M/s. Muttom Service Co-op bank Ltd, Alappuzha V. The ITO, Alappuzha

CO 1/COCH/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3404 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 12-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Question of law; Competent authority
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K, JM & SHRI MANJUNATHA G., AM ITA NO. 451 /COCH/201 6 : ASST.YEAR 2013 - 2014 THE INCOME TAX OFFICER WARD - 5 ALAPPUZHA . VS. M/S.THE MUTTOM SERVICE CO - OP BANK LTD. NO.1165, MAIN ROAD CHERTHALA P.O. ALAPPUZHA 688 524. PAN : AACFT8176C . (APPELLANT) (RESPONDENT) CO NO. 1 /COCH/201 7 : ASST.YEAR 2013 - 2014 M/S.THE MUTTOM SERVICE CO - OP BANK LTD. NO.1165, MAIN ROAD CHERTHALA P.O. ALAPPUZHA 688 524. VS. THE INCOME TAX OFFICER WARD - 5 ALAPPUZHA. ( CROSS OBJECTOR ) (RESPONDENT) REVENUE BY : SRI. A.DHANARAJ, SR.DR ASSESSEE BY : SRI. JOJO, CA & ADVOCATE DATE OF HEARING : 18 .1 2 .2017 DATE OF PRONOUNCEMENT : 15.01 .2018 O R D E R PER BENCH THIS APPEAL AT THE INSTANCE OF THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE CIT(A) S ORDER DATED 21.07.2016 . THE RELEVANT ASSESSMENT YEAR IS 2013 - 2014. 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOW: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), KOTTAYAM IN SO FAR AS THE POINTS STATED BELOW ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 2 ARE CONCERNED, IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80P(2)(A)(I) OF THE ACT. 3. THE LD. CIT (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE - SOCIETY HAD ADVANCED AGRICULTURAL LOANS ONLY TO THE EXTENT OF 0.24% OF T HE TOTAL LOANS GRANTED UNDER VARIOUS HEADS. 4. WHILE PLACING RELIANCE ON THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD IN ITA NO.212 OF 2013, THE LD. CIT (A) OUGHT TO HAVE CONSIDERED WHETHER THE ASSESSEE - SOCIETY CLAIMING THE STATUS OF 'PRIMARY AGRICULTURAL CREDIT SOCIETY' HAS ACTUALLY FULFILLED THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF PROVIDING AGRICULTURAL LOANS TO AGRICULTURISTS. 5. THE LD. CIT (A) OUGHT TO HAVE ALSO CONSIDERED AN EARLIER DECISION OF THE JURISDICTIONAL HIGH COURT IN WP NO.14226 OF 2012 DATED 14 - 09 - 2012 IN THE CASE OF THATHAMANGALAM SCB LTD. IN WHICH THE COURT HAS HELD THAT 'IT IS VERY MUCH OBLIGATORY FOR THE PETITIONER - SOCIETIES WHO CLAIM THE STATUS AND THE BENEFITS OF PRIMARY AGRI CULTURAL CREDIT SOCIETIES TO SUBSTANTIATE THAT THEIR MAIN OBJECT OF INCORPORATION IS BEING CONTINUED TO BE FULFILLED AS WELL'. 6. IN VIEW OF THE TWO DIF FERENT JUDG MENTS OF THE JURISDICTIONAL HIGH COURT ON THE SAME ISSUE AND ALSO IN ACCORDANCE WITH SECTIO N 80P(4) OF THE ACT, THE LD. CIT (A) OUGHT NOT TO HAVE ALLOWED THE DEDUCTION MERELY ON THE STRENGTH OF THE CERTIFICATE ISSUED BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES. 7. THE LD. CIT (APPEALS) ALSO ERRED IN DELETING THE DISALLOWANCE OF STATUTORY CONTR IBUTION OF RS.22, 15,415/ - . THE LD. CIT (A) OUGHT TO HAVE EXAMINED THE ALLOWABILITY OF THE CONTRIBUTIONS MADE BY THE ASSESSEE TO RESERVE FUND, EDUCATION FUND, RELIEF FUND, CREDIT STABILIZATION FUND, ETC. ETC. ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 3 FOR THESE AND OTHER GROUNDS THAT MAY BE ADVA NCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2 . BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOW: 3 .1 THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, REGISTERED UNDER THE KERALA STATE CO - OPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEAR 2013 - 2014, THE RETURN OF INCOME WAS FILED ON 31.03.2015 DECLARING A TOTAL INCOME OF RS.836 AFTER CLAIMING DED UCTION U/S 80P(2) OF THE INCOME - TAX ACT. THE ASSESSMENT U/S 143(3) WAS COMPLETED VIDE ORDER DATED 22.12.2015 BY DISALLOWING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE ACT. THE REASON FOR DENYING THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT WAS THAT ACCORDI NG TO THE ASSESSING OFFICER, THE ASSESSEE WAS PRIMARILY DOING THE BUSINESS OF BANKING AND THEREFORE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT, IN VIEW OF INSERTION OF SECTION 80P(4) OF THE ACT WITH EFFECT FROM 01.04.2007. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) FOLLOWING THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. AND OTHERS [(201 6) 384 ITR 490 (KER.)] DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW: - ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 4 7. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM U/S 80P AFTER MUCH DISCUSSION. ALL THE PREVIOUS JUDGMENTS AND ARGUMENTS OF ASSESSI NG OFFICER ON THIS ISSUE HAVE BEEN NULLIFIED BY THE RECENT JUDGMENT OF KERALA HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. (ITA NO.212 OF 2013). HENCE, THE ARGUMENT OF THE AR IS UPHELD ON THIS GROUND AND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P. 5. THE REVENUE BEING AGGRIEVED, HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL AND THE ASSESSEE HAS FILED THE CROSS OBJECTION SUPPORTING THE ORDER OF THE CIT(A). THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS ACCEPTED DEPOSITS AND D ISBURSED LOANS TO OUTSIDERS, HENCE, THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF THE CITIZENS CO - OPERATIVE SOCIETY LIMITED V. ACIT [(2017) 397 ITR 1 (SC)] HAS APPLICATION TO THE FACTS OF THE INSTANT CASE. 6. THE LEARNED AR, ON THE OTHER HAND, SU BMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD.& OTHERS (SUPRA). 7 . WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. THE UNDISPU TED FACTS ARE THAT THE ASSESSEE IN THIS CASE IS PRIMARY AGRICULTURAL CREDIT SOCIETY , REGISTERED AS SUCH UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - O PERATIVE BANK LIMITED & ORS. (SUPRA) ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 5 HAD CATEGORICALLY HELD IN PARA 17 PAGE 14 OF THE JUDGMENT THAT WHEN A PRIMARY AGRICULTURAL CREDIT SOCIETY IS REGISTERED AS SUCH UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969, SUCH SOCIETY IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE INCOME - TAX ACT. THE HON'BLE HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION/ THE TRIBUNAL IS CORRECT IN LAW IN DECIDING AGAINST THE ASSESSEE/ THE ISSUE REGAR DING ENTITLEMENT FOR EXEMPTION UNDER SECTION 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? 7 .1 IN CONSIDERING THE ABOVE QUESTION OF LAW, THE HON'BLE HIGH COURT RENDERED THE FOLLOWING FINDINGS: '15. APPELLANTS IN THESE DIFFERENT APPEALS ARE INDISPUTABLY SOCIETIES REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT 1969, FOR SORT, KCS ACT AND THE BYE - LAWS OF EACH OF THEM, AS MADE AVAILABLE TO THIS COURT AS PART OF THE PAPER BOOKS, CLEARLY SHOW THAT THEY HAVE BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE COMPETENT AUTHORITY UNDER THE PROVISIONS OF THAT ACT. THE PARLIAMENT, HAVING DEFINED THE TERM 'CO - OPERATIVE SOCIETY' FOR THE PURPOSES OF THE BR ACT WITH REFERENCE TO, AMONG OTHE R THING THE REGISTRATION OF A SOCIETY UNDER ANY STATE LAW RELATING TO CO - OPERATIVE SOCIETIES FOR THE TIME BEING; IT CANNOT BUT BE TAKEN THAT THE PURPOSE OF THE SOCIETIES SO REGISTERED UNDER THE STATE LAW AND ITS OBJECTS HAVE TO BE UNDERSTOOD AS THOSE WHICH HAVE BEEN APPROVED BY THE COMPETENT AUTHORITY UNDER SUCH STATE LAW. THIS, WE VISUALIZE AS DUE RECIPROCATIVE LEGISLATIVE EXERCISE BY THE PARLIAMENT RECOGNIZING THE PREDOMINANCE OF DECISIONS RENDERED UNDER THE RELEVANT STATE LAW. IN THIS VIEW OF THE MATTER, ALL THE APPELLANTS HAVING BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 6 COMPETENT AUTHORITY UNDER THE KCS ACT IT HAS NECESSARILY TO BE HELD THAT THE PRINCIPAL OBJECT OF SUCH SOCIETIES IS TO UNDERTAKE AGRICULTURAL CREDIT ACTIVITIES AND TO PROVIDE LOANS AND ADVANCES FOR AGRICULTURAL PURPOSES; THE RATE OF INTEREST ON SUCH LOANS AND ADVANCES TO BE AT THE RATE FIXED BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES UNDER THE KCS ACT AND HAVING ITS AREA OF OPERATION CONFINED TO A VILLAGE, PANCHAYAT OR A MUNICIPALITY. THIS IS THE CONSEQUENCE OF THE DEFINITION CLAUSE IN SECTION 2(OAA) OF THE KCS ACT. THE AUTHORITIES UNDER THE IT ACT CANNOT PROBE INTO ANY ISSUE OR SUCH MATTER RELATING TO SUCH APPLICANTS. 16. THE POSITION OF LAW BEING AS ABOVE WITH REFERE NCE TO THE STATUTORY PROVISIONS, THE APPELLANTS HAD SHOWN TO THE AUTHORITIES AND THE TRIBUNAL THAT THEY ARE PRIMARY AGRICULTURAL CREDIT SOCIETIES IN TERMS OF CLAUSE (CCIV) OF SECTION 5 OF THE BR ACT HAVING REGARD TO THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF EACH OF THE APPELLANTS. IT IS ALSO CLEAR FROM THE MATERIALS ON RECORD THAT THE BYE - LAWS OF EACH OF THE APPELLANTS DO NOT PERMIT ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS MEMBER, EXCEPT MAY BE, IN ACCORDANCE WITH THE PROVISO TO SUB - CLAUSE 2 OF SEC TION 5(CCIV) OF THE BR ACT. THE DIFFERENT ORDERS OF THE TRIBUNAL WHICH ARE IMPEACHED IN THESE APPEALS DO NOT CONTAIN ANY FINDING OF FACT TO THE EFFECT THAT THE BYE - LAWS OF ANY OF THE APPELLANT OR ITS CLASSIFICATION BY THE COMPETENT AUTHORITY UNDER THE KCS ACT IS ANYTHING DIFFERENT FROM WHAT WE HAVE STATED HEREIN ABOVE. FOR THIS REASON, IT CANNOT BUT BE HELD THAT THE APPELLANTS ARE ENTITLED TO EXEMPTION FROM THE PROVISIONS OF SECTION 8OP OF THE IT ACT BY VIRTUE OF SUB - SECTION 4 OF THAT SECT; ON. IN THIS VIE W OF THE MATTER, THE APPEALS SUCCEED. 17. IN THE LIGHT OF THE AFORESAID, WE ANSWER SUBSTANTIAL QUESTION: `A IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW IN DECIDING THE ISSUE REGARDING THE ENTITLEMENT OF EXEMPTION UNDER SECTION BOP AGAINST THE APPELLANTS. WE HOLD THAT THE PRIMARY AGRICULTURAL CREDIT SOCIETIES, REGISTERED AS SUCH UNDER THE KCS ACT; AND CLASSIFIED SO, UNDER THAT ACT INCLUDING THE APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 7 7 .2 IN THE INSTANT CASE, THE ASSESSEE IS PRI MARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. THE CERTIFICATE HAS BEEN ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES TO THE ABOVE SAID EFFECT AND THE SAME IS ON RECORD. THE HONBLE HIGH COURT, IN THE CASE CITED SUPRA , HAD HELD THAT PRIMARY AGRICULTURAL CREDIT SOCIETY, REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969, IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). SINCE THERE IS A CERTIFICATE ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES, STATING THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, GOING BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, ASSESSEE IS ENTITLED TO DEDUCTION U/S 80P(2). HOWEVER, THE REVENUES CONTENTION IS THAT THE HONBLE APEX COURT IN THE CASE O F CITIZENS CO - OPERATIVE SOCIETY LTD. (SUPRA) CATEGORICALLY DECIDED WHEN DEPOSITS ARE RECEIVED FROM GENERAL PUBLIC / NOMINAL MEMBERS OR LOANS ARE DISBURSED TO GENERAL PUBLIC / NOMINAL MEMBERS, THE ASSESSEE WOULD BE DOING THE BUSINESS OF BANKING AND THEREFOR E, WOULD NOT BE ENTITLED TO DEDUCTION U/S 80P(2) OF THE INCOME - TAX ACT. IN THE CONTEXT OF THE SUBMISSION MADE BY THE REVENUE , LET US EXAMINE WHETHER THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CITIZENS CO - OPERATIVE SOCIETY LTD. (SUPRA) HAS APPLIC ATION TO THE FACTS OF THE PRESENT CASE. 8 . THE HONBLE APEX COURT JUDGMENT IN THE CASE OF CITIZEN CO - OPERATIVE SOCIETY (SUPRA) LTD. WAS RENDERED IN THE CONTEXT OF ELIGIBILITY OF A CREDIT CO - OPERATIVE SOCIETY FOR DEDUCTION ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 8 UNDER SECTION 80 P OF THE ACT. THE APEX COURT, REFERRING TO THE SPECIFIC FACTS OF THE CASE HELD THAT THE ASSESSEE THEREIN IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80 P OF THE INCOME - TAX ACT. IN THE AFORESAID CASE, THE HON'BLE APEX COURT WAS NOT DEALING WITH A CASE OF ELIGIBILITY OF A PRIMARY AGRICULTURAL CREDIT SOCIETY FOR DEDUCTION UNDER SECTION 80P OF THE INCOME - TAX ACT . THE HONBLE SUPREME COURT AT PARA 23 OF THE AFORESAID JUDGMENT HAD EMPHASIZED THAT EVEN AFTER THE AMENDMENT MADE TO THE PROVISIONS OF SECTION 80 P OF THE ACT BY INSERTION OF SECTION 80P (4) OF THE INCOME - TAX ACT, THE PRIMARY AGRICULTURAL CREDIT SOCIETY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 P OF THE ACT. 8 .1 THE ASSESSEE SOCIETY IN THE CASE CONSIDERED BY THE HONBLE SUPREME COURT WA S ESTABLISHED ON 31 - 5 - 1997 AND WAS REGISTERED UNDER SECTION 5 OF THE ANDHRA PRADESH MUTUALLY AIDED CO - OPERATIVE SOCIETIES ACT, 1995 . T HEREAFTER AS THE OPERATIONS OF THE ASSESSEE HAD INCREASED MANIFOLD AND WERE SPREAD OVER STATES OF ERSTWHILE, ANDHRA PRADE SH, MAHRASHTRA AND KARNATAKA, THE ASSESSEE - SOCIETY GOT ITSELF REGISTERED ON 26.07.2005 UNDER THE MULTI STATE CO - OPERATIVE SOCIETIES ACT, 2002 (MACSA) 8 .2 THE HONBLE APEX COURT IN THE AFOREMENTIONED CASE SPECIFICALLY TOOK NOTE OF THE FACTUAL FINDINGS OF THE A SSESSING O FFICER (WHICH WAS STATED IN PARA 15 OF THE JUDGMENT) REFERRING TO THE BYE LAWS AND THE PROVISIONS OF MUTUALLY AIDED CO - OPERATIVE SOCIETIES ACT, 1995. THE A SSESSING O FFICER WAS OF THE ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 9 VIEW THAT THE ASSESSEE THEREIN CANNOT ADMIT `NOMINAL MEMBE RS AND MOST OF THE DEPOSITS WERE TAKEN FROM SUCH CATEGORY OF PERSON (AS THEY WERE NOT MEMBERS AS PER THE PROVISIONS REFERRED). THE APEX COURT IN PARA 25 OF THE JUDGMENT HAS POINTED OUT THAT THE MAIN REASON FOR DISENTITLING THE ASSESSEE FROM GETTING THE DE DUCTION PROVIDED UNDER SECTION 80 P OF THE ACT IS NOT SUB - SECTION (4) OF THE ACT. ON THE CONTRARY, THE HONVBLE APEX COURT HELD THAT THE CREDIT CO - OPERATIVE SOCIETY WAS NOT ENTITLED FOR DEDUCTION U/S 80P OF THE ACT FOR THE REASON OF CATEGORIC AL FINDING OF THE A.O. THAT THE ACTIVITIES OF THE ASSESSEE ARE IN VIOLA TION OF THE PROVISIONS OF THE M ACSA UNDER WHICH IT IS FORMED AS THE SUBSTANTIAL DEPOSITS WERE FROM `NOMINAL MEMBERS WHO ARE ACTUALLY NON - MEMBERS AS PER THE PROVISIONS OF LAW REFERRED. THE HONBLE AP EX COURT SPECIFICALLY TOOK NOTE OF THE FACT THAT THE ASSESSEE THEREIN HAS CARVED OUT A CATEGORY OF `NOMINAL MEMBERS WHO ARE INFACT NOT THE MEMBERS IN THE REAL - SENSE. THEREFORE THE DEPOSITS RECEIVED FROM THE CARVED OUT CATEGORY VIZ NOMINAL MEMBERS WHO ARE NOT THE MEMBERS AS PER THE PROVISIONS OF THE LAW REFERRED TO THEREIN AND WITHOUT THE PERMISSION OF THE REGISTRAR OF SO C IETIES WAS HELD TO BE VIOLATIVE OF THE PROVISIONS AND WERE TREATED/ PROCEEDED WITH AS DEPOSITS FROM THE PUBLIC. IN OTHER WORDS, IN THE CA SE BEFORE THE HONBLE SUPREME COURT, THE FINDING ON THE PRINCIPLE OF MUTUALITY WAS ARRIVED AT INTERALIA; ON THE FACTUAL FINDING THAT THE ASSESSEE WAS RECEIVING DEPOSITS MOSTLY FROM A CARVED OUT CATEGORY OF MEMBER VIZ `NOMINAL MEMBER WHO ARE NOT MEMBERS AS PER THE PROVISIONS OF LAW REFERRED, AND THAT MOST OF THE BUSINESS ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 10 OF THE ASSESSEE THEREIN WAS WITH THIS CARVED OUT CATEGORY OF PERSON AND ALSO GRANTING LOANS TO PUBLIC AND WITHOUT THE APPROVAL FROM THE REGISTRAR OF THE SOCIETIES. 8 .3 AS FAR AS THE KERALA CO - OPERATIVE SOCIETIES ACT WHICH IS APPLICABLE TO THE PRESENT CASE IS CONCERNED, THE DEFINITION OF A 'MEMBER' AS PROVIDED IN SECTION 2(1) OF THE KERALA CO - OPERATIVE SOCIETIES ACT INCLUDES A NOMINAL MEMBER. SECTION 2 (1) OF THE SAID ACT IS AS FOLLOWS: 'M EMBER' MEANS A PERSON JOINING IN THE APPLICATION FOR THE REGISTRATION OF A CO - OPERATIVE SOCIETY OR A PERSON ADMITTED TO MEMBERSHIP AFTER SUCH REGISTRATION IN ACCORDANCE WITH THIS ACT, THE RULES AND THE BYE LAW AND INCLUDES A NOMINAL OR ASSOCIATE MEMBER' 8 .4 THE `NOR MAL MEMBER IS DEFINED UNDER 2(M ) OF THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969, WHICH READS AS FOLLOW: - (M) `NOMINAL OR ASSOCIATE MEMBER MEANS A MEMBER WHO POSSESSES ONLY SUCH PRIVILEGES AND RIGHTS OF A MEMBER AND WHO IS SUBJECT ONLY TO S UCH LIABILITIES OF A MEMBER AS MAY BE SPECIFIED IN THE BYE - LAWS; 8 .5 THEREFORE, IN THE PRESENT CASE , THE NOMINAL MEMBERS ARE MEMBERS AS PROVIDED IN LAW AND DEPOSITS FROM SUCH NOMINAL MEMBERS CANNOT BE CONSIDERED OR TREATED AS FROM THE NON - MEMBERS OR FROM PUBLIC AS WAS NOTED BY THE APEX COURT JUDGMENT CITED SUPRA. ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 11 8 .6 IN THIS CONTEXT, IT IS RELEVANT TO MENTION THAT THE HONBLE SUPREME COURT IN THE CASE OF U.P.CO - OPERATIVE CANE UNION V. COMMISSIONER OF INCOME - TAX (1999) 237 ITR 574 (SC) - PARA 8 OF THE J UDGMENT HAS OBSERVED AS UNDER: - 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 8 0P(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 SECTION80P(2)(A)(I) OF THE ACT IN THE LIGHT OF THE DEFINITION OF THAT EXPRESSION AS CONTAINED IN SECTION 2(N) OF THE CO - OPERATIVE SOCIETIES ACT. 8 .7 THE BOMBAY HIGH COURT IN JALGAON DISTRICT CENTRAL V. UOI (2004) 265 ITR 423 (BOM) IN THE LIGHT OF T HE ABOVE SUPREME COURT JUDGMENT HAD HELD THAT NOMINAL MEMBER IS ALSO MEMBER UNDER THE MAHARASHTRA CO - OPERATIVE SOCIETIES ACT AND ENTITLED FOR BENEFITS UNDER SECTION 80P. [PARA 17 TO 20 OF THE JUDGMENT], AS UNDER: - 17. IN CASE OF M/S U.P.CO - OP. CANE UNIO N FEDERATION LTD., LUCKNOW (CITED SUPRE), THE SUPREME COURT HAS HELD THAT THE EXPRESSION MEMBER IS NOT DEFINED IN THE INCOME TAX ACT. SINCE THE CO - OPERATIVE SOCIETY HAS TO BE ESTABLISHED UNDER THE PROVISIONS OF LAW MADE BY THE STATE LEGISLATURE IN THAT R EGARD, THE EXPRESSION MEMBER IN SECTION 80P(2)(A)(I) MUST, THEREFORE, BE CONSTRUED IN THE CONTEXT OF THE PROVISIONS OF LAW ENACTED BY THE STATE LEGISLATURE UNDER WHICH THE CO - OPERATIVE SOCIETY CLAIMING EXEMPTION HAS BEEN ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 12 FORMED. THE SUPREME COURT HAS FUR THER OBSERVED THAT IT IS NECESSARY TO CONSTRUE THE EXPRESSION MEMBER IN SECTION 80P(2)(A)(I) OF THE ACT IN THE LIGHT OF THE DEFINITION OF MEMBER GIVEN UNDER SECTION 2(N) OF THE U.P.CO - OPERATIVE SOCIETIES ACT, 1965. 18. THE DEFINITION OF MEMBER GIVE N IN SECTION 2(19) OF THE MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960 TAKES WITHIN ITS SWEEP EVEN A NOMINAL MEMBER, ASSOCIATE MEMBER AND SYMPATHIZER MEMBER. THERE IS NO DISTINCTION MADE BETWEEN DULY REGISTERED MEMBER AND NOMINAL, ASSOCIATE AND SYMPATHIZER MEMBER. 19. IN THE CASE OF K.K.ADHIKARI (CITED SUPRA), DIVISION BENCH OF THIS COURT HAS HELD THAT THE DEFINITION OF A MEMBER UNDER SECTION 2(19) OF THE MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960 INCLUDES A NOMINAL MEMBER OR A SYMPATHIZER MEMBER. IT IS FURTHER HELD THAT NOTWITHSTANDING THE FACT THAT A NOMINAL MEMBER DOES NOT ENJOY ALL THE RIGHTS AND PRIVILEGES WHICH ARE AVAILABLE TO AN ORDINARY MEMBER, HIS STATUS IS THAT OF A MEMBER AS DEFINED IN SECTION 2(19) OF THE ACT. 20. DIVISION BENCH OF THIS COURT IN THE CASE OF THE COMMISSIONER OF INCOME TAX, NASIK (CITED SUPRA) HAS ALSO TAKEN A SIMILAR VIEW THAT THE DEFINITION OF MEMBER UNDER SECTION 2(19)(A) OF THE MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960 INCLUDES A NOMINAL MEMBER. IT IS FURTHER HELD BY THE DIVISION BENCH THAT THERE IS NOTHING IN SECTION 80P(2)(III) OF THE INCOME TAX ACT TO THE CONTRARY. 8 .8 AS PER SECTION 3 OF THE BANKING REGULATI ON ACT, 1949 , THE PROVISIONS OF BANKING REGULATION ACT SHALL NOT APPLY TO PRIMARY AGRICULTURAL CREDIT SOCIETIES. THE EXPLANATION TO SECTION 80P (4) STATES THAT 'PRIMARY AGRICULTURAL CREDIT SOCIETY' AND 'CO - OPERATIVE BANK' WILL HAVE THE SAME MEANING AS PROVIDED IN PART V OF THE BANKING REG ULATION ACT, 1949. THE ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 13 EXPLANATION PROVIDED AFTER CLAUSE (CCVI) OF SECTION 5 R.W.S 56 OF THE BANKING REGULATION ACT SPECIFICALLY PROVIDES THAT IF ANY DISPUTE ARISES AS TO THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF ANY CO - OPERATIVE SOCIETY REFERRED TO IN C LAUSES (CCIV), (CCV) AND (CCVI), A DETERMINATION THEREOF BY THE RESERVE BANK SHALL BE FINAL. THE RESERVE BANK OF INDIA, WHICH IS THE COMPETENT AUTHORITY AS PER THE BANKING REGULATION ACT, TREATS ASSESSEE SOCIETY AND SIMILAR SOCIETIES AS ONLY 'PRIMARY AGRIC ULTURAL CREDIT SOCIETY' NOT FALLING WITHIN THE AMBIT OF BANKING REGULATION ACT. THE RESERVE BANK OF INDIA HAS GIVEN LETTERS TO THE SOCIETIES SIMILAR TO ASSESSEE STATING THAT THEY ARE PRIMARY AGRICULTURAL CREDIT SOCIETIES AND THEREFORE IN TERMS OF SECTION 3 OF THE BANKING REGULATION ACT ARE NOT ENTITLED FOR BANKING LICENSE; (COPIES OF SUCH LETTER FROM RBI ARE PLACED ON RECORD). 8 .9 THAT BEING THE CASE, THE A SSESSING O FFICER WAS NOT COMPETENT AND DID NOT POSSESS THE JURISDICTION TO RESOLVE / DECIDE THE ISSUE AS TO WHETHER THE ASSESSEE WAS A 'PRIMARY AGRICULTURAL CREDIT SOCIETY' OR A 'CO - OPERATIVE BANK', WITHIN THE MEANING ASSIGNED TO IT UNDER THE PROVISIONS OF THE BANKING REGULATION ACT AND TO TAKE A CONTRARY VIEW ESPECIALLY IN VIEW OF THE EXPLANATION PROVIDE D AFTER THE CLAUSE (CCVI) OF SECTION 5 R.W.S SECTION 56 OF THE BANKING REGULATION ACT. 8 .10 IN VIEW OF THE AFORESAID REASONING, WE HO L D THAT T HE JUDGMENT OF THE HONBLE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY LTD. IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. ACCORDING TO US , THE JUDGMENT OF THE HONBLE JURISDICTIONAL ITA NO. 451 / COCH /201 6 CO NO.01/COCH/2017 . M/S.THE MUTTOM SERVICE CO - OP.BANK LTD. 14 HIGH COURT IS IDENTICAL T O THE FACTS OF THE PRESENT CASE AND IS SQUARELY APPLICABLE. THEREFORE, WE HOLD THAT THE CIT(A) HAS CORRECTLY ALLOWED THE CLAIM OF DEDUCTION IN THE ABOVE CAS E AND WE UPHOLD THE ORDER OF THE CIT(A). IT IS ORDERED ACCORDINGLY. 9. THE CROSS OBJECTION IS ONLY SUPPORTIVE OF THE ORDER OF CIT(A). SINCE WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE, THE CROSS OBJECTION HAS BECOME INFRUCTUOUS AND WE DISMISS THE SAME. 10 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED ON THIS 15 TH DAY OF JANUARY, 2018 . SD/ - SD/ - (MANJUNATHA G.) (GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN ; DATED : 15 TH JANUARY, 2018 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE PR. CIT, KOTTAYAM . 4. CIT(A) KOTTAYAM . 5. DR, ITAT, COCHIN 6. GUARD FILE.