Income Tax Officer, Ward -2(2), , Belgavi V. Shiva Credit Souharda Sahakari Niyamit, Belgavi

ITA 18/PAN/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6153 (ITAT-PANAJI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: WT(D)
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 56; 143(3); 80P; 143(2); 43; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCHE : PANAJI, GOA BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA.No.18/PAN/2019 Assessment Year 2012-2013 The Income Tax Officer, Ward – 2 (2), Belagavi. [vs. M/s. Shiva Credit Souharda Sahakari Niyamit, LIG-41/A, Mahantesh Nagar, Belagavi. PAN AAFTS1405A (Appellant) (Respondent) For Assessee : -None- For Revenue : Sh Mayur Kamble, Sr. D.R. Date of Hearing : 17.06.2022 Date of Pronouncement : 17.08.2022 ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed by the Revenue against the Order of the Ld. CIT(A), Hubballi, dated 28.11.2018, for the A.Y. 2012-2013. 2 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 2. Briefly stated facts of the case are that the assessee is a Cooperative Credit Society registered under the Karnataka Souharda Sahakari Act, 1997. The main object of the assessee-society is to accept the deposits and to provide financial accommodation to the members of the Society. During the assessment year under consideration the assessee-society filed its return of income on 27.09.2012 declaring total income at Rs.NIL after claiming deduction under section 80P(2)(i) of the I.T. Act, 1961 of Rs.78,31,020/- under Chapter-VIA. 2.1. The case of the assessee-society was selected for scrutiny and notice under section 143(2) of the I.T. Act, 1961 was issued to the assessee. Subsequently, notices under section 142 of the I.T. Act, 1961 are also issued. In response to the said notices, the assessee’s Authorised Representative appeared before the A.O. and has filed copy of P & L A/c, balance-sheet and schedules thereto along with confirmation of closing balances in respect of accounts held by the assessee-society. During the course of assessment proceedings, it was the contention of the 3 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. assessee-society before the A.O. that since the assessee society is carrying on the business of banking or providing credit facilities to its members, therefore, the claim of the assessee-society for deduction under section 80P(2)(a)(i) of the I.T. Act, 1961 be allowed. However, the A.O. vide assessment order dated 15.12.2016 under section 143(3) of the I.T. Act, 1961 rejected the assessee’s claim of deduction of its income under section 80P(2)(a)(i) of the I.T. Act, 1961, on the ground that as per the newly inserted provisions of Section 2(24) (viia) by the Finance Act, 2006 with effect from 01.04.2007, includes the profit and gains of any business of banking (including providing credit facilities) carried on by a co-op society with its members. The A.O. further held that deduction under section 80P shall not be available to a Co-operative Bank other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank, though it is available to Co-operative Societies engaged in the activity of providing credit facility to members. The A.O, accordingly held that the income of a Co-operative Society, 4 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. including the profits and gains of banking or providing credit facility carried on by such Co-operative Society, is not eligible for deduction, if they are a Co-operative Bank within the meaning of part -V of the Banking Regulation Act, 1949. The A.O, therefore, disallowed the claim of exemption under section 80P(2)(a) of the I.T. Act, 1961, by holding that the assessee-society fulfils all conditions that are required to treat the assessee society as a Co-operative Bank/Primary Co-operative Bank, and the provisions of Section 80P(4) of the I.T. Act, 1961, are applicable. Accordingly, the A.O. computed the total income of assessee-society at Rs.1,86,26,310/- under section 143(3) of the I.T. Act, 1961. 2.2. Aggrieved by the order of the A.O. the assessee society carried the matter in appeal before the Ld. CIT(A). Despite several opportunities/adjournments provided to the assessee-society to put-forth its submissions, the assessee society did not appear before the Ld. CIT(A) nor filed any documentary evidences in support of its claim of deduction under section 80P(2)(a)(i) of the I.T. Act, 1961. 5 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. However, the Ld. CIT(A) vide order dated 28.11.2008 partly allowed the claim of assessee-society, on merits, with a direction to the A.O. to allow the income of the assessee- society that is earned from its business activity of providing credit facilities to its regular members, having equal voting rights and dividends rights, if any, by following the Judgment of Hon’ble Supreme Court in the case of The Citizen Co-operative Society Ltd., vs., ACIT in Appeal No.10245 of 2017 dated 08.08.2017 and M/s. Totgars’ Co- Operative Sale Society Ltd., vs., ITO in Appeal No.1622 of 2010. 3. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds : 1. “The decision of the Ld.CIT(A) is not acceptable on the facts of the cases. 2. The Ld.CIT(A) erred in partly allowing the assessee society's claim of deduction u/s 80P(2)(a)(i) of the Act on interest earned from Regular Members as the assessee is an entity which is registered under the 6 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. Karnataka Souharda Sahakari Act, 1997 and not under the Karnataka Cooperative Societies Act, 1959. Hence the assessee is not entitled for deduction u/s 80P(2)(a)(i) at all. 3. The Ld.ClT(A) did not appreciate the fact that a Souharda Sahakari is not a Cooperative Society which has been affirmed by the decision of the Hon’ble ITAT, Bangalore Bench, Bangalore in the case of M/s Uday Souharda Credit Co.Op. Society Ltd., Bangalore 4. For these and other grounds that may be adduced at the time of hearing the order of the Id. CIT(A) may be set aside and that of the Assessing Officer be restored.” 4. None appeared on behalf of the assessee. We, therefore, proceed to decide the appeal, on merits, safter hearing the Ld. D.R. 5. Before us, the Ld. D.R. strongly supported the order of the A.O. 7 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 6. We have heard the Ld. D.R. and perused the material available on record. From the careful perusal of the assessment order we have observed that the assessee- society is not entitled for claiming of deduction under section 80P(2)(a)(i) of the I.T. Act, 1961 on such interest income of investment as interest not being earned by way of providing credit facilities to its members. From the First Appellate Order we have observed that the Ld. CIT(A) has confirmed the disallowance made by the A.O. observing that the income earned from persons other than its regular members would not be eligible for deduction under section 80P(2)(a)(i) of the I.T. Act, 1961 and such income earned from business with persons other than the regular members would be taxable as income from business. Similar issue was placed for adjudication before ITAT, Chennai Bench, Chennai in the case of Varathappam Palayam Primary Agricultural Co-op. Credit Society vs. ITO u/s 270 order dated 29.06.2022 in ITA No.282/Chny/2021 for AY 2016-17, wherein the Coordinate Bench of the Tribunal after considering the Judgment of ITAT, Chennai 8 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. Bench in the case of AA-435 Velankattuvalasu Primary Agricultural Cooperative Credit Society Ltd. v. ACIT in I.T.A. Nos. 600 & 601/Chny/2021 for the assessment years 2011-12 & 2017-18 dated 29.04.2022, held as under:- “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 ITA Nos.31 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:- 9 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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. 4. 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 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 10 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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; 11 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. (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; 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 12 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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; 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 13 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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- 14 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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 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. 25. 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. 15 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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. 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. 16 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 26. 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 17 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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. 27. Before us, the learned Counsel for the Assessee has categorically made statement at the bar and produced evidences 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 I.T.A. No.1318/Mad/2013, 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) 18 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. of the Act was left open and the Tribunal became final on the same. 28. 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. 40. As a matter of fact, some primary agricultural credit societies applied for a banking license to the RBI, as their byelaws also contain 19 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. as one of the objects of the Society the 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 20 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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. 46. 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: “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: 21 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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).” 29. 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. 30. 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 22 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. (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 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 23 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. 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.” 6.1. In view of the above, we are compelled to held that the assessee is eligible for exemption under section 80P(2)(a)(i) of the I.T. Act, 1961 from the income earned from its regular members as well as from Associate/Other members. Therefore, the A.O. was not right in making disallowance and the Ld. CIT(A) has also erred in confirming the baseless and unsustainable disallowance. 24 ITA.No.18/PAN./2019 M/s. Shiva Credit Souharda Sahakari Niyamit, Belagavi. Therefore, grounds of assessee are allowed and A.O. is directed to allow the deduction under section 80P(2)(a)(i) of the I.T. Act, 1961. 7. In the result, appeal of the Assessee is allowed. Order pronounced on this 17 th day of August, 2022 u/s 34(4) of the IT(AT) Rules, 1963. Sd/- Sd/- (GIRISH AGRAWAL) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi, Dated 17 th August, 2022 VBP/- Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT Panaji Bench, Panaji Goa 6. Guard File. // BY Order // Assistant Registrar : ITAT Panaji Bench : Panaji.