnish the return of income u/s 139(1) of the Act was 31.10.2018, but the return was filed only on 12.03.2019. The provisions of section 80AC(ii) of the Act make it abundantly clear that any deduction that is claimed under "Part C of Chapter VIA" would be admissible only if the return of income in that case are filed within the due date prescribed u/s 139(1) of the Act. Thus, no claim under any of the provisions of Part C of Chapter VIA would be admissible in the case of a belated return. The issue of strict interpretation of the provisions of section 80AC of the Act came to be considered by the Hon'ble Calcutta High Court in a recent case of Suolificio Linea Italia (India) (P.) Ltd. vs. JCIT (2018) 93 taxmann.com 462 (Calcutta), wherein the Hon'ble High Court has held as under: "2. The appellant seeks to raise a legal question upon the appellant's claim for the benefit conferred under Section 80-IB of the Income Tax Act, 1961 being declined on the ground that the appellant did not file its return for the relevant assessment year within the period prescribed under Section 139 (1) of the Act.
The facts are not much in dispute. Section 80-IB of the Act allows certain deductions if an industry is established in a backward area. Such deductions are allowed for a period of ten years. A condition for obtaining the benefit of such deductions is that the return for the relevant year should be filed within the time prescribed under Section 139(1) of the Act. Such condition is imposed by Section 80AC of the Act and the wording of the material part is couched in a negative fashion: "...no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section 1 of Section 139." In other words, an embargo is imposed by Section 80AC of the Act on the conferment of the benefit under Section 80-IB of the Act. The condition also specifically refers to Section 139(1) of the Act and not to Section 139 as a whole.
4. According to the appellant-assessee, a joint venture company was established and some of the directors or share-holders of the joint venture company were not resident in India. As a result, the annual accounts for the joint venture company could not be completed within the stipulated time and an application was made before the relevant Registrar of Companies for extension of the time to complete the finalisation of the accounts and the acceptance thereof at a deferred annual general meeting. Pursuant to the Registrar's orders, the accounts were finalised in November of the relevant year and the annual general meeting was also held.
In terms of Section 139(4) of the Act, the returns were filed at a belated stage but upon complying with the requirements of such provision.
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022
The appellant claims that once the returns are filed and they are taken on record, the condition stipulated in Section 80AC of the Act would be deemed to have been complied with. In support of such proposition, the appellant relies on an unreported judgment of this Court rendered on February 24, 2016 in of 2009 CIT v. S.R. Batliboi Associates [2015] 56 taxmann.com 152/230 Taxman 438 (Cal.) . The appellant also fairly submits that there is a previous judgment of this Court CIT v. Shelcon Properties (P.) Ltd. [2014] 44 taxmann.com 170/225 Taxman 165 (Mag.)/370 ITR 305 (Cal.) where this Court had taken an adverse view on the issue directly involved in the present case.
The judgment in S.R. Batliboi Associates (supra) was based on the Supreme Court dictum in the judgment CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 (SC). As a matter of fact, the Kulu Valley Transport Co. (P.) Ltd. (supra) judgment was also considered in course of the Shelcon Properties P. Ltd. (supra) judgment and it was held that the dictum would not apply to a case governed by Section 80-IB of the Act read with the condition imposed by Section 80AC thereof. 8. In Kulu Valley Transport Co. (P.) Ltd. (supra), the assessee did not file its retums of income in respect of assessment years 1953-54 and 1954-55 within the period specified in the general notice issued under Section 22(1) of the Income Tax Act, 1922. In January, 1956, the company filed voluntary returns disclosing loss of income in course of its business amounting to sums of Rs.1,51,520/- and Rs.48,977/-, respectively, for the two assessment years in question. The income tax officer refused to determine the loss observing that it was a "loss case" and the returns had been filed after the statutory date, as a consequence whereof the assessee was not entitled to the benefit of the carry forward of the loss in the subsequent assessments. 9. The Supreme Court found that the statute provided for an extended period within which returns could be filed. Since there was no specific embargo in the statute for carrying forward loss upon valid returns being filed, though beyond the prescribed date, the Court held that the filing of the returns would be the determining factor. 10. The ratio is utterly inapplicable when the statute confers a benefit and imposes a condition for the enjoyment of the benefit. The dictum would not be applicable, particularly, since the embargo is couched in negative words. Had it been a case where the express prohibition as in the words quoted from Section 80AC were not there, an arguable case could have been made out. However, when the governing provision expressly mandates that no such deductions shall be allowed unless the assessee filed his returns of income "on or before the due dates specified under" Section 139 (1) of the Act, there is no question of referring to the extended period permitted under Section 139(4) of the Act to seek the benefit. Indeed, if the embargo were not as strict as is evident from the relevant provision, the entirety of Section 139 would have been mentioned in the relevant expression in Section 80AC of the Act which would have included within its sweep the extended period under sub-section (4) thereof. But in such provision referring only to Page | 5
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 sub-section (1) of Section 139 of the Act, the reference to the other provisions of Section 139 must be understood to have been excluded.
11. Since the legal issue raised by the appellant is directly covered in the judgment of Shelcon Properties P. Ltd. (supra) and the view expressed therein does not require to be revisited notwithstanding the aberration in the case of S.R. Batliboi Associates (supra), the appeal is dismissed at the admission stage. ITAT No.385 of 2016 and GA No.690 of 2018 stand dismissed. GA No. 3162 of 2016 was the application under Section 5 of the Limsilation Act, 1963, which has been allowed at the beginning.”
10. The above exposition of law makes it amply evident that section 80AC will apply to the case of the appellant in hand with full force. Bare perusal of section BOAC reveals that it not only contains the time limit for preferring the claim of deduction u/s 80P, but it also provides for the consequences that would follow if the return of income containing claim for deduction u/s 80P is not furnished before the due date specified in section 139(1). It is, thus, quite apparent that the provisions contained in section 80AC are mandatory. If the assessee wants to avail deduction uls BOP or under any section of Part C of Chapter VIA, he has to necessarily furnish his return of income containing such claim before the due date specified in section 139(1). The language of section 80AC is negatively worded inasmuch as it provides in clear terms that deduction under any provision of Chapter VIA under the heading "C- Deductions in respect of certain income" (section 80P is included here) shall not be allowed if the return of income containing such claim is not furnished by the due date specified in section 139(1). In the face of such clear language of section 80AC, it is evident that the provisions of section 80AC are mandatory in nature. Therefore, failure to furnish the retum of income before the due date specified in section 139(1) would disentitle the assessee for the claim of deduction u/s 80P.
It is well settled that an act must be done strictly in the manner provided by law. If section 80AC requires that deduction u/s 80P cannot be available unless the return is famished before the due date specified in section 139(1), the claim of the appellant for deduction cannot be entertained in contravention of the provisions of section 80AC. A similar issue to that of the present one came up for consideration before the Hon'ble Tribunal of Rajkot Special Bench in the case of Saffire Garments vs. ITO (2012) 28 taxmann.com 27 (Rajkot) (SB). After analysing the issue in depth and also extensively quoting various provisions of sections of the Income-tax Act and Judicial views on the issue, the Hon'ble Special Bench had observed that: "16. The second submission of the learned authorised representative in the written submission is that the requirement of filing of return of income is procedural aspect and, therefore, it should be considered as directory and not mandatory. In support of this contention also, reliance has been placed on various decisions submitted by the assessee in the paper books II and III. We do not find any merit in these submissions of the assessee also because when consequences of not filing the return of income within the due date prescribed under section 139(1) of the Income-tax Act, 1961 are so grave, i.e., charging of interest 234A, possibility of prosecution under section 276CC and denial of various Page | 6
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 deductions under sections 10A, 108, 10BA and various sections under Chapter VI-A, it cannot be said that this requirement of filing return of income is a procedural aspect….
23. The only issue raised in this appeal is the one which we have considered in the question No. (a). We have held that the provisions of the proviso to section 10A(1A) are mandatory and not directory i.e., in favour of the Revenue and against the assessee."
12. In view of the aforesaid discussions and judicial precedents on the subject and in the absence of any contrary decision of the jurisdictional High Court pointed out by the appellant, it is held that the appellant's case is hit by provisions of section 80AC of the Act and hence, the appellant is not entitled to claim any deduction u/s 80P of the Act. The action of the AO is, therefore, confirmed. The Ground Nos. 1, 2 and 3 are consequently dismissed. As the claim of deduction u/s 80P is held to be inadmissible at the threshold itself for the afore-discussed reasons, the other grounds of appeal
raised by the appellant on merits of the case require no further adjudication.
13. In the result, the appeal of the appellant is dismissed.”
7. Before us, the learned Counsel for the assessee the Assessing Officer at Para–4.1 has discussed the decision of the Hon’ble Apex Court in the case of M/s. Citizen Co–operative Society Ltd. v/s ACIT, (2017) 9 SCC 364 (SC), which is distinguishable in facts, as the Hon’ble Court has no adversity as regard to the claim of deduction under section 80P of the Act. The learned Counsel for the assessee placing reliance on the decision of the Co–ordinate Bench of the Tribunal rendered in assessee’s own case in Dr. Panjabrao Deshmukh Krihi Vidyapeeth Karmchari Sahakari Path Sanstha Akola v/s PCIT, ITA no.292–298/Nag./2007, order dated 21/05/2008, has submitted that the Society is eligible for deduction under section 80P of the Act as the assessee is providing credit facilities to its Members. The learned Counsel for the assessee further submitted that this decision has been followed in assessee’s own case in assessment year 1999–2000 and 2005–06 and deduction under section 80P(2)(a)(i) of the Act has been granted and the Revenue has not Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 challenged the issue before the higher forum. The learned Counsel further placed reliance on the decision of the Hon’ble High Court of Telangana and Andhra Pradesh in the case of Vavveru Co–operative Rural Bank Ltd., 396 ITR 371 (AP&T) wherein the Hon'ble Court has clearly explained the statutory provisions of section 80P(2) and allowability of deduction under clause (a) and clause (d) of sub-section (2) of section 80P, and submitted that the ratio laid down by the Hon’ble High Court squarely applies to the facts of the present case. The learned Counsel for the assessee further explained that the assessee in involved in the activity within the State of Maharashtra where nominal members can be admitted and transaction of providing credit facilities to members can be carried out for nominal members. He submitted that the assessee for this proposition places reliance on the decision of ITAT, Nagpur Bench, Nagpur, dated 06/04/2022 in M/s. Bhagyashri Nagri Sahakari Pat Sanstha Maryadit in and ITA No.112/Nag./2019. The aforesaid judgment is a most recent judgment on the subject. The Tribunal, Nagpur Bench, has considered the decision of Hon'ble Apex Court in the case of Citizen Co-operative Society Ltd. discussed in assessment order which has been explained in recent decision of Hon'ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. reported at 123 taxmann.com 161 (SC). Ratio laid down by the aforesaid judgment squarely applies to the facts in the case of assessee. Considering the same transaction with nominal members in respect to activities of providing credit facilities to its members cannot be faulted for the purpose of grant of deduction u/s 80P of I.T. Act 1961.
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022
The learned Counsel for the assessee, while referring to the assessment order at Para–4.2 and 4.3, submitted that the Assessing Officer has discussed the receipt of interest by assessee co-operative society at Rs.1,00,18,385/-. The interest earned is on investment made with M/s.Akola District Central Co- operative Bank Ltd. Akola. The Assessing Officer has concluded that aforesaid amount is not income from business as claimed by assessee and is liable to be considered income from other source and thus it is not eligible for deduction under section 80P of the Act. He submitted that the above observation of the Assessing Officer is unjustified and is not correct, as his observation that interest income from investment of surplus funds arising from carrying on primary activity of assessee society is taxable under the head Other Sources is not correct as source of investment is amount received from members. The very business of assessee is accepting deposits from its members on interest and lending funds to members for earning interest. He submitted that parking of funds generated from carrying on business activity of borrowing and advancing funds to earn income as investments is a prudent business decision to avoid keeping the funds collected from member's idle and avoiding loss of interest. The interest income earned is very much operational income of the assessee society. He submitted that it is clearly income attributable to the activity of providing credit facilities to members and is eligible for deduction under section 80P(2)(a)(i) of the Act.
The learned Counsel for the assessee referring to the assessment order at Para 4.2, invited our attention to the decision decision of Hon'ble Apex Court in the case of Totgars Co-operative Sales Society Ltd. Wherein the Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 Assessing Officer while concluding that interest received on investment with co-operative society and other institutions would not fall with the meaning of the expression profit and gain of business. He submitted that the judgment of Hon'ble Apex Court has been considered by Hon'ble High Court of Andhra Pradesh & Telangana in the case of Vavveru Co-operative Rural Bank Ltd. while dealing with deduction under section 80P(2)(a)(i) of the Act. After considering the judgment of Apex Court, it has been concluded that interest received from nationalized bank and other society is income attributable to providing credit facility to its members and it is eligible for deduction under section 80P(2)(a)(i) of the Act. Similar view has been taken by various Income Tax Appellate Tribunals across the country and there is near to unanimity in allowing deduction under section 80P(2)(a)(i) of the Act on interest received from nationalized bank and co-operative society. The assessee places reliance on such judgments wherein above view has been adopted. Details of such judgements are given hereunder.
i) Hon'ble High Court of Karnataka order in IT Appeal No.307 of 2014 in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vide order dated 28/10/2014. ii) (2015) 377 ITR 0464 (Karn.) Guttigedarara Credit Co-operative Society Ltd. vs. ITO ⅲ) ITAT order in IT Appeal No.6627 (Mum) of 2014 in the case of Jaoli Taluka Sahakari Ptpedhi Maryadit vide order dated 10/08/2015. iv) ITAT order in IT Appeal No.5793 (Mum) of 2014 in the case of Gandhinglaj Taluka Sahakari Patpedhi Ltd. vide order dated 14/08/2015. v) ITAT order in in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit vide order dated 19/08/2015. v)
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 vi) ITAT order in IT Appeal Nos.898 & 900 (PN) of 2014 in the case of Kundalika Nagari Sahakari Patsanstha Maryadit vide order dated 29/01/2016.
Keeping in view the above case laws, the learned Counsel for the assessee submitted that the ratio laid down by Hon'ble High Courts and Hon'ble ITAT referred to hereinabove squarely applies to the facts in the case of assessee. He submitted that in all the judgements decision of Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. is considered. In view of above the learned Counsel for the assessee humbly submitted that Assessing Officer be directed to allow deduction of interest received from banks as income attributable to the business activity of providing credit facilities to members u/s 80P(2)(a)(i) of the Act.
The learned Counsel for the assessee further places reliance on the decision of ITAT, Nagpur Bench, Nagpur in the case of Chhattisgad Urban Credit Sahakari Sanstha Maryadit vs ITO, Nagpur in vide order dated 27/05/2015, wherein at Para 8 has concluded that interest on deposits would qualify for deduction u/s 80P(2)(a)(i) of the Act and has allowed appeal in favour of assessee. Ratio laid down by the aforesaid decision of Hon'ble Jurisdictional ITAT squarely applies to the facts in the case of assessee. Considering the same denial of deduction u/s 80P(2)(a)(i) by A.O. is unjustified.
11. The learned Counsel for the assessee placed reliance on the following decisions of Tribunal, Nagpur Bench, Nagpur, to support its claim of deduction of income earned from the activity of providing credit facilities to members under section 80P(2)(a)(i) of the Act. Page | 11
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 i) ITAT order in in the case of MSEB Engineers Co- op Credit Society Ltd. vide order dated 05/05/2016. ii)) ITAT order in ITA Nos.08 & 09/Nag/2015 in the case of M/s. The Nirmal Ujjwal Credit Co-op. Society vide order dated 31/05/2016. iii) ITAT order in ITA No.528/Nag/2014 in the case of Sant Amardas Urban Credit Co-op. Society Ltd. vide order dated 17/06/2016. iv) ITAT order in ITA No.31/Nag/2015 in the case of Shri Sant Gajanan Nagri Sahakari Pat Sanstha Ltd. vide order dated 05/07/2016.
Further, the learned Counsel for the assessee referred to Para 4.4 to 4.13 of the assessment order wherein the Assessing Officer has discussed the provisions of section 80P(2)(d) of I.T. Act 1961 to conclude that interest received from Akola District Central Co-operative Bank Ltd., Akola, is not from Co-operative Society and, therefore, interest under section 80P(2)(d) of the Act cannot be allowed in the case of assessee Society. The observations of the Assessing Officer is that Co-operative Bank are no longer Co-operative Society and, therefore, no deduction under section 80(P)(2)(d) of the Act can be granted. The assessee is in receipt of interest from co-operative society to the tune of Rs.100.18 lakh. To counter this observation of the Assessing Officer, the learned Counsel for the assessee submitted that the bare reading of provisions of section 80P(2)(d) of the Act provides that any interest from Co-operative Society is eligible for deduction u/s 80P(2)(d) of the Act which the assessee eligible for deduction in respect to interest received from investment in Co-operative Society. The interest received from Co-operative Society is in respect to investment made with Co-operative Societies and such interest is clearly allowable being income earned on investment in Co- operative Societies. Page | 12
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022
Insofar as the Assessing Officer’s observations that the assessee has derived interest income from Co–operative Bank and not from Co–operative Society, hence not eligible to claim deduction under section 80P of the Act, in this regard, the argument of the learned Counsel for the assessee is that Co– operative Banks and Co–operative Societies are governed under the provisions of Co–operative Societies Act. He submitted that Co–operative Banks were primarily Co–operative Societies licensed by RBI to carry on the business of banking. The learned Counsel for the assessee placed reliance on the following case laws to argue that the in all the decisions listed below wherein interest received by Co–operative Societies from Co–operative Societies and Co–operative Banks is held to be allowable deduction under section 80P(2)(d) of the Act.
“i) ITAT order in (Mum.) of 2017 in the case of Kaliandas Udyog Bhavan Premises Co-op. Society Ltd. vide order dated 25/04/2018. ii) ITAT order in ITA No.7352/Mum/2016 in the case of MTNL Mumbai Employees Cooperative Credit Society Ltd. vide order dated 17/04/2018. iii) ITAT order in ITA No.826 (Pune) of 2019 in the case of Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vide order dated 23/09/2020. iv) ITAT order in ITA No.3733/Mum/2019 in the case of MTNL Mumbai Employees Cooperative Credit Society Ltd. vide order dated 27/01/2021.” v) ITAT order in ITA No.512 & 513/JP/2019 in the case of M/s. Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. vide order dated 02/09/2019.”
The learned Counsel for the assessee, while concluding his arguments submitted that the issue of allowability of interest income from the Co– operative Banks as deduction under section 80P(2)(d) of the Act has been decided by the Tribunal, Jaipur Bench, in M/s. Jaipur Zila Dugdh Utpadak Page | 13
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 Sahakari Sangh Ltd. v/s DCIT, ITA no.512–513/Jp./2019, order dated 02/09/2019, and the ratio of this decision is squarely applies to the facts of the present case. Accordingly, the learned Counsel for the assessee prayed that the Assessing Officer was not justified in denying the deduction claimed under section 80P by the assessee which may be directed to be allowed.
The learned Departmental Representative supported the order of the authorities below.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below as well as the considered judicial pronouncements which have been pressed by the learned Counsel for the assessee vehemently are in support of his arguments and contentions discussed herein above. While going through the material available on record, we find that though, the Assessing Officer stated that the assessee has filed its return of income belatedly, however, in the paper book filed by the assessee, vide Page–41, it is clearly mentioned that the date of filing of the return of income is 31/10/2018 and the revised return of income was filed on 12/03/2019, which is placed at Page–42 of the paper book. Consequently, we are of the opinion that by considering the return of income filed by the assessee i.e., on 31/10/2008, the assessee had filed its return of income in time and, therefore, this ground of appeal raised by the assessee is allowed.
17. Another ground raised by the assessee is that the Assessing Officer had denied the claim of the assessee on the gound that the assessee being a Co–
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 operative Society, not eligible to claim deduction under section 80P(2) of the Act. In this regard, we refer to Clause (19)(a) of The Maharashtra Co– operative Societies Act, 1960, wherein it is clearly mentioned that the Co– operative Society is eligible to claim deduction. Clause (19)(a) is reproduced below:–
“(19) (a) "member" means a person joining in an application for the registration of a co-operative society which is subsequently registered, or a person duly admitted to membership of a society after registration, and includes a nominal [or associate] member and any depositor or financial service user of primary cultural co-operative credit society:]”
In view of the above, the Assessing Officer was not correct to hold that the assessee being Co–operative Society is not eligible to claim deduction. We further find that the assessee’s claim of deduction under section 80P(2) of the Act is squarely covered by the decision of the Co–ordinate Bench of the Tribunal in M/s. Bhagyashri Nagri Sahakari Pt. Sanstha Maryadit v/s PCIT, ITA no.122/Nag./2018, etc., A.Y. 2013–14 and 2014–15, order dated 06/04/2022, wherein the Tribunal has decided the identical issue in favour of the assessee by observing as under:– “10. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. Adverting to the view taken by the Pr. CIT that as the assessee society was as per its bye-laws permitted to admit nominal members in addition to its regular members, the failure on the part of the Assessing Officer in not bringing on record the transactions entered into by the assessee society with its nominal members i.e. total deposits received, loans given to the nominal members etc. had rendered his order erroneous in so far as it was prejudicial to the interest of the revenue, for the reason, that pursuant to the judgment of the Hon‟ble Supreme Court in the case of Citizen Co-operative Society Ltd. Vs. ACIT (supra), as nominal members are not akin to members in real sense, therefore, deduction u/s.80P of the Act would not be available to the assessee qua its transactions with the nominal members. In our considered view the Pr. CIT had arrived at the aforesaid conclusion on the basis of misconceived and part baked facts. As stated by the Ld. AR, Page | 15
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 and rightly so, as the assessee society is registered under the Maharashtra Co-operative Credit Societies Act, 1960 which takes within the sweep of the definition of “Member” even “Nominal Members” and does not provide for any distinction between the duly registered member and nominal members, therefore, the view taken by the Pr. CIT that the transactions of the assessee society with its nominal members would not qualify for deduction u/s.80P cannot be accepted. At this stage, we may herein observe, that the reliance placed by the Pr. CIT on the judgment of the Hon'ble Supreme Court in the case of Citizen Co- operative Society Ltd. (supra) being distinguishable on facts would not assist his case. In the case of Citizen Co-operative Society Ltd. (supra), the society therein involved was registered under Andhra Act, wherein the term "Member" did not take within its sweep nominal members. Our aforesaid view that the definition of "Member" u/s. 2(19) of the Maharashtra Co-operative Societies Act, 1960 takes within its sweep even a nominal member and does not provide for any distinction between the duly registered members and the nominal members is supported by the judgment of the Hon'ble High Court of Bombay in the case of Jalgaon District Central Co- operative Bank Ltd. Vs. Union of India (2004) 134 Taxman 1 (Bom). Apart from that, we find the Hon'ble Supreme Court in its recent judgment in the case of Mavilayi Service Co-operative Bank Ltd... Vs. CIT (2021) 123 taxmann.com 161(SC) after referring to and considering its earlier judgment in the case of Citizen Co-operative Society Ltd. (supra) had observed, that unlike as in the case of Citizen Co-operative Societ Ltd. (supra) which dealt with the Andhra Act wherein the term 'Member‟ did not take within its sweep "Nominal Member", in the case before them the assessee society was registered under Kerala Act where the term Member included Nominal member, therefore, the assessee society was eligible for claim of deduction of the interest income earned on the loans e given to its nominal members u/s.80P(2)(a)(i) of the Act. Backed by our aforesaid view, we are of a strong conviction that where the State Act under which the assessee society is registered includes within the definition of "Member" a "Nominal Member", there can be no question of denial of benefit u/s. 80P(2)(a)(i) of the Act qua the interest income pertaining to the transactions entered into by the assessee society with its Nominal Members. Our aforesaid view is supported by the orders of the co- ordinate bench of the Tribunal in the case of Vainganga Nagari Sahakari Pat Sanstha Ltd. Vs. ITO, Ward-2, Bhandara, 2020, dated 21.06.2021 and that in the case of M.S.E.B Employees Co- operative Credit Society Ltd. Va., ITO, Ward-3, Nagpur, ITA No.369/NAG/ 2019, dated 19.02.2020…….”
We further find that the similar issue of deduction claimed by the assessee under section 80P(2) of the Act also came up before the Co– ordinate Bench of the Tribunal, Chennai Bench, in Varathappam Palayam Primary Agricultural Co–operative Credit Society v/s ITO, ITA no.282/Chny./ 2021, A.Y. 2016–17, (wherein one of us Judicial Member is a party to this Page | 16
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 order), wherein the Tribunal dealt with the issue and decided the same in favour of the assessee by observing as follows:– “5. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Similar issue on identical facts was subject matter in appeal before the Tribunal in the case of AA-435 Velankattuvalasu Primary Agricultural Cooperative Credit Society Ltd. v. ACIT (supra), wherein, the Coordinate Benches of the Tribunal has observed and held as under: “8. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that this issue is squarely covered exactly on identical facts by the Co-ordinate Bench decision in the case of Tamilnadu Co-operative State Agriculture and Rural Development Bank Limited in to 33/CHNY/2021, the decision pronounced on 29.04.2022, wherein considering the decision of Hon‟ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd., supra and the decision of Hon‟ble Madras High Court in the case of S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd., supra, the deduction is allowed u/s.80P(2) of the Act in respect of income earned from associated members. The Tribunal in the case of Tamilnadu Co- operative State Agriculture and Rural Development Bank Limited, supra held as under:- 21. We have heard the rival contentions and had gone through the facts and circumstances of the case. We have perused the case records, including the assessment order and the order of the CIT(A). We have also perused the paper-book filed by the learned Counsel of the Assessee consisting of pages 1 to 120 and pages 1 to 25. The Revenue has also filed a paper-book consisting of 1 to 84 pages and also filed written submissions along with annexures which were considered. We noted that the first objection of the learned CIT-DR is that the Assessee is a Co-operative Bank and not a Co-operative Society. We will deal with this argument of the learned CIT-DR. First of all, we have gone through the bye-laws of the Assessee Society which are placed at page 92. The relevant objects of the Assessee are mentioned at pages 93 and 94 of the Assessee‟s paper-book and the relevant reads as under: “Objects : 3. The object of the Bank shall be primarily to finance Primary Land Development Banks.
In order to fulfil such object, it shall have power: a) To float debentures on the security / of its assets and of land mortgages, other assets transferred or deemed under the provisions of section 23A of the Act to have been transferred to it by Primary Land Development Banks or against the guarantee of Government of Tamil Nadu for Page | 17
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 repayment in full of principal and payment of interest in respect of loans granted by Tamil Nadu Co-operative State Land Development Bank to any institution approved by the Government by general or special order in writing, for such period and on such conditions as may be laid down by the provisions of the Act and the regulations made there under by the Board.[R.D. is 938/90C, dated 14.05.1990] (aa) TO OBTAIN LOANS WITH GOVERNMENT GUARANTEE FROM ANY FINANCING AGENCIES OR FROM GOVERNMENT WITHOUT FLOATATION OF DEBENTURE ON SUCH CONDITIOONS AS MAY BE LAID DOWN BY THE GOVERNMENT. 1) Enbloc amendments from 1 to 35 and 43 to 54 registered by the DR of CS(c) vide his letter No.Rc.4673/71-k, dated 21.05.1971 (2) Enbloc amendments from 36 to 42 registered by theDR of CS(c) vide his letter No.Rc.4673/71-k, dated 19.04.1971. (b) to receive deposits; (c) to grant loans to Primary Land Development Banks and other institutions referred to in by law 2(c) for the purpose specified in Rule 13 of the Tamil Nadu Co-operative Land Development Banks (Miscellaneous provisions) Rules 1970 and on such terms consistent with their bylaws as the Board shall decide; [No.Rc.1636/77K, dated 26.02.1977) (d) to function as the agent of any Co-operative Bank, subject to such conditions as the Registrar may, by general or special order, specify; (e) to acquire such immovable properties and construct such buildings as it may consider necessary for the proper conduct of its business; (f) to appoint what staff it considers necessary to conduct the affairs of the bank; (g) to inspect the primary land development banks and the lands mortgaged to them and to appoint the necessary staff or the authority; (h) to develop, assist and co-ordinate the work of the affiliated primary land development banks and afford them financial and other help wherever necessary; (i) to do such other things as are incidental to or conducive to the above subject;
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 The Assessee‟s primary objective as mentioned in the objects is to provide finance to primary land development banks to extend loans for agricultural activities. We noted that the Assessee is a Cooperative Society registered under the Tamil Nadu Co- operative Society Act, 1983 and obtained registration as a Co- operative Society on 12.12.1929 and since then, it has been operating as a Cooperative Society providing finance to the members of the Society. We noted that the Assessee, like other co-operative institutions is a Cooperative Society and was entitled for deduction u/s.80P of the Act, the legislature, through the Finance Act 2006, introduced Section 80P(4) of the Act with a specific intention to exclude co-operative banks from this scope of deduction u/s.80P of the Act. The reasons sighted in the Finance Act, 2006 reads as under: “166. Co-operative Banks, like any other Bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies [PACS] and Primary Cooperative Agricultural and Rural Development Banks [PCARDb] stand on a special footing and will continue to be exempt for tax under section 80P of the Income Tax Act. However, I propose to exclude all other co-operative banks from the scope of that section.” From the above, it is clear that the provisions of Section 80P(4) of the Act was brought under the statute book, is to exclude the co-operative banks out from the ambit of Section 80P of the Act because, they have functions of any normal bank. In the present case, before us, although the Assessee by nomenclature, the name is “Tamil Nadu Co-operative Society, Agriculture and Rural Development Bank Limited”, but it is a co-operative Society registered under the Tamil Nadu Co- operative Societies Act, 1983.
22. We noted that the learned CIT-DR heavily relied on the decision of the Hon‟ble Supreme Court in the case of Citizen Cooperative Society Limited (supra); wherein the Hon‟ble Supreme Court has upheld the disallowance of the claim of deduction u/s.80P of the Act. We noted the facts that the Hon‟ble Supreme Court has discussed the following crucial aspects: I. The Society was originally formed under the mutually aided co-operative Societies Act, 1995 [MACSA] and subsequently had got registered under the Multi-State Cooperative Societies Act 2002 and their activities were in violations of the provisions of the Multi-State Co-operative Societies Act 2002 under which it had been functioning; II. The persons from whom deposits were received were not traceable;
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 III. Additions were proposed u/s.68 of the Income Tax Act, 1961; IV. They had approached the Reserve Bank of India [RBI] vide letter dated 19.10.1997 requesting for conversion of the Co-operative Society into an Urban Bank; V. They had lent money to general public without obtaining permission from the concerned Registrar of the Cooperative Societies; VI. They had claimed to be a Co-operative Society for the claim of deduction u/s.80P of the Act and Banking Company / Co-operative Bank for the purpose of Section 269SS and 269T.
23. Now, we have gone through the facts of the Assessee and that, what is the difference as in the case-law of the Hon‟ble Supreme Court, in the case of Citizen Co-operative Society Limited (supra) and that of the present case is noted as follows: I. That the Assessee is registered as a Co-operative Society under Tamil Nadu Co-operative Societies Act, 1983. II. That the Assessee provides services only to its members and not to the public and hence the principle of mutuality applies, III. That the Society has a record of the name and address of all the members are identifiable and available; IV. That the Society has not obtained any authorization or License from RBI to operate as a Banking Institution. Added to that, there is no inspection by the Reserve Bank of India [RBI], no reports are sent to RBI, there is no cheque withdrawal facility, the Society is not allowed to issue Demand Drafts and finally, the deposits are only from members and no non-members are involved; V. That the Society has taken due approval for admission of members from the Registrar of Co-operative Societies and with members‟ capital only, it has been lending and conducting its business transactions; 24. Now, coming to an another objection of the learned CIT-DR that the Assessee never gave the list of “B” category members or Associate members, as they were general public and whole of their accounts were in the banks. It was the argument of the learned CITDR that “B” category members were general public derived the facilities of the Assessee Bank without having any voting right in the Bank and moreover, they only gave the maximum business support
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 to the Assessee Bank. We have considered this argument and noted that the Assessee has two categories of members, as under: a) Members – State Government and Primary Co- operative Agriculture and Rural Development Banks. b) Associate Members – Individuals and other Institutions.
We noted that the Assessee had filed before us, the extracts of the provisions of the Tamil Nadu Co-operative Societies Act, 1983 and the Tamil Nadu Co-operative Societies Rules. The Rule relating to the Associate Member as provided in Section 2(6) and in Section 2(16) reads as under: a. “Definitions as in the Act: I. Section 2(6) of the Act defines “Associate Member” as member who possesses only such privileges and rights of a member and who is subject only to such liabilities of a member as may be specified in this Act and the bye-laws. II. Section 2(16) of the Act defines a “Member” as a person joining in the application for the registration of a Society and a person admitted to membership after registration in accordance with the provisions of this Act, the Rules and Bye-laws and includes an Associate Member.” We also noted that the Section 22 of the Tamil Nadu Co- operative Societies Act, 1983 and Rule – 32 of the Tamil Nadu Co-operative Societies Rules describe the procedure for admission of Associate Member and the relevant Rule reads as under: I. Section 22 – Admission of Associate Members: - (1) Notwithstanding anything contained in Section 21, every registered society of such class as may be prescribed may admit any person possessing such qualifications as may be prescribed, as an associate member. (2) Except as otherwise provided in the Rules, an Associate Member shall not be entitled to participate in the general meeting of the registered Society, or in the elections to the Board of such Society or to become an Officer of the registered Society or to any share in any form whatsoever in the assets or profits of the registered Society.
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 II. Rule 32 : - Admission of Associate members : - (1) Persons possessing the qualifications specified in sub-rule (2) may, if the bye-laws so provide, be admitted as Associate Members in the following class of Societies namely: (9) An Associate Member shall not be required to contribute to the share capital of the Society but shall pay such admission fee as may be specified in the bye-laws, which shall not in any case exceed one hundred rupees. The admission fee shall not be refundable.
Before us, the learned Counsel for the Assessee explained the procedure and argued that an individual member, to become an Associate member of the Assessee Society, they will have to get the approval from the Registrar of the Co-operative Society. He agreed that the bye-laws of the Assessee Society clearly states that all the members are required to hold shares but Associate members are exempted from holding such shares, in view of the Section 22(2) of the Tamil Nadu Co-operative Societies Act, 1983 and the Rules as amended from time to time. We noted that the Assessee‟s transactions are restricted only to the members or Associate members and not to the general public as alleged by the learned CIT-DR. According to us, the Assessee cannot be construed to carry the business of Banking as defined u/s.5(b) of the Banking Regulation Act, 1949. Thus, if the Banking Regulation Act, 1949 is now to be seen, what is clear from Section 3, read with Section 56 of the Banking Regulation Act, 1949 is that, a Primary Co-operative Bank cannot be a Primary Agriculture Credit Society as such a Co-operative Bank must be engaged in the business of banking, as defined by Section 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment of deposits of money from the public. Even the provisions of Section 22(1)(b) of the Banking Regulation Act, which is also applicable to the Co-operative Societies, but no Co-operative Society shall carry on Banking business in India, unless it is a Co-operative Bank and holds a license issued on it‟s behalf by the Reserve Bank of India [RBI]. The Assessee in the present case does not hold any license from the Reserve Bank of India or it is neither registered as a Banker under the Banking Regulation Act and as such, the Assessee is not allowed cheque or withdrawal facility and not allowed to issue Demand Draft and finally the deposits are only from the members or Associate members but not from non- members.
Before us, the learned Counsel for the Assessee has categorically made statement at the bar and produced evidences Page | 22
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 that the Assessee has records of the names and addresses of the members and all the members are identifiable and available. Further, it was contended that the Assessee has always submitted all relevant documents as and when sought for and it is not the case of the Assessing Officer that the Assessee has not submitted the relevant documents or any particular depositor is not an Associate member. Further, we also noted that the applicability of the provisions of Section 80P(4) of the Act was first raised by the Revenue for the Assessment Year 2009 – 2010, as the Assessee had adopted the same deduction and had filed his return of income accordingly. The Tribunal has categorically held that, in Assessment Year 2009 – 2010 in Assessee‟s own case, in dated 01.05.2014 that the Assessee is a Co- operative Society and is not engaged in the business of Banking and hence the provisions of Section 80P(4) of the Act does not apply to the Assessee‟s case. However, this matter was carried before the Hon‟ble Madras High Court by the Revenue in T.C.A. No.540 of 2015, which was dismissed by the Hon‟ble High Court in view of the monetary limit fixed by the CBDT for maintainability of appeal before the Hon‟ble High Court but the substantial question of law framed with respect of the Section 80P(4) of the Act was left open and the Tribunal became final on the same.
Now, we have noted that the Hon‟ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited (supra) considering the earlier decision in the case of Citizen Co-operative Society Limited (supra) has considered exactly an identical issue on exactly identical facts and held in paragraph nos.39 and 40, as under: “39. The above material would clearly indicate that the limited object of Section 80P(4) is to exclude co-operative banks that function at par with other commercial banks, i.e. which lend money to members of the public. Thus, if the Banking Regulation Act, 1949 is not to be seen, what is clear from Section 3 read with section 56 is that a primary co-operative bank cannot be a primary agricultural credit society, as such co-operative bank must be engaged in the business of banking as defined by section 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment of deposits of money from the public. Likewise, under section 22(1)(b) of the Banking Regulation Act, 1949 as applicable to co-operative societies, no co-operative society shall carry on banking business in India, unless it is a cooperative bank and holds a license issued in that behalf by the RBI. As opposed to this, a primary agricultural credit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities.
As a matter of fact, some primary agricultural credit societies applied for a banking license to the RBI, as their byelaws also contain as one of the objects of the Society the Page | 23
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 carrying on of the business of banking,. This was turned down by the RBI in a letter dated 25.10.2013 as follows: “Application for license Please refer to your application dated April 10, 2013 requesting for a banking license. On a scrutiny of the application, we observe that you are registered as a Primary Agricultural Credit Society [PACS]. In this connection, we have advised RCS vide letter dated UBD (T) No.401/10.00/16A/2013-14 dated October 18, 2013 that in terms of Section 3 of the Banking Regulation Act, 1949 [AACS], PACS are not entitled for obtaining a banking license. Hence, your society does not come under the purview of the Reserve Bank of India, RCS will issue the necessary guidelines in this regard.” After considering these, the Hon‟ble Supreme Court has summed up the issue in paragraph nos.45 and 46 as under: “45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Limited (supra), must be given effect to Section 80P of the Income Tax Act, being a benevolent provision enacted by the Parliament to encourage and promote the credit of the cooperative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the Assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the world “agriculture” into Section 80P(2)(a)(i) when it is not there. Further, Section 80P(4) is to be read as a proviso, which proviso now specifically excludes cooperative banks which are co-operative societies engaged in banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench Judgement is wholly incorrect in its reading of Citizen Co-operative Society Limited (supra). Clearly, therefore, once Section 80P(4) is out of harm‟s way, all the Assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted.
It must also be mentioned here that unlike the Andhra Act that Citizen Co-operative Society Limited (supra) considered, „nominal members‟ are „members‟ as defined under the Kerala Act. This Court in U.P. Co-operative Cane Unions‟ Federation Limited vs. Commissioner of Income Tax [1997] 11 SCC 287 referred to section 80P of the Income Tax Act and then held: Page | 24
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 “8. The expression “members” is not defined in the Act. Since a co-operative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression “members” in section 80P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the Co-operative Society claiming exemption has been formed. It is therefore, necessary to construe the expression “members” in Section 80-P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: “2.(n). „Member‟ means a person who joined in the application for registration of a Society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the byelaws for the time being force but a reference to „members‟ anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power have no such liability or duty;”” Considering the definition of „member‟ under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i).”
Another aspect highlighted by the learned Counsel for the Assessee is that the Revenue while framing the assessment u/s.143(3) of the Act for the Assessment Year 2017 – 2018, vide order dated 25.12.2019 has accepted the above stated position that the Assessee is a Co-operative Society and is not engaged in any banking business and therefore eligible for claim of deduction u/s.80P(2) of the Act and further the Revenue has followed the decision of the Hon‟ble Supreme Court in the case of Mavilayi Cooperative Society Limited (supra). It means that the Revenue has accepted the position in the Assessment Year 2017 – 2018 while framing the scrutiny assessment and now the Revenue cannot go back from its stand because there is no change in the facts.
In view of the above facts discussed and the case-laws of the Hon‟ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. Commissioner of Income Tax, Calicut (supra), we are of the view that the Assessee is a Co-operative Society under the name and style as “Tamil Nadu Co-operative State Agricultural and Rural Development Bank Limited” and it is not engaged in the banking activities. It is also clear that in view of Section 3 read with Section 56 of the Banking Regulation Act, 1949, the Assessee cannot be considered as a Primary Co-operative Bank but it is a Primary Agricultural Credit Society because Co-operative Bank must be engaged in the business of Banking as defined in the Section 5(b) of the Banking Regulation Act, which means accepting, for the Page | 25
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022 purpose of lending or investment of deposits of money from the public. Similarly, u/s.22(1)(b) of the Banking Regulation Act, as applicable to Co-operative Societies, no Cooperative Society shall carry on in banking business in India, unless it is a Co-operative Bank and holds license issued on this behalf by the Reserve Bank of India. In the present case also, there is no banking activity and it is not registered as a Bank and it does not hold any license issued by the Reserve Bank of India. The Assessee being a Primary Agriculture Credit Society is a Co-operative Society. The primary object of which is to provide financial accommodation to its members, i.e. members as well as Associate members for agriculture purposes or for purpose connected with the agricultural activities. Further, we are of the view that the provision of Section 80P(4) of the Act is to be read as a proviso, which proviso now specifically excludes cooperative banks which are co-operative societies engaged in the banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the Reserve Bank of India. Clearly, therefore, the Assessee‟s case is out of the provisions of Section 80P(4) of the Act. In relation to the Associate members, we are of the view that the provisions of Section 22 read with Rule 32 of the Tamil Nadu Co-operative Societies Act, 1983 and Tamil Nadu Co-operative Societies Rules clearly determine the procedure to admit Associate members and accordingly in the present case, the Assessee‟s Cooperative Society has admitted the same. In view of the above finding, we hold that the Assessee is entitled for the claim of deduction u/s.80P(2)(a)(i) of the Act. Thus, we reverse the orders of the lower authorities and allow these three appeals of the Assessee. Accordingly, we find the issue is squarely covered and hence, in this case also we allow the claim of deduction u/s.80P(2) of the Act.” 5.1 Respectfully following the above decision of the Coordinate Benches of the Tribunal, we hold that irrespective of the fact that whether the assessee is having “A” class Members or “B” class Members, the assessee is entitled for claiming exemption under section 80P(2)(a)(i) of the Act. Thus, the ground raised by the assessee is allowed.”
Respectfully following the aforesaid decisions of the Co–ordinate Bench of the Tribunal cited supra and consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) and hold that the assessee is eligible to claim deduction under section 80P(2)(d) of the Act. Consequently, grounds no.2 to 4, are allowed.
Doctor Punjabrao Deshmukh Krushi Vidyapeeth Karamchari Pat Sanstha Mryat Akola ITA no.331/Nag./2022
Ground no.5, relates to charging of interest under section 234A, 234B and 234C of the Act.
Charging of interest being consequential, the Assessing Officer is directed to given consequently effect, if any, in view of our directions as aforesaid.
In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 19/06/2024