ITO, Pondicherry V. Kalapet Primary Agricultural Co-operative Bank Ltd., Pondicherry

ITA 634/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4545 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 19-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH JT
• Assessee Lawyers: G BASKAR
• Keywords: Search and seizure; Opportunity of being heard
• Section: 143(3); 147; 6; 56; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , ! . '# , $ %& ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ITA NOS.634/MDS/2016 & 295/MDS/2017 $ ( )( / ASSESSMENT YEAR : 2009-10 INCOME TAX OFFICER, WARD-4, D.P. THOTTAM, MUTHIALPET, PUDUCHERRY 605 003. VS. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD., KALAPET POST, PONDICHERRY 605 014. [PAN: AAAAK 1570G] ( /APPELLANT ) ( / RESPONDENT ) *+ - . / APPELLANT BY : SHRI A.V.SREEKANTH, JT. CIT /0*+ - . / RESPONDENT BY : SHRI G.BASKAR, ADVOCATE - 1 / DATE OF HEARING : 19.04.2017 2) - 1 / DATE OF PRONOUNCEMENT : 19.05.2017 /ORDER PER SANJAY ARORA, AM : THIS IS A SET OF TWO APPEALS BY THE REVENUE ARISING OUT OF THE COMMON ORDER DATED 31.12.2015 BY THE COMMISSIONER OF INCOM E TAX (APPEALS), PUDUCHERRY (CIT(A) FOR SHORT), DISPOSING THE ASSE SSEES APPEALS CONTESTING ITS ASSESSMENTS U/S. 143(3) AND S. 143(3) R/W S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR ASSESSMENT YEAR (AY) 20 09-10 DATED 26.12.2011 AND 10.03.2015 RESPECTIVELY. 2 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. 2. THERE IS A DELAY OF 313 DAYS IN FILING THE LATE R APPEAL BY THE REVENUE. THE FACTS ON RECORD BEAR OUT THAT A SINGLE APPEAL WAS F ILED BY IT IN TIME (I.E., ON 18.03.2016). SUBSEQUENTLY, ON BEING INFORMED BY THE REGISTRY OF THE TRIBUNAL THAT THE COURSE ADOPTED WAS NOT PROPER AND THAT TWO APPEALS WOULD BE REQUIRED TO BE PREFERRED IN-AS-MUCH AS THE IMPUGNED ORDER DE CIDES TWO SEPARATE APPEALS (BY THE ASSESSEE), QUA SEPARATE ASSESSMENTS, THE REVENUE HAS FILED A SEPA RATE APPEAL. A CONDONATION PETITION DATED 30.01.2017, AC COMPANYING THE SUBSEQUENT APPEAL, ENUMERATES THE SAME, PRAYING FOR CONDONATIO N OF THE DELAY UNDER THE CIRCUMSTANCES. WE FIND THE DELAY AS SATISFACTORILY EXPLAINED EVEN AS THE LD. COUNSEL FOR THE ASSESSEE DID NOT FAIRLY RAISE ANY O BJECTION. THE REVENUES APPEAL (IN ITA NO.295 OF 2017) WAS ACCORDINGLY ADMITTED, A ND THE HEARING IN THE MATTER PROCEEDED WITH. WE SHALL TAKE UP BOTH THE AP PEALS SEPARATELY. ITA NO.634/MDS/2016 3. THE ONLY ISSUE ARISING IN THIS APPEAL IS THE SUS TAINABILITY IN LAW, AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, OF THE IMPUGNE D ORDER. THE BONE OF CONTENTION BETWEEN THE ASSESSEE AND THE REVENUE IS THE ASSESSEES ELIGIBILITY FOR DEDUCTION U/S. 80P OF THE ACT, WHICH IN ITS RELEVAN T PART READS AS UNDER: DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOC IETIES. 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-O PERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT T O THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY : ( A ) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN ( I ) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR ( II ) - ( VII ) . PROVIDED THAT IN THE CASE OF A CO-OPERATIVE SOCIETY FALLING UNDER SUB-CLAUSE ( VI ), OR SUB-CLAUSE ( VII ), THE RULES AND BYE-LAWS OF THE SOCIETY RESTRICT T HE VOTING RIGHTS TO THE FOLLOWING CLASSES OF ITS MEMBERS, NAM ELY: ( 1 ) THE INDIVIDUALS WHO CONTRIBUTE THEIR LABOUR OR, A S THE CASE MAY BE, CARRY ON THE FISHING OR ALLIED ACTIVITIES; 3 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. ( 2 ) THE CO-OPERATIVE CREDIT SOCIETIES WHICH PROVIDE F INANCIAL ASSISTANCE TO THE SOCIETY; ( 3 ) THE STATE GOVERNMENT; (B) TO (F) .. EXPLANATION. (3) ..... (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIE TY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. EXPLANATION. FOR THE PURPOSES OF THIS SUB-SECTION, A) CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDI T SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); B) PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELO PMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFIN ED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LON G-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. THE ASSESSEE, A CO-OPERATIVE SOCIETY, REGISTERED UN DER THE PUDUCHERRY CO- OPERATIVE SOCIETIES ACT, 1972, FURNISHED ITS RETUR N FOR THE YEAR, CLAIMING DEDUCTION 80P(2)(A) ON ITS ENTIRE INCOME, RETURNING NIL INCOME. THE SAME WAS DENIED IN ASSESSMENT AS THE ASSESSEE IS A PRIMARY C O-OPERATIVE BANK, SINCE EXCLUDED U/S. 80P(4), I.E., BY FINANCE ACT, 2006, W .E.F. 01.4.2007. IN APPEAL, THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE, NEVER THELESS, IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, WHICH STANDS EXCEPTED U/S. 80-P(4) AND, THEREFORE, IS ELIGIBLE FOR DEDUCTION U/S. 80P(1), I.E., EVEN UNDE R THE AMENDED LAW. HE, ACCORDINGLY, DIRECTED DELETION IN FULL. AGGRIEVED, THE REVENUE IS IN APPEAL. THE LD. CIT(A) VIDE THE IMPUGNED ORDER ISSUES TWO FINDINGS IN THE MATTER: A) THE ASSESSEE IS NOT A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, WHICH IS FOR THE REASON THAT ITS PRINCIPAL OBJECT IS NOT THE PROVISION OF, AS EXPLANATION (B) TO S. 80P(4) STIPULATES, PROVISION OF LONG TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOP MENT ACTIVITIES, AND FOR WHICH HE REFERS TO PROVISION 6(2) OF THE BYE-LAWS, REPRODUCING THE SAME, AND WHICH PROVIDES FOR PROVISION OF SHORT/MEDIUM TE RM LOANS FOR AGRICULTURAL AND ALLIED PURPOSES. ( EMPHASIS, BY UNDERLINING, OURS ) B) THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIE TY IN-AS-MUCH AS IT SATISFIES THE CONDITION OF THE DEFINING PROVISION - S.5 (CCIV) R/W. S. 56(C) 4 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. OF THE BANK REGULATION ACT, 1949 (THE BR ACT HERE INAFTER), READING AS UNDER: 5( CCIV ) PRIMARY AGRICULTURAL CREDIT SOCIETY MEANS A CO -OPERATIVE SOCIETY, (1) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHI CH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES (INCLUDING THE MARKETI NG OF CROPS); AND (2) THE BYE-LAWS OF WHICH DO NOT PERMIT ADMISSION O F ANY OTHER CO-OPERATIVE SOCIETY AS A MEMBER : PROVIDED THAT THIS SUB-CLAUSE SHALL NOT APPLY TO THE ADMISSION OF A CO-OPERATIVE BANK AS A MEMBER BY REASON OF SUCH COOPERATIVE BANK SUBSCRIBING TO THE SHARE CAPITAL OF SUCH COOPERATIVE SOCIETY OUT OF FU NDS PROVIDED BY THE STATE GOVERNMENT FOR THE PURPOSE; THE DEFINITION OF A PRIMARY AGRICULTURAL CREDIT SO CIETY, THUS, PROVIDES TWO CONDITIONS, FINDING QUA BOTH OF WHICH STANDS, AS IS REQUIRED TO BE, RENDERE D BY THE LD. CIT(A), AGAIN WITH REFERENCE TO THE ASSESSE ES BYE-LAWS, THE RELEVANT PARTS OF WHICH STAND REPRODUCED IN HIS ORDER. CLAUS E-16 OF THE BYE-LAWS (CHAPTER-6) IS IN RESPECT OF MEMBERSHIP, AND WHICH STANDS REPRODUCED AT PARA 6.5.5 (PGS. 11-12) OF THE ORDER. OF THE THREE CLASS ES OF MEMBERS, CLASS A AND C ARE INDIVIDUAL PERSONS, WHILE CLASS B PROVIDE S FOR ADMISSION OF GOVERNMENT OF PUDUCHERRY AS MEMBER. CLEARLY, THEREF ORE, THE BYE-LAWS DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS A MEMBER. CLAUSE-6 (FALLING IN CHAPTER-3) OF THE BYE-LAWS, DEFINING TH E ASSESSEES MAIN OBJECTS, WHICH STANDS ALSO REPRODUCED IN THE IMPUGNED ORDER, IS EXTRACTED HEREUNDER: CHAPTER 3 OBJECTIVES 6. MAIN OBJECTIVES OF THE SOCIETY:- (1) RECEIPT OF DEPOSITS:- RECEIPTS OF ALL KINDS OF DEPOSITS FROM THE MEMBER S AND NON-MEMBERS. (2) AGRICULTURAL LOAN:- ISSUE OF SHORT/MEDIUM LOANS TO THE CLASS A MEMBER S OF THE SOCIETY FOR THE FOLLOWING PURPOSES:- (A) AGRICULTURAL FARMING; (B) PURCHASE OF AGRICULTURAL INPUTS, IMPLEMENTS, MACHINERY; AND 5 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. (C) ESTABLISHMENT OF CATTLE FARMS, ORCHARDS. (3) MORTGAGE LOAN.- ISSUE OF MORTGAGE LOAN TO CLASS' A' MEMBERS ON THEIR AGRICULTURAL PRODUCE. (4) JEWEL LOAN :- ISSUE OF JEWEL LOAN TO CLASS A AND C' MEMBERS ON PLEDGING THEIR JEWELS. (5) CONSUMER LOAN :- ISSUE OF CONSUMER LOAN TO CLASS' A' MEMBERS. (6) SALE OF CONSUMER GOODS :- PURCHASE AND SALE OF GROCERIES, CLOTH, STATIONERY, VEGETABLES, HOUSEHOLD ARTICLES; SETTING UP OF SALE CENTERS WITH IN THE AREA OF OPER ATION OF THE SOCIETY WITH THE PRIOR APPROVAL OF THE REGISTRAR FO R RETAIL SALES. (7) RUNNING OF FAIR PRICE SHOPS (8) PURCHASE AND SALE OF AGRICULTURAL INPUTS, IMPLEMENTS. MACHI:NERIES, ETC., (9) SMALL-SCALE INDUSTRY LOAN :- ISSUE OF SHORT/MEDIUM TERMS LOANS TO CLASS A MEMBERS OF THE SOCIETY FOR STARTING/EXPANSION OF SMALL SCALE INDUSTRIES WITH IN THE AREA OF OPERATION OF THE SOCIETY. (10) PROVIDING THE SERVICES REQUIRED FOR THE WELFAR E OF THE MEMBERS AND TO ACHIEVE THE AFORESAID OBJECTIVES. ON THAT BASIS THE LD. CIT(A) HAS ISSUED A FINDING T HAT THE ASSESSEE IS PROVIDING FINANCIAL ACCOMMODATION TO ITS MEMBERS F OR AGRICULTURAL PURPOSES ONLY (PARA 6.5.5/PG.11 OF THE IMPUGNED ORDER). WE ARE CLEARLY UNABLE TO AGREE WITH THE SAID FINDING BY THE LD. CIT(A) . THE OBJECTS UNDER REFERENCE ARE THE MAIN OBJECTS OF THE ASSESSEE-SOCIETY, SO THAT ALL OF THE M QUALIFY AS ITS PRINCIPAL OBJECTS FOR WHICH IT IS FORMED. THERE IS NOTHING TO SUGGEST THAT ANY ONE OBJECT IS MORE BASIC OR PREDOMINANT THAN THE OTHER. FURTHER, SUB-CLAUSES (4), (5), (6), (7) & (9) OF Q.6, I.E., 5 OUT OF 9 OBJECTS, RELATE TO N ON-AGRICULTURAL PURPOSES. ON BEING CONFRONTED WITH THIS DURING HEARING, THE LD. COUNSEL FOR THE ASSESSEE WOULD SUBMIT THAT JEWELLERY LOANS COULD BE FOR AGRICULTURAL PURPOSES/ ACTIVITIES AS WELL, AS THE NOMENCLATURE DOES NOT INDICATE THEIR E ND-USE, I.E., THE PURPOSE FOR WHICH THE LOAN IS/IS TO BE UTILIZED; THE NAME ONLY REFERRING TO THE MANNER OF ITS GRANT, I.E., ON PLEDGE OF JEWELLERY. TRUE, BUT THEN IT COULD EQUALLY BE FOR NON- AGRICULTURAL PURPOSES. THIS IS RATHER ALL THE MORE PROBABLE AS BEING SUBJE CT TO A HIGHER RATE OF INTEREST, I.E., VIS-A-VIS AGRICULTUR AL LOANS, WOULD ORDINARILY STAND TO BE AVAILED ONLY FOR NON-AGRICULTURAL PURPOSES. THIS, IN FACT, COULD BE SO FOR 6 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. MORTGAGE LOANS AS WELL, WHICH AGAIN DOES NOT INDICA TE THE PURPOSE OF THE LOAN, BEING STATED ONLY IN TERMS OF THE SECURITY PROVIDED THEREFOR . THE MATTER, IN ANY CASE, IS ONE OF FACT, ON WHICH THEREFORE A FINDING, ONE WAY OR THE OTHER, WOULD HAVE TO BE ISSUED, AND ONLY ON THE BASIS OF MATERIA L, VIZ. LOAN AND RELATED DOCUMENTS. FURTHER, EVEN SO, EXCLUDING JEWELLERY L OANS FOR THE SAKE OF ARGUMENT, WOULD YET IMPLY THAT 4 (5, INCLUDING MORT GAGE LOANS) OUT OF 8 OBJECTS AS BEING, OR POSSIBLY, FOR NON-AGRICULTURAL PURPOSE S. THOUGH NOT INDICATIVE OF THE VOLUMES, WHICH SHALL BE RELEVANT TO DETERMINE THE A SSESSEES PREDOMINANT ACTIVITY, IT CANNOT, AT ANY RATE, BE SAID, ON THAT BASIS, THAT THE ASSESSEES PRIMARY OBJECT IS TO FINANCE AGRICULTURAL (AND RELATED) ACT IVITIES, AS THE LD. CIT(A) HOLDS. WHY, IT MAY WELL BE THAT JEWELLERY LOANS ITSELF CON STITUTE A SUBSTANTIAL PART OF THE TOTAL LOAN PORTFOLIO . THE SAME, AS SHALL BE SEEN, ARE ELIGIBLE FOR BEIN G PROVIDED TO CLASS C MEMBERS, I.E., AS AGAINST ONLY CLASS A M EMBERS FOR THE OTHER CATEGORIES (OF LOANS). ON THIS BEING OBSERVED BY TH E BENCH DURING HEARING, THE LD. AR WOULD, ALLUDING TO ADITANAR EDUCATIONAL INSTITUTION & OTHRS. V. ADDL. CIT [1997] 224 ITR 310 (SC), ARGUE THAT THERE IS A DIF FERENCE BETWEEN OBJECTS AND POWERS (OF THE CONCERNED ENTITY). IN OUR VIEW , ADMITTING THE SAID DIFFERENCE, REFERENCE THERETO AND, THEREFORE, TO TH E SAID DECISION, IS MISPLACED. THE OBSERVATIONS BY THE HONBLE APEX COURT THEREIN STAND MADE IN THE CONTEXT OF THE REQUIREMENT OF THE RELEVANT PROVISION (S. 10 (22)) THAT AN INSTITUTION TO BE ELIGIBLE THERE-UNDER SHOULD EXIST SOLELY FOR THE PURPOSE OF EDUCATION, AND NOT FOR THE PURPOSE OF PROFIT , EXPLAINING THAT THE OBJECT (OF THE SAID SOCIETY) BEING NOT TO MAKE PROFIT, IT SHALL NOT CEASE TO EXIST SOLELY FOR EDUCATIONAL PURPOSES, IF IN A PARTICULAR YEAR A SURPLUS INCIDENTALLY ARISES. THAT IS, IT GIVES PRIMACY TO THE OBJECT (CLAUSE), SO THAT THE ACTUAL WORKING, UNLESS SHOWN TO BE OTHERWISE, WOULD PRESUMABLY BE ONLY IN PURSUANCE AND FURTHERANCE OF ITS OBJECTS. THE QUESTION IN FACT DOES NOT ARISE IN THE PRESENT CASE, AGAIN FOR THE REASON THAT THERE IS NO INCONSISTENCY BETWEEN THE ASSESSEES OBJECTS AND TH E CORRESPONDING POWERS. THE 7 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. ASSESSEE, AS A PART OF ITS REGULAR BUSINESS, ACCEP TS DEPOSITS AS WELL AS GRANTS LOANS. WHILE THE FORMER IS FROM THE MEMBERS OF THE PUBLIC AT LARGE, THE LATTER IS RESTRICTED TO ITS MEMBERS . THE DIFFERENT PURPOSES FOR WHICH LOANS COULD BE GRANTED ARE LISTED SEPARATELY IN ITS CHARTER UNDER THE HEAD MAIN OBJECTS. THE SAME IS CLEARLY ONLY IN EXERCISE OF THE POWER TO GR ANT LOANS FOR VARIOUS PURPOSES, I.E., AS LONG AS IT IS TO, FIRSTLY, MEMBERS AND, TW O, CONFINED TO THE AREA OF OPERATION AS SPECIFIED UNDER CLAUSE-4 AREA OF OPER ATION OF CHAPTER-1 OF ITS BYE-LAWS. WHERE, THEN, IS THE DISTINCTION, I.E., BE TWEEN OBJECTS AND POWERS, IN THE INSTANT CASE; THE TWO BEING IN COMPLETE HARMONY . RATHER, THE VERY FACT THAT THE ASSESSEE HAS THE POWER, AND WHICH IS ONLY IN PU RSUANCE OF ITS OBJECTS, TO LEND FOR NON AGRICULTURAL PURPOSES, IS ITSELF SUFFI CIENT, AND IT IS NOT NECESSARY, TO REGARD IT AS SET UP/FORMED EQUALLY FOR NON AGRICULT URAL PURPOSES, THAT NON AGRICULTURAL LOANS TO ANY EXTENT ARE ACTUALLY GRANT ED, I.E., AS LONG AS THE ASSESSEE- SOCIETY HAS THE POWER TO DO SO, BEING IN FACT A DEF INED OBJECT AND PURPOSE PER ITS CONSTITUTION. EVEN AS POINTED OUT BY THE BENCH DURING HEARING, THE HON'BLE APEX COURT IN DELHI STOCK EXCHANGE ASSOCIATION LTD. V. CIT [1997] 225 ITR 235 (SC), CLARIFIED LIKEWISE. IN THE FACTS OF THAT CASE, THE CLAIM OF THE ASSESSEE, A COMPANY LIMITED BY SHARES, ESTABLISHED TO PROMOTE A ND REGULATE THE BUSINESS IN STOCKS, SHARES, DEBENTURES AND OTHER SECURITIES, AD MITTEDLY AN OBJECT OF GENERAL PUBLIC UTILITY, RUNNING A STOCK EXCHANGE, FOR EXEMP TION U/S. 11 OF THE ACT WAS DENIED BY THE TRIBUNAL IN THE ABSENCE OF ANY PROHIB ITION (IN ITS ARTICLES OF ASSOCIATION) FOR DISTRIBUTION OF DIVIDEND TO THE SH AREHOLDERS AND, RATHER, SPECIFIC PROVISIONS FOR CREATING FUNDS FOR THE BENEFIT OF TH E SHAREHOLDERS, EMPLOYEES OR THEIR RELATIONS. THIS WAS CONFIRMED BY BOTH THE HO N'BLE HIGH COURT AND THE HON'BLE APEX COURT, HOLDING THAT THE MERE FACT THAT THE ASSESSEE WAS AT LIBERTY TO DISTRIBUTE INCOME OR CREATE FUNDS FOR THAT PURPO SE WAS SUFFICIENT, AND NOT AN ACTUAL EXERCISE OF THAT POWER. THERE MUST BE, IT EX PLAINED, A LEGAL OBLIGATION TO SPEND THE MONEY EXCLUSIVELY AND ESSENTIALLY ON CHAR ITY, AND WHICH WAS ABSENT 8 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. DURING THE RELEVANT PERIOD, SO THAT IT WAS PERMISSI BLE FOR THE ASSESSEE (BY ITS CHARTER) TO DISTRIBUTE THE WHOLE OR PART OF ITS IN COME BY WAY OF DIVIDEND TO ITS SHARE-HOLDERS. REFERENCE IN THIS CONTEXT MAY ALSO B E DRAWN TO THE DECISION IN, INTER ALIA, CIT VS. PALGHAT SHADI MAHAL TRUST [2002] 254 ITR 212 (SC); UPPER GANGES SUGAR MILLS LTD. VS. CIT [1997] 227 ITR 578 (SC); CIT VS. K.R. CHENNI KRISHNA CHETTY [1997] 225 ITR 234 (MAD). IN THE FACTS OF THE PRESENT CASE, ONE CANNOT, WITHOUT REFERENCE TO THE RECORD BEING A M ATTER OF FACT, STATE THAT NO LOANS HAD BEEN GRANTED FOR NON-AGRICULTURAL PURPOSE S, SO THAT THE STATEMENT BY THE LD. AR IN THIS REGARD MUST BE TAKEN AS A PLEA DE HORS THE RECORD. CONTRAST THIS WITH THE SPECIFIC PLEA AS TO NON DISTRIBUTION OF DI VIDEND AND NON-CREATION OF ANY FUNDS IN THE CITED CASE, AND WHICH WAS CONSIDERED A S OF NO MOMENT. THE FINDING BY THE LD. CIT(A), STATING THE ASSESSEES PRIMARY O BJECT AS PROVIDING FINANCIAL ACCOMMODATION FOR AGRICULTURAL PURPOSES CANNOT THER EFORE BE APPROVED. AT THE SAME TIME, THE WORDS IN THE DEFINING PROVI SION OF A PRIMARY AGRICULTURAL CREDIT SOCIETY (S. 5 (CCIV) R/W S. 56 (C) OF THE BR ACT) INCLUDES OR THE PRINCIPAL BUSINESS, I.E., APART FROM THE PRIM ARY OBJECT, SO THAT IT MAY WELL BE THAT EVEN A CO-OPERATIVE SOCIETY WITH MIXED OBJE CTS, AS THE ASSESSEE, COULD ENGAGE PRINCIPALLY IN THE BUSINESS OF PROVIDING LOA NS (TO ITS MEMBERS) FOR AGRICULTURAL AND RELATED PURPOSES. THAT IS, THOUGH EMPOWERED BY ITS OBJECTS TO LEND FOR NON-AGRICULTURAL PURPOSES TO ANY EXTENT, T HE SOCIETY YET LENDS PRINCIPALLY FOR AGRICULTURAL AND RELATED ACTIVITIES. THE MATTER IS THUS ESSENTIAL FACTUAL , I.E., WHETHER THE ASSESSEES PRINCIPAL BUSINESS DURING TH E RELEVANT YEAR/S INASMUCH THE SAME COULD VARY FROM YEAR TO YEAR, IS PROVISION OF FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES, INCLUDIN G PURPOSES CONNECTED THERETO, WOULD REQUIRE BEING DETERMINED (REFER OBJECT CLAUSE S 6(2) AND 6(8) OF THE MAIN OBJECTS). AND FOR WHICH THEREFORE THE MATTER SHALL REQUIRE BEING RESTORED TO THE FILE OF THE ASSESSING AUTHORITY. THE LD. AR WOULD, UPON THIS, EXPRESS CONCERN, STATING THAT THIS WOULD PUT THE ASSESSEE TO HARASSM ENT. WE ARE AFRAID TO SAY THAT 9 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. THIS IS, WITH RESPECT, UNFORTUNATE. THE BURDEN TO P ROVE ITS RETURN, AND THE CLAIMS PREFERRED THEREBY, IS ON THE ASSESSEE ( CIT V. R. VENKATASWAMY NAIDU [1956] 29 ITR 529 (SC); CIT V. CALCUTTA AGENCY LTD . [1951] 19 ITR 191 (SC)), AND WHICH IT HAS SINGULARLY FAILED TO. THE ASSESSEE, APART FROM RAISING A PLEA, WHICH, WITHOUT SUBSTANTIATION, IS OF NO CONSEQUENCE, DOES PRECIOUS LITTLE, EXCEPT FURNISHING THE COPY OF ITS BYE-LAWS, WHICH IN FACT DISPROVES ITS CASE . WHY, IT DOES NOT EVEN SPECIFY THE (EXEMPT) CATEGORY (OF THE COOPERATIVE SOCIETY) IT FALLS UNDER, MUCH LESS STATING THE BASIS THERE-FOR, AND M ERELY MAKES A BALD CLAIM FOR DEDUCTION. IN FACT, EVEN HERE WE OBSERVE A CONTRADICTION . WHILE IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMS TO BE A PRIMARY AGRICULTURAL CREDIT SOCIETY, EXTENDING CREDIT FACILITIES TO ITS MEMBE RS (REFER PG.2 OF THE ASSESSMENT ORDER), BEFORE THE LD. CIT(A) IT, CHANGING STAND, C LAIMS TO BE A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK IN-AS-MUCH AS IT IS A SOCIETY WITH ITS OPERATIONS CONFINED TO A TALUK, WITH THE PRIMARY OBJECT OF PROVIDING LONG-TERM CREDIT FOR AGRICULTURAL DEVELOPMENT (REFE R EXPLANATION (B) TO S. 80- P(4)) - A CLAIM REJECTED BY HIM. AND WHICH THE ASS ESSEE DOES NOT DISPUTE, EITHER BY WAY OF AN APPEAL OR EVEN IN THE PRESENT PROCEEDI NGS BEFORE US; RATHER, COULD NOT, IN-AS-MUCH AS THE SAME STANDS MADE CONTRARY TO AND DE HORS ITS OBJECT CLAUSE (CL. 6(2)) AS WELL AS ITS BUSINESS. THE WHOLE PURPORT, AS IT APPEARS, IS TO SOMEHOW CLAIM TO BE ENTITLED TO DEDUCTION U/S. 80-P . IT CHANGES ITS STAND IN THE APPELLATE PROCEEDINGS, CLAIMING TO BE ENGAGED IN TH E BANKING BUSINESS, IN RURAL AREAS, SO THAT IT IS ADMITTEDLY A CO-OPERATIVE SOCI ETY ENGAGED IN BANKING BUSINESS, I.E., A PRIMARY CO-OPERATIVE BANK, AS HEL D BY THE AO. THAT IT SERVES IN RURAL AREAS, WHICH IS AGAIN DISPUTED BY THE REVENUE , CLAIMING THE AREAS IT SERVES TO BE FALLING WITHIN THE MUNICIPAL LIMITS, WOULD HA VE NO BEARING IN THE MATTER, AS WOULD BE THE FACT OF IT OPERATING, ASSUMING SO, IN A TALUK, IN-AS-MUCH AS THE SAID REQUIREMENT IS ONLY QUA A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK (REFER EXPLANATION (B) TO S. 80-P(4)), WHICH THE ASSESSEE IS 10 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. DECIDEDLY NOT. HERE IT MAY ALSO BE PERTINENT TO CLA RIFY THAT THE ASSESSEE IS ACCEPTING DEPOSITS FROM THE BOTH MEMBERS AND NON-MEMBERS, I.E., FROM THE PUBLIC AT LARGE AND, FURTHER, ALSO PROVIDES OTHER BANKING SERVICES , I.E., APART FROM FINANCIAL INTERMEDIATION; ITS MISCELLANEOUS I NCOMES INCLUDE A NUMBER OF CHARGES (REFER PG. 2 OF THE ASSESSMENT ORDER). IT, ACCORDINGLY, IS ENGAGED IN THE BUSINESS OF BANKING, AS DEFINED IN S. 5(B) OF THE BANKING REGULATION ACT, 1949, AS UNDER: '(B) 'BANKING' MEANS THE ACCEPTING, FOR THE PURPOSE OF LENDING O R INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC, R EPAYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWABLE BY CHEQUE, DRAFT, OR DER OR OTHERWISE.' IT IS CLEAR THAT THE LD. CIT(A) HAS OMITTED TO PERU SE THE ASSESSEES STATED STAND BEFORE HIM, I.E., BY WAY OF STATEMENT OF FACTS, F ILED ALONG WITH THE MEMO OF APPEAL BEFORE HIM, AND WHICH CORRESPONDS WITH THE M ATERIAL ON RECORD. IT IS THEREFORE THE ASSESSEE WHO HAS TAKEN AN INCONSISTEN T AND AMBIVALENT STAND IN THE MATTER, WITH THE LD. CIT(A) IN FACT ISSUING A FINDI NG CONTRADICTORY TO THE ASSESSEES OWN STATED DECISION. SO HOWEVER, IT COULD ALSO BE THAT ITS PRINCIPAL BU SINESS IS RESTRICTED TO PROVIDING FINANCIAL ACCOMMODATION TO ITS MEMBERS F OR AGRICULTURAL AND RELATED PURPOSES. WE SAY SO AS THE SAID ACTIVITY ALSO IS A SUB SET OF ACTIVITY OF LENDING, A BUSINESS THE ASSESSEE IS DEFINITELY ENGAGED IN. THE MATTER WOULD THEREFORE REQUIRE BEING EXAMINED ON FACTS. AND THE ASSESSEE A LLOWED DEDUCTION IF ITS PRINCIPAL BUSINESS FOUND TO BE SO, SO THAT IT IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, EVEN AS HELD BY THE LD. CIT(A), EVEN THOUG H IN CONTRADICTION TO THE ASSESSEES CLAIM BEFORE HIM. THIS IS AS THE MATTER IS PRINCIPALLY OF FACT, ON WHICH NO EXAMINATION HAS TAKEN PLACE; THE ASSESSING OFFIC ER (AO) ALSO RESTING CONTENT ON FINDING, AND NOT INCORRECTLY, THAT THE ASSESSEE IS A PRIMARY CO-OPERATIVE BANK, I.E., SAVE FOR IT BEING A PRIMARY AGRICULTURAL CRED IT SOCIETY, WHICH STANDS EXCEPTED IN THE DEFINITION OF THE FORMER AND, IN ANY CASE, I S EXCEPTED U/S. 80-P(4) AND, THEREFORE, IS ENTITLED TO DEDUCTION U/S. 80-P(1). W HERE SO, AND WHICH WOULD ONLY 11 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. BE ON THE BASIS OF A POSITIVE FINDING TO THAT EFFEC T, THE ASSESSEEE, IRRESPECTIVE OF ITS NAME, WHICH IS APPOSITE, IS ELIGIBLE FOR DEDUC TION U/S. 80-P. THE MATTER IS ACCORDINGLY RESTORED TO THE FILE OF THE AO, WHO SHA LL DECIDE PER A SPEAKING ORDER, ISSUING DEFINITE FINDING/S OF FACT, AFTER AL LOWING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD, AND ON WHOM THE BURDEN TO ESTABLISH ITS CLAIM/S, LEADING EVIDENCE IN THE MATTER, LIES. FURTHER, THE DEDUCTION, IN ANY CASE, SHALL BE RESTRICTED TO THE SUMS SPECIFIED IN S. 80-P(2)(A)(I ); THE ASSESSEE HAVING OTHER INCOMES, OR INCOMES FROM OTHER ACTIVITIES, AS WELL. ITA 295/MDS/2017 4. THE ONLY ISSUE IN THIS APPEAL IS THE OBLIGATION IN LAW OR OTHERWISE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE UNDER SECTION 194A ON THE INTEREST ALLOWED BY IT ON THE TIME DEPOSITS MAINTAINED WITH IT BY ITS DEP OSITORS, MEMBERS OR NON- MEMBERS. THE ASSESSEE HAVING NOT DEDUCTED THE SAID TAX, IN THE VIEW OF THE AO, THE PROVISION OF SECTION 40(A)(IA) STOOD ATTRACTED AND, ACCORDINGLY, DISALLOWED THE SAID INTEREST, WHICH WOULD, ACCORDINGLY, IN TER MS OF THE SAID PROVISION, BE ALLOWED ONLY IN THE YEAR IN WHICH THE SAID TAX IS D EPOSITED TO THE CREDIT OF THE CENTRAL GOVERNMENT. THE LD. CIT(A) HAS ALLOWED RELI EF TO THE ASSESSEE IN VIEW OF THE PROVISION OF SECTION 194A(3)(VIIA)(A), WHICH RE ADS AS UNDER, EXCLUDING THE INTEREST ALLOWED BY A PRIMARY AGRICULTURAL CREDIT S OCIETY FROM THE PURVIEW OF S. 194A(1): INTEREST OTHER THAN INTEREST ON SECURITIES. 194A. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY IN COME BY WAY OF INTEREST OTHER THAN INCOME BY WAY OF INTEREST ON SECURITIES, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT TH E TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE: (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APP LY ( VIIA ) TO SUCH INCOME CREDITED OR PAID IN RESPECT OF, 12 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. ( A ) DEPOSITS WITH A PRIMARY AGRICULTURAL CREDIT SOCIE TY OR A PRIMARY CREDIT SOCIETY OR A CO-OPERATIVE LAND MORTGAGE B ANK OR A COOPERATIVE LAND DEVELOPMENT BANK; ( B ) DEPOSITS (OTHER THAN TIME DEPOSITS MADE ON OR A FTER THE 1ST DAY OF JULY, 1995) WITH A CO-OPERATIVE SOCIETY, OTHER THAN A CO- OPERATIVE SOCIETY OR BANK REFERRED TO IN SUB-CLAUSE ( A ), ENGAGED IN CARRYING ON THE BUSINESS OF BANKING; WEVE, SETTING ASIDE THE IMPUGNED ORDER, ALREADY RE STORED THE MATTER BACK TO THE FILE OF THE AO FOR FACTUAL DETERMINATION AS TO WHET HER THE ASSESSEE COULD, IN VIEW OF ITS PRINCIPAL BUSINESS, WHERE SO, BE REGAR DED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY. THIS THUS HAS A DIRECT BEARING ON THE APPLICATION OR OTHERWISE OF SECTION 194A AND, THUS, SECTION 40(A)(IA), TO THE A SSESSEE FOR THE RELEVANT YEAR AND, CONSEQUENTLY, THE MAINTAINABILITY OF THE ASSES SEES CLAIM OF BEING NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE SAID INTEREST. THIS ISSUE IS, THEREFORE, ALSO RESTORED TO THE FILE OF THE AO TO DECIDE IN LIGHT OF ITS FIN DINGS IN THE REVENUES APPEAL IN ITA NO. 634 OF 2016. IN THIS REGARD, WE MAY ALSO CL ARIFY THAT THE HIGHER COURTS OF LAW HAVE REGARDED THE AMENDMENTS TO SECTION 40(A )(IA) BY FINANCE ACT, 2012 W.E.F. 01/7/2012 AS RETROSPECTIVE, SO THAT WHERE (A ND TO THE EXTENT) THE ASSESSEE IS NOT DEEMED TO BE IN DEFAULT UNDER THE FIRST PROVISO TO S. 201, INSERTED SIMULTANEOUSLY, FOR WHICH THE AO SHALL ALLOW OPPORT UNITY TO THE ASSESSEE TO EXHIBIT, S. 40(A)(IA) SHALL NOT APPLY. 5. IN SUMMATION THE ASSESSEE, A CO-OPERATIVE SOCIETY, CLAIMED DEDUC TION UNDER SECTION 80-P OF THE ACT ON ITS ENTIRE INCOME/PROFIT FOR THE YEAR. SECTION 80P OF THE ACT IS IN RESPECT OF DEDUCTION ON THE INCOMES SPECIFIED THERE -UNDER OF A CO-OPERATIVE SOCIETY. SUB-SECTION (1) SPELLS OUT THE CONTOURS OF THE DEDUCTION, I.E., TO AN ASSESSEE, BEING A CO-OPERATIVE SOCIETY, THE GROSS T OTAL INCOME OF WHICH INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), ALLOWING DEDUCTION IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SAID SECT ION. WITH REGARD TO A CO- OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKI NG OR PROVIDING CREDIT 13 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. FACILITIES TO ITS MEMBERS, IT IS THE WHOLE AMOUNT O F PROFITS OR GAINS OF THE BUSINESS ATTRIBUTABLE TO SUCH ACTIVITY. SUB-SECTION (4), INSERTED BY FINANCE ACT, 2006 W.E.F. 01.4.2007, PROVIDES THAT THE PROVISIONS OF SEC. 80P SHALL NOT APPLY IN RELATION TO A CO-OPERATIVE BANK OTHER THAN A PRI MARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AN D RURAL DEVELOPMENT BANK. WHILE THE FORMER TWO TERMS ARE TO HAVE THE SAME MEA NING AS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANK REGULATION A CT, 1949 (BR ACT FOR SHORT), A PRIMARY CO-OPERATIVE AGRICULTURAL AND RU RAL DEVELOPMENT BANK STANDS DEFINED VIDE EXPLANATION (B) THERETO. THE ASSESSEES CLAIM WAS DISALLOWED BY THE AO IN ASSESSMENT ON THE GROUND THAT THE ASSESSE E-SOCIETY IS A PRIMARY CO- OPERATIVE BANK, A TERM DEFINED UNDER THE BR ACT, AS A CO-OPERATIVE-SOCIETY, OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY, W HOSE PRIMARY OBJECT OR PRINCIPAL BUSINESS IS THE TRANSACTION OF BANKING BU SINESS. FURTHER QUALIFICATIONS (FOR IT TO BE SO REGARDED), AND WHICH ARE SATISFIED IN THE PRESENT CASE, IS THAT ITS PAID-UP CAPITAL IS NOT LESS THAN ONE LAKH OF RUPEES AND, FURTHER, THAT ITS BYE-LAWS DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE S OCIETY AS A MEMBER. AT THIS STAGE, IT MAY BE CLARIFIED THAT IN VIEW OF THE BANK ING LAWS (APPLICATION TO CO- OPERATIVE SOCIETIES) ACT, 1965, THE BR ACT, TO THE EXTENT SPECIFIED THERE-UNDER, APPLIES TO CO-OPERATIVE SOCIETIES. SEC. 56 (FALLING UNDER PART-V) OF THE BR ACT, IS RELEVANT IN THIS REGARD AND IS EXTRACTED AS UNDER I N ITS RELEVANT PART: PART V OF BANKING REGULATION ACT, 1949: APPLICATION OF THE ACT TO CO-OPERATIVE BANKS ACT TO APPLY TO CO-OPERATIVE SOCIETIES SUBJECT TO M ODIFICATIONS. 56. THE PROVISIONS OF THIS ACT, AS IN FORCE FOR THE TI ME BEING, SHALL APPLY TO, OR IN RELATION TO, CO-OPERATIVE SOCIETIES AS THEY APPLY T O, OR IN RELATION TO, BANKING COMPANIES SUBJECT TO THE FOLLOWING MODIFICATIONS, N AMELY : ( A ) THROUGHOUT THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, ( I ) REFERENCES TO A BANKING COMPANY OR THE COMPANY OR SUCH COMPANY SHALL BE CONSTRUED AS REFERENCES TO A CO-O PERATIVE BANK, 14 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. ( II ) REFERENCES TO COMMENCEMENT OF THIS ACT SHALL BE CONSTRUED AS REFERENCES TO COMMENCEMENT OF THE BANKING LAWS (APP LICATION TO COOPERATIVE SOCIETIES) ACT, 1965 (23 OF 1965) ; ( B ) IN SECTION 2, THE WORDS AND FIGURES THE COMPANIE S ACT, 1956 (1 OF 1956), AND SHALL BE OMITTED ; ( C ) IN SECTION 5, ( I ) AFTER CLAUSE ( CC ), THE FOLLOWING CLAUSES SHALL BE INSERTED, NAMELY: - ( CCI ) CO-OPERATIVE BANK MEANS A STATE CO-OPERATIVE BA NK, A CENTRAL COOPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK; ( CCII ) ; ( CCIIA ) CO-OPERATIVE SOCIETY MEANS A SOCIETY REGISTERED OR DEEMED TO HAVE BEEN REGISTERED UNDER ANY CENTRAL ACT FOR T HE TIME BEING IN FORCE RELATING TO THE MULTI-STATE CO-OPERA TIVE SOCIETIES, OR ANY OTHER CENTRAL OR STATE LAW RELATI NG TO CO- OPERATIVE SOCIETIES FOR THE TIME BEING IN FORCE; ( CCIV ) (EXTRACTED EARLIER ) ( CCV ) PRIMARY CO-OPERATIVE BANK MEANS A CO-OPERATIVE SOCIETY, OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY, ( 1 ) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHIC H IS THE TRANSACTION OF BANKING BUSINESS ; ( 2 ) THE PAID-UP SHARE CAPITAL AND RESERVES OF WHICH A RE NOT LESS THAN ONE LAKH OF RUPEES ; AND ( 3 ) THE BYE-LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS A MEMBER : PROVIDED THAT THIS SUB-CLAUSE SHALL NOT APPLY TO THE ADMISSION OF A CO-OPERATIVE BANK AS A MEMBER BY REASON OF SUCH COOPERATIVE BANK SUBSCRIBING TO THE SHARE CAPITAL OF SUCH COOPERATIVE SOCIETY OUT OF FU NDS PROVIDED BY THE STATE GOVERNMENT FOR THE PURPOSE; ( CCVI ) PRIMARY CREDIT SOCIETY MEANS A CO-OPERATIVE SOC IETY, OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY,- IN APPEAL, THE ASSESSEE CLAIMED TO BE A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, A SPECIES OF A PRIMARY CO-OPERATIVE BANK, DEFINED IN SECTION 80-P, WHICH EXCEPTS SUCH A BANK FROM THE OPERATION OF SECTION 80- P(4), WHICH SUB-SECTION, INSERTED BY FINANCE ACT, 2 006, W.E.F. 01.4.2007, EXCLUDES A CO-OPERATIVE BANK FROM THE PURVIEW OF SE CTION 80-P(1). REFERENCE HERE MAY ALSO BE DRAWN TO S. 2(24)(VIIA), ALSO INSE RTED ALONG WITH, INCLUDING THE PROFITS AND GAINS OF ANY BUSINESS OF BANKING, OR PR OVISION OF CREDIT FACILITIES TO ITS MEMBERS, BY A CO-OPERATIVE SOCIETY, IN THE DEFI NITION OF INCOME, INCLUSIVELY DEFINED U/S. 2(24). THE LD. CIT(A), WITH REFERENCE TO THE ASSESSEES BYE-LAWS, 15 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. FOUND IT TO BE NOT SO IN-AS-MUCH AS THE ASSESSEE IS ENGAGED IN, AMONG OTHERS, PROVIDING SHORT-TERM AND MEDIUM-TERM CREDIT FOR AGR ICULTURAL PURPOSES. THE ASSESSEE, HOWEVER, WAS FOUND BY HIM TO BE A PRIMARY AGRICULTURAL CREDIT SOCIETY, I.E., A CO-OPERATIVE SOCIETY WHOSE PRIMARY OBJECT O R PRINCIPAL BUSINESS IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL AND ALLIED PURPOSES, EXCEPTED U/S. 80-P(4). IN FURTHER APPEAL BY THE REVENUE, WHILE IT CHALLENGES THE FINDING ON THE BASIS OF WHICH THE AS SESSEE STANDS ALLOWED RELIEF, THE ASSESSEE SUPPORTS THE IMPUGNED ORDER. WITHOUT D OUBT, UPON AMENDMENT BY FINANCE ACT, 2006, A CO-OPERATIVE SOCIETY ENGAGED I N THE BUSINESS OF BANKING OR PROVISION OF CREDIT FACILITIES TO ITS MEMBERS, WHICH (BUSINESSES) ARE THUS REGARDED AT PAR (ALSO REFER S. 2(24)(VIIA)), ONLY SOCIETIES EXCEPT ED U/S. 80-P(4) WOULD QUALIFY FOR DEDUCTION U/S. 80-P(1). THE LAW I N THE MATTER IS AMPLY CLEAR, WITH THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. MADRAS AUTORICKSHAW DRIVERS COOPERATIVE SOCIETY LTD . [1983] 143 ITR 981 (MAD) (AFFIRMED IN [2001] 249 ITR 330 (SC)), CLARIFYING THAT DEDUCTION U/S. 80-P IS ASSESSEE SPECIFIC, SO THAT THE SAME SHALL EXTEND TO ELIGIBLE SOCIETIES ONLY. TAXING STATUTES, IT IS WELL SETTLED, ARE TO BE STRICTLY CONSTRUED (V IZ. UOI VS. BOMBAY ELPHINSTONE SPINNING & WEAVING CO. LTD. & ORS . 2001(1) SC 536;); MORE SO AN EXEMPTION PROVISION, CAST AS IT DOES AN EXCEPTION FROM THE GE NERAL RULE AND NATURAL TENOR OF THE STATUTE ( ORISSA STATE WAREHOUSING CORPN. VS. CIT [1999] 237 ITR 589 (SC); NOVAPAN INDIA LTD. V. CCE 1994 (73) ELT 769 (SC)), AND IS ACCORDINGLY TO BE INTERPRETED ONLY IN TERMS OF THE LANGUAGE USED BY T HE STATUE ( BOMBAY ELPHINSTONE SPINNING & WEAVING CO. LTD. (SUPRA); IPCA LABORATORY LTD. V. DY. CIT [2004] 266 ITR 521 (SC)). NOT TO DO SO, I.E., TO T AKE COGNIZANCE OF THE SAME, INTERPRETING IT BY APPLYING THE RECOGNIZED IN TERPRETATIVE PROCESSES, AMOUNTS TO LEGISLATING, WHICH THE COURTS OF LAW, CA NNOT, EVEN AS CLARIFIED BY THE APEX COURT TIME AND AGAIN, FURTHER CLARIFYING IN CBI VS. KESHUB MAHINDRA & OTHERS [IN CURATIVE PETITION NOS. 39-42 OF 2010 IN CRIMINA L APPEAL NOS. 1672- 16 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. 1675 OF 1996] THAT NO COURT, INCLUDING ITSELF, COUL D READ THE LAW IN A MANNER SO AS TO NULLIFY THE EXPRESS PROVISIONS OF AN ACT OR C ODE (PARA 4 OF THE DECISION). COMING BACK TO THE FACTS OF THE CASE, WE OBSERVE TH AT WHILE THE FINDING OF THE ASSESSEE BEING A PRIMARY CO-OPERATIVE BANK, I.E ., BY THE ASSESSING AUTHORITY, HAS NOT BEEN DISPUTED, THE FINDING AS TO IT BEING A PRIMARY AGRICULTURAL CREDIT SOCIETY CANNOT BE SAID TO BE CORRECT ON FACTS ON RE CORD, AS ITS BYE-LAWS CLEARLY PROVIDE, AND IN NO SMALL MEASURE, FOR EXTENSION OF CREDIT TO ITS MEMBERS BY THE ASSESSEE FOR NON-AGRICULTURAL PURPOSES. IN-AS-MUCH AS, HOWEVER, THE ASSESSEES PRINCIPAL BUSINESS, IN PURSUANCE TO SOME OF ITS OBJECTS , COULD YET BE TO FINANCE AGRICULTURAL AND ALLIED ACTIVITIES, IT, NEVERTHELES S AND DESPITE ITS OBJECTS, MAY BE A PRIMARY AGRICULTURAL CREDIT SOCIETY, ELIGIBLE FOR DEDUCTION U/S. 80-P(1) R/W S. 80-P(4); IT ADMITTEDLY BEING NOT A PRIMARY COOPERAT IVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. IN OTHER WORDS, IT BEING A PRIMAR Y CO-OPERATIVE BANK, ONE OF THE THREE COOPERATIVE BANKS, SHALL NOT BE A LIMITIN G FACTOR, OR SHALL BECOME AN IRRELEVANT CONSIDERATION WHERE THE ASSESSEE IS SHOW N TO BE A PRIMARY AGRICULTURAL CREDIT SOCIETY; RATHER, THE DEFINITION OF THE FORME R EXCLUDES THE LATTER (S.5(CCV) OF THE BR ACT). THE ONLY OPTION AVAILABLE FOR THE ASSE SSEE IS OF ITS CLAIM BEING EXAMINED ON THIS ASPECT, AND THE ISSUE DETERMINED O N THE BASIS OF A FINDING IN THE MATTER, A QUESTION OF FACT, ALLOWING IT AN OPPO RTUNITY TO EXHIBIT ITS CASE IN THE MATTER, WITH REFERENCE TO ITS PRINCIPAL OR DOMI NANT BUSINESS. WE ARE CONSCIOUS THAT THE ASSESSEE HAS AT NO STAGE CLAIMED TO BE SO, I.E., TO BE A PRIMARY AGRICULTURAL CREDIT SOCIETY; RATHER , STATING OF ITS CLAIM TO HAVE BEEN ERRONEOUSLY SO REGARDED BY THE AO (REFER STAT EMENT OF FACTS FORMING PART OF THE MEMO OF APPEAL BEFORE THE LD. CIT(A)). AND, FURTHER, OF THE CLAIM BY ITS COUNSEL BEFORE US AS WITHOUT REFERENCE TO AND DE HORS ANY MATERIAL ON RECORD; NAY, CONTRARY THERETO. THE QUESTION, HOWEVER, IS ON E OF FACT, ON WHICH WE FIND NO EXAMINATION AT ANY STAGE, SO THAT THE CLAIM MAY WELL BE TRUE AND, IN ANY CASE, REMAINS TO BE DETERMINED. IT NEEDS TO BE APPRECIATE D THAT IT IS THE CORRECT LEGAL 17 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. POSITION THAT IS RELEVANT, AND NOT THE VIEW THAT TH E PARTIES MAY TAKE OF THEIR RIGHTS IN THE MATTER ( CIT V. C. PARAKH & CO. (INDIA ) LTD . [1956] 29 ITR 661 (SC); KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC)). FINALLY, EVEN WHERE THE ASSESSEE SUCCEEDS, IT BEING ONLY ON THE B ASIS OF ITS PRINCIPAL BUSINESS, WHICH, COULD VARY IN ITS COMPOSITION FR OM YEAR TO YEAR, I.E., IN RESPONSE TO THE MARKET (SUPPLY AND DEMAND) FORCES, THE ASSESSEE-BANKS CLAIM WOULD NECESSARILY REQUIRE BEING REVIEWED ON A YEAR TO YEAR BASIS, AND DECIDED ON THE BASIS OF FACTS FOUND. TWO, THE DEDUCTION U/S . 80P(1) SHALL BE NECESSARILY RESTRICTED TO THE INCOME FROM THE ACTIVITIES, AS WE LL AS THE INCOME/S, SPECIFIED U/S. 80P(2). THE MATTER, ACCORDINGLY, IS RESTORED T O THE FILE OF THE AO TO DETERMINE THE ASSESSEES CLAIM AS MADE BEFORE US, I .E., OF ITS PRINCIPAL BUSINESS BEING TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEM BERS FOR AGRICULTURAL (AND ALLIED) ACTIVITIES. THE WORD PRINCIPAL, A WORD OF COMMON USAGE, IS WELL UNDERSTOOD BOTH IN LAW AND IN COMMON PARLANCE. ITS USE, IN CONJUNCTION WITH THE WORDS PRIMARY OBJECT, AS EXPLAINED IN MADRAS AUTORICKSHAW DRIVERS COOPERATIVE SOCIETY LTD . (SUPRA), IS TO ASCERTAIN THE CHARACTER OF THE BUSINESS BEING ACTUALLY CARRIED OUT BY THE SOCIETY IN TERMS OF ITS OBJECTS . THE MAINTAINABILITY OF SECTION 194A(3)(VIIA), ON THE BA SIS OF WHICH RELIEF STANDS ALLOWED TO THE ASSESSEE BY THE LD. CIT(A) IN THE RE VENUES SECOND APPEAL, IS CONSEQUENTIAL, THOUGH THE ASSESSEE, A CO-OPERATIVE SOCIETY IN THE BUSINESS OF BANKING, IS AT LIBERTY TO ADVANCE ITS CASE, I.E., AS TO THE NON-APPLICATION OF SECTION 194A(1), ALTERNATIVELY, ON ANY OTHER GROUND /BASIS IN THE SET-ASIDE PROCEEDINGS. THE AO SHALL DECIDE PER A SPEAKING ORD ER, ALLOWING THE ASSESSEE A REASONABLE OPPORTUNITY TO STATE AND PRESENT ITS CA SE BEFORE HIM. THE ONUS TO ESTABLISH ITS CLAIM/S, WE MAY THOUGH CLARIFY, WOULD BE STRICTLY ON THE ASSESSEE. WE DECIDE ACCORDINGLY. 18 ITA NO.634/MDS/2016 & 295/MDS/2017 (AY 2009-10) ITO V. KALAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. 6. IN THE RESULT, THE REVENUES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MAY 19, 2017 AT CHENNAI . SD/- SD/- ( ! . '# ) (DUVVURU RL REDDY) $ /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED, MAY 19, 2017 EDN 4 - /$156 76)1 /COPY TO: 1. *+ /APPELLANT 2. /0*+ /RESPONDENT 3. 81 ( )/CIT(A) 4. 81 /CIT 5. 69: /$1$ /DR 6. :#( ; /GF