Thudiyalur Co-op Agricultural Services Ltd., CHENNAI v. ITO, Coimbatore

ITA 2830/CHNY/2014 | 2007-2008
Pronouncement Date: 26-10-2016

Appeal Details

RSA Number 283021714 RSA 2014
Assessee PAN AAAAT3838L
Bench Chennai
Appeal Number ITA 2830/CHNY/2014
Duration Of Justice 1 year(s) 11 month(s) 8 day(s)
Appellant Thudiyalur Co-op Agricultural Services Ltd., CHENNAI
Respondent ITO, Coimbatore
Appeal Type Income Tax Appeal
Pronouncement Date 26-10-2016
Appeal Filed By Assessee
Bench Allotted D
Date Of Final Hearing 09-08-2016
Next Hearing Date 09-08-2016
Assessment Year 2007-2008
Appeal Filed On 17-11-2014
Judgment Text
IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH CHENNAI . BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY JUDICIAL MEMBER I.T.A. NO S . 475 /MDS/201 2 & 2830/MDS/2014 ASSESSMENT YEAR S : 20 08 - 09 & 2007 - 08 M/S. THUDIYALUR COOPERATIVE AGRICULTURAL SERVICE LTD. NO. K - 1550 THUDIYALUR POST COIMBATORE 641 034. [PAN: AAAAT3838L] VS. THE INCOME TAX OFFICER CO MPANY WARD I C OIMBATORE . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A.S. SRIRAMAN ADVOCATE / RESPONDENT BY : SHRI DURAI PANDIAN JCIT / DATE OF HEARING : 09 . 08 .201 6 / DATE OF P RONOUNCEMENT : 26 . 1 0.2016 / O R D E R PER DUVVURU RL REDDY JUDICIAL MEMBER : BOTH T HE APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I C OIMBATORE DATED 1 9 . 12 .201 1 F OR THE ASSESSMENT YEAR 20 08 - 09 AND DATED 08.09.2014 FOR THE ASSESSMENT YEAR 2007 - 08 . I.T.A. NO. 475/MDS/2012 [A.Y. 2008 - 09] 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: (I) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF THE CLA IM OF DEDUCTION UNDER SECTION 80P(4) OF THE INCOME TAX ACT 1961 [ ACT IN SHORT] AMOUNTING TO .2 80 80 373/ - . (II) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF .11 57 086/ - BEING THE INTEREST ON CLOSING STOCK DEBITED IN DIFFERENT SECTIONS WHILE CREDITING EQUAL AMOUNT IN BANKING SECTION I.T.A. NOS. 475 /M/1 2 & 2830/M/14 2 DEMONSTRATING THE INTERNAL TRANSFER BY WAY OF SUCH ENTRIES IN THE COMPUTATION OF TAXABLE TOTAL INCOME. (III) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF .79 85 573/ - BEING THE AMOUNTS RELATABLE TO THE CLAIM OF BAD DEBTS IN THE COMPUTATION OF TAXABLE TOTAL INCOME. 3. AT THE TIME OF HEAR ING BY MAKING ENDORSEMENT IN THE GROUNDS OF APPEAL IN GROUND NO. (II) ABOVE THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE GROUND RAISED BY THE ASSESSEE IS NOT PRESSED AND ACCORDINGLY DISMISSED AS NOT PRESSED. 4. BRIEF FACTS OF THE CASE ARE T HAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND FILED ITS RETURN OF INCOME ON 07.05.2009 ADMITTING INCOME OF .2 80 80 373/ - WHILE THE DUE DATE OF FILING OF RETURN WAS 30.09.2008 . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2 ) OF THE ACT WAS ISSUED ON 27.08.2010. IN RESPONSE THERETO THE ASSESSEE HAS FURNISHED DETAILS AS CALLED FOR. DURING THE COURSE OF HEARING THE AR OF THE ASSESSEE HAS FILED REVISED STATEMENT OF TOTAL INCOME AT .2 61 55 270/ - AND EXPLAINED THAT THE DECREAS E OF .19 25 103/ - WAS DUE TO ADDITIONAL EXPENSES TOWARDS INTEREST PAID PURCHASE SALES TAX ADJUSTMENTS ETC. BEFORE THE ASSESSING OFFICER THE AR OF THE ASSESSEE HAS EXPLAINED THAT THE AUDIT REPORT UNDER SECTION 44AB OF THE ACT WAS COMPLETED ON 30.09.200 8 ITSELF AND THE RETURN WAS APPAREL FILED ON THE BASIS OF THE AUDIT REPORT UNDER SECTION 44AB OF THE ACT. SINCE THE ASSESSEE HAS NOT FILED ANY REVISED RETURN OF INCOME AND TAKEN ANY PROPER REMEDIAL ACTION TO SUBSTANTIATE THEIR CLAIM THE I.T.A. NOS. 475 /M/1 2 & 2830/M/14 3 ASSESSING OFFICER HAS NOT ACCEPTED THE REVISED STATEMENT OF GROSS TOTAL INCOME WHEREBY THE GROSS TOTAL INCOME HAS BEEN REDUCED BY .19 75 103/ - AND TAKEN THE TOTAL INCOME OF THE ASSESSEE AT .2 80 80 373/ - . AFTER CONSIDERING VARIOUS DETAILS FILED BY THE ASSESSEE THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT .3 44 31 30 5/ - AFTER MAKING VARIOUS ADDITIONS/DISALLOWANCES. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND RAISED VARIOUS GROUNDS . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE . 6. ON BEING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. WITH REGARD TO THE DISALLOWANCE OF THE CLAIM OF DEDUCTION UNDER SECTION 80P(4) OF THE ACT BY RELYING ON THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. VEERAKERALAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY IN T.C.A. NOS. 735 755 OF 2014 AND 460 OF 2015 THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND PLEADED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 7. ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDER PASSED BY THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH SIDES PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSE SSEE IS REGISTERED AS A I.T.A. NOS. 475 /M/1 2 & 2830/M/14 4 COOPERATIVE SOCIETY UNDER THE TAMIL NADU COOPERATIVE SOCIETIES ACT 1983. THIS SOCIETY WAS FORMALLY FUNCTIONING AS TUDIYALUR COOPERATIVE RURAL BANK AS PER REGISTRATION DATED 29.04.1955. SUBSEQUENTLY ON 13.08.1966 THE NAME OF THE S OCIETY WAS CHANGED AS THE TUDIYALUR CO - OPERATIVE AGRICULTURAL SERVICES LTD. AND VARIOUS AGRICULTURAL SERVICES WERE INCLUDED THEREIN INCLUDING BANKING BUSINESS. IN THE RETURN OF INCOME THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 80P OF THE ACT. ACCORD INGLY THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF INCEPTION OF THE SOCIETY AND ITS ACTIVITIES. BY FILING COPY OF THE BYE - LAWS OF THE SOCIETY THE ASSESSEE HAS BRIEFLY EXPLAINED THE ACTIVITIES OF THE SOCIETY ELIGIBILITY FOR EXEMPTION UNDER SECTION 80P O F THE ACT AND THE CORRECTNESS OF THE DEDUCTION CLAIMED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY CONSIDERING THE NEWLY INSERTED PROVISIONS OF SECTION 80P(4) OF THE ACT W.E.F. 01.04.2007 BY HOLDING THAT THE ASSESSEE SOCIETY IS A COOPERATIVE BANK WITHIN THE MEANING OF EXPLANATION (A) TO SECTION 80P(4) OF THE ACT THE ASSESSING OFFICER DISALLOWED .2 80 80 373/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. BY CONSIDERING THE PROVISIONS OF SECTION 80P(4) OF THE ACT THE LD. CIT(A) AGREED TO THE CONCLUSION ARRIVED BY THE ASSESSING OFFICER AND DISMISSED THE GROUND RAISED BY THE ASSESSEE. ON AN IDENTICAL ISSUE IN SIMILAR FACTS AND CIRCUMSTANCES IN THE CASE OF CIT V. M/S. VEERAKERALAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY IN T.C.A. NOS . 735 755 OF 2014 AND 460 OF 2015 VIDE ORDER DATED 05.07.2016 THE HON BLE JURISDICTIONAL HIGH COURT HAS OBSERVED AS UNDER: 2. THE FACTS OF THE CASE ARE AS FOLLOWS : - I.T.A. NOS. 475 /M/1 2 & 2830/M/14 5 THE ASSESSEE SOCIETY NAMELY VEERAKERALAM PRIMARY AGRICULTURAL CO - OPERATIVE CREDIT S OCIETY FILED RETURN OF INCOME FOR THE ASSESSMENT YEARS 2008 - 09 2009 - 10 AND 2010 - 11 ON 30.03.2010 ADMITTING 'NIL' INCOME. THE CASES WERE SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INC OME TAX ACT WAS ISSUED AND SERVED ON THE ASSESSEE. THE ASSESSEE STATING THEY ARE A PRIMARY AGRICULTURAL CREDIT SOCIETY CARRYING ON THE BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS CLAIMED DEDUCTION UNDER SECTION 80P (2) OF THE INCOME TAX ACT . THE ASSESSEE SOCIETY IS REGISTERED UNDER TAMIL NADU CO - OPERATIVE SOCIETIES ACT PRIMARILY ENGAGED IN THE PRINCIPLE BUSINESS OF PROVIDING FI NANCIAL ASSISTANCE TO ITS MEMBERS BESIDES DERIVING INCOME FROM ITS TRACTOR DIVISION AND PUBLIC DISTRIBUTION DIVISION. THE AFORESAID ASSESSEE INVESTED ITS FUNDS IN CDCC BANK ETC. TO COMPLY WITH THE STATUTORY OBLIGATIONS AND RECEIVED INTEREST FROM SUCH INV ESTMENTS WHICH HAS BEEN HEADED UNDER INCOME FROM OTHER SOURCES . THEREFORE THE INTEREST INCOME AND DIVIDEND INCOME HAVE COME UNDER THE TAXABLE INCOME UNDER SECTION 80P (2)(A)(I) & (D) OF THE INCOME TAX ACT 1961. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE BY NOMENCLATURE IS A PRIMARY AGRICULTURAL CO - OPERATIVE CREDIT SOCIETY AND WITH THE INSERTION OF SECTION 80P (4) ALL THE CO - OPERATIVE BANKS OTHER THAN PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK BECOME INELIGIBLE FOR EXEMPTION UNDER S ECTION 80P . 3. IT IS FURTHER STATED THAT THE MEANING OF PRIMARY AGRICULTURAL CREDIT SOCIETY AS DEFINED IN SECTION 5 (CCIV) OF THE BANKING REGULATI ON ACT 1949 READS AS FOLLOWS : - (CCIV) PRIMARY AGRICULTURAL CREDIT SOCIETY MEANS CO - OPERATIVE SOCIETY : - (1) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOS ES CONNECTED WITH AGRICULTURAL ACTIVITIES (INCLUDING THE MARKETING OF CROPS); AND (2) THE BYE - LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER ; THEREFORE THE ASSESSING OFFICER DECIDED THAT THOUGH THE ASSESSEE SOCIETY IS A PRIMARY CO - OPERATIVE SOCIETY SINCE CARRYING ON THE BUSINESS OF BANKING IT FALLS WITHIN THE AMBIT OF PRIMARY CO - OPERATIVE SOCIETY. AS THE ASSESSEE SOCIETY IS A CO - OPERATIVE BANK WITHIN THE MEANING OF EXPLANATION OF SECTION 80P (4) THE BENEFIT UNDER SECTION 80P IS DENIED. AGGRIEVED BY THE SAID ORDERS THE ASSESSEE SOCIETY WENT BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) - I COIMBATORE ON APPEA L RAISING THE FOLLOWING GROUNDS : - I.T.A. NOS. 475 /M/1 2 & 2830/M/14 6 1. THE ASSESSEE THE VEERAKERALAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY IS ENGAGED WITH THE PRIME OBJECTIVE OF PROVIDING AGRICULTURAL CREDIT FACILITIES TO ITS MEMBERS AND ALSO DOING BANKING BUSINESS. THE STAT US OF THE ASSESSEE AS A PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY HAS BEEN AFFIRMED BY THE AUDIT REPORTS OF THE CO - OPERATIVE AUDITOR OF THE TAMIL NADU GOVERNMENT. AT THE OUTSET OF THE ASSESSMENT ORDER IN QUESTION THE ASSESSING OFFICER TREATED AS WELL THE STATUS OF THE ASSESSEE AS PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY FOR THE REASON OF THE FACTS OF THE CASE OF THE ASSESSEE. HOWEVER THE ASSESSING OFFICER ERRED IN DISALLOWING THE DEDUCTION CLAIMED UNDER SECTION 80P BY THE ASSESSEE FOR THE REASON THAT THE ASSESSEE BEING PRIMARY COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING. SUCH A DISALLOWANCE IS NOT BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ASSESSING OFFICER ERR ED IN TREATING ITS INTEREST ETC. ON INVESTMENTS MADE AS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER BANKING BUSINESS. THE JUDICIAL DECISION CITED I.E. M/S.TOTGAR'S COOPERATIVE SALE SOCIETY LIMITED VS ITO 229 CTR 209 (SC) 2010 IS NOT RELEVANT TO THE ASSESSEE'S CASE WHERE THE FACTS ARE ENTIRELY DIFFERENT. ALSO FOR THE ASSESSEE THE ENTIRE INTEREST AND DIVIDEND INCOME ARE DEDUCTIBLE UNDER SECTION 80P(2)(D) ALSO. 3. THE ASSESSING OFF ICER ERRED IN IGNORING THE FACTS AND CIRCUMSTANCES OF THE CASE I.E. PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY DOING BANKING AS ITS PRINCIPAL BUSINESS COMPLYING WITH SECTION 5(CCIV) OF THE BANKING REGULATION ACT 1949 BUT BASED HER ASSESSMENT ON THE STATEMENTS MADE BY THE AUTHORISED REPRESENTATIVE AT THE TIME OF ASSESSMENT PROCEEDINGS. 4. IN THE AFORESAID CIRCUMSTANCES IT IS EARNESTLY PRAYED THAT THE DEDUCTION U/S 80P MAY BE RESTORED IN TOTO I N THE ASSESSMENT AND THE TAX DEMAND RAISED MAY BE NULLIFIED. 4. THE APPELLANT HAS SUBMITTED BEFORE THE COMMISSIONER OF INCOME TAX THAT SECTION 80P WAS AMENDED VIDE FINANCE ACT 2006 WITH EFFECT FROM 01.04.2007 I.E. FROM THE ASSESSMENT YEAR 2008 - 09 ONWARDS. SUB SECTION (4) WAS INTRODUCED UNDER SECTION 80P . THIS SUBSECTION DENIED THE DEDUCTION TO A COOP ERATIVE BANK. TILL THE AMENDMENT OF INTRODUCING SUBSECTION (4) UNDER SECTION 80P THERE WAS NO REQUIREMENT TO ANALYSE AND UNDERSTAND THE VARIOUS TERMS NAMELY BANKING BUSINESS AGRICULTURAL CREDIT SOCIETY PRIMARY COOPERATIVE SOCIETY THE NATURE OF HEAD OF INCOME UNDER WHICH THE INCOME SHOULD BE CATEGORIZED ETC.. THE ASSESSEE IS A I.T.A. NOS. 475 /M/1 2 & 2830/M/14 7 PRIMARY AGRICULTURAL CREDIT SOCIETY WITHIN THE MEANING OF BANK REGULATION ACT 1949. SUBSECTION (CCIV) WHICH HAS BEEN MODIFIED BY SECTION 56 OF THE SAID ACT DEFINES 'THE PRIMARY AGRICULTURAL CREDIT SOCIETY'. IN VIEW OF THE ABOVE DEFINITION THE ASSESSEE SOCIETY PROVIDES FINANCIAL ASSISTANCE ONLY TO ITS MEMBERS FOR AGRICULTURAL AND RELATED PURPOSES. ITS BYELAW DOES NOT PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY AS A MEMBER. ALL THE DEPOSITS IT RECEIVE FROM THE MEMBERS ARE DEPOSITED INTO THE COIMBATORE DISTRICT CENTRAL COOPERATIVE BANK AND THE CREDIT FACILITIES ARE WITHDRA WN FROM THESE ACCOUNTS FOR ITS MEMBERS. THEREFORE THE ASSESSEE SOCIETY IS NOT A COOPERATIVE BANK AS DEFINED UNDER SECTION 5(B) OF THE BANKING REGULATION ACT 1949 WHICH IS EXTRACTED BELOW : - 5(B) - BANKING MEANS THE ACCEPTING FOR THE PURPOSE OF LENDING OR INVESTMENT OF DEPOSITS OF MONEY FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWABLE BY CHEQUE DRAFT ORDER OR OTHERWISE. 5. IT IS FURTHER SUBMITTED THAT WITHOUT LICENSE FROM RESERVE BANK OF INDIA NO PERSON OTHER THAN THE PRIMARY CREDIT SOCIETY CAN CARRY ON THE BUSINESS OF BANKING. THE ASSESSEE SOCIETY IS NOT A PRIMARY CREDIT SOCIETY AND HAS NOT OBTAINED ANY LICENSE FROM RBI AND THE BUSINESS IT CARRIES IS NOT BANKING AS PER T HE BANKING REGULATION ACT . FURTHER THE INTEREST INCOME IS DERIVED FROM INVESTMENT IN A COOPERATIVE SOCIETY AND SO CLAIMED DEDUCTION UNDER SECTION 80 P (2)(D). CONSIDERING THE ABOVE SUBMISSIONS THE APPELLATE AUTHORITY IN ITS ORDER HAS CLEARLY DEFINED THE DIFFERENCE BETWEEN THE COOPERATIVE BANK AND THE COOPERATIVE SOCIETY AND DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE AND GRANTED RELIEF UNDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT. THUS THE APPEAL WAS ALLOWED BY THE APPELLATE AUTHORITY. 6. AGAINST THE AFORESAID ORDER THE REVENUE FILED AN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL AND THE SAID APPEAL WAS ALSO DISMISSED BASED ON THE PROVISIONS OF THE BANKING REGULATION ACT AND THE COOPERATIVE SOCIETIES ACT . THE TRIBUNAL ALSO CONSID ERED THE DECISION RENDERED BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BANGALORE COMMERCIAL TRANSPORT CREDIT CO - OPERATIVE SOCIETY LIMITED IN ITA NO.1069/BANG/2010 RELEVANT TO THE AY 2007 - 08 DECIDED ON 08.04.2011 WHICH WAS SUBSEQUENTLY FOLLOWED BY THE CO - ORDINATE BENCHES OF THE TRIBUNAL AND HELD THAT THE ACTIVITIES ARE NOT REGULATED BY THE RESERVE BANK OF INDIA OR BY THE PROVISIONS OF THE BANKING REGULATION ACT . THEREFORE THE APPEAL FILED BY THE REVENUE WAS DISMISSED BY THE TRIBUNAL. 7. AGGRIEVED WITH THE ABOVESAID ORDERS RENDERED BY THE COMMISSIONER OF INCOME TAX AS WELL AS THE APPELLATE TRIBUNAL THE REVENUE HAS FILED THE INSTANT APPEALS. I.T.A. NOS. 475 /M/1 2 & 2830/M/14 8 8. LEARNED COUNSEL FOR THE APPELLANT WOU LD SUBMIT THAT REVENUE HAS FILED THE INSTANT APPEALS MAINLY ON THE GROUND THAT ALLOWING A CLAIM FOR DEDUCTION ON THE INCOME ARISEN THROUGH BANKING BUSINESS BY THE ASSESSEE SOCIETY IS CONTRARY TO THE PROVISIONS OF LAW WHEN THE DEDUCTION IS ALLOWABLE ONLY FOR PRIMARY AGRICULTURAL CREDIT SOCIETY AND PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK . AND THAT THE DEDUCTION IS NOT ALLOWABLE TO A PRIMARY AGRICULTURAL CREDIT SOCIETY CARRYING ON THE BUSINESS OF BANKING. THE APPELLANT REVENUE HAS RAISED SUCH SUBSTANTIAL QUESTIONS OF LAW IN THE ABOVE APPEALS. 9. LEARNED COUNSEL FOR THE RESPONDENT SUBMITTED THAT THEY ARE A PRIMARY AGRICULTURAL CO - OPERATIVE CREDIT SOCIETY WITHIN THE MEANING OF S ECTION 5 OF BANKING REGULATION ACT 1949. SUBSECTION (CCIV) OF THE SAID SECTION DEFINES THE PRIMARY AGRICULTURAL CREDIT SOCIETY. THE SOCIETY PROVIDES FUNDS ONLY TO ITS MEMBERS AND ITS BYE - LAWS DO NOT ADMIT ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER. THE SUB SECTION (4) OF SECTION 80P PROVIDES THAT DEDUCTION UNDER THE SAID SECTION SHALL NOT BE EXTENDED TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE A GRICULTURAL AND RURAL DEVELOPMENT BANK. 'CO - OPERATIVE BANK' SHALL HAVE ITS MEANING UNDER PART V OF THE BANKING REGULATION ACT 1949. IT IS CLEAR FROM THE ABOVE SAID PROVISIONS OF SUB SECTION 4 OF SECTION 80P THAT THE BENEFIT SHALL NOT BE AVAILABLE TO CO - O PERATIVE BANKS. THERE IS A DIFFERENCE BETWEEN CO - OPERATIVE BANK AND CO - OPERATIVE SOCIETY WHICH ARE REGISTERED UNDER DIFFERENT ACTS. 'CO - OPERATIVE BANKS' ARE GOVERNED BY THE CO - OPERATIVE SOCIETY REGISTERED UNDER THE BANK REGULATION ACT 1949 AND THE AFORES AID REGULATION IS BINDING ON THE CO - OPERATIVE BANKS. WHEREAS THE 'CO - OPERATIVE SOCIETIES' ARE GOVERNED BY THE CO - OPERATIVE SOCIETIES ACT REGISTERED UNDER THE CO - OPERATIVE SOCIETIES ACT AND THE SAME WILL BE GOVERNED BY THE CO - OPERATIVE SOCIETIES ACT 1959. THEREFORE THE INTRODUCTION OF SUBSECTION (4) TO SECTION 80P IS BROUGHT INTO THE STATUE ONLY TO BRING THE COOPERATIVE BANKS ON PAR WITH THE COMMERCIAL BANKS. THEREFORE THE ASSESSEE SOCIETY IS NOT A CO - OPERATIVE BANK BUT A CO - OPERATIVE SOCIETY EXTENDING CREDIT FACILITIES TO ITS MEMBERS. I T IS SUBMITTED THAT IN VIEW OF THE ABOVE THE APPELLATE AUTHORITY AS WELL AS THE APPELLATE TRIBUNAL HAVE RIGHTLY REJECTED THE CONTENTION OF THE REVENUE AND PASSED ORDERS IN FAVOUR OF THE ASSESSEE SOCIETY. 10. HEARD MR.T.R.SENTHIL KUMAR LEARNED SENIOR STANDING COUNSEL FOR THE APPELLANT AND MR. A.R. SRI RAMAN FOR MR. S. SRIDHAR LEARNED COUNSEL FOR THE RESPONDENT. 11. AT THE TIME OF ADMISSION THIS COURT ADMITTED THE INSTANT APPEALS FRAMING THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW : - I.T.A. NOS. 475 /M/1 2 & 2830/M/14 9 1. WHETHER O N THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE TRIBUNAL WAS RIGHT IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION UNDER SECTION 80P(2) OF THE INCOME TAX ACT TO THE ASSESSEE WHO IS PRI MARILY ENGAGED IN LENDING LOANS FOR NON AGRICULTURAL PURPOSES? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEE S CLAIM FOR DEDUCTION IS NOT RESTRICTED BY SECTION 80P (4) OF THE INCOME TAX ACT ? 12. THE ASSESSEE SOCIETY PRIMARILY REGISTERED AS VEERAKERALAM PRIMARY AGRICULTURAL CO - OPERATIVE BANK LTD. UNDER THE TAMILNADU CO - OPERATI VE SOCIETIES ACT 1964 SUBSEQUENTLY IN 1968 HAS CHANGED ITS NAME AS VEERAKERALAM PRIMARY AGRICULTURAL CO - OPERATIVE CREDIT SOCIETY . THE ASSESSEE CLAIMS TO BE A PRIMARY AGRICULTURAL CREDIT SOCIETY ENGAGED PRIMARILY IN THE PRINCIPLE BUSINESS OF PROVIDI NG FINANCIAL ASSISTANCE TO ITS MEMBERS DURING THE ASSESSMENT YEARS 2008 - 2009 2009 - 2010 AND 2010 - 2011. THE MEMBERS OF THE SOCIETY ARE AGRICULTURISTS AND ARE GOVERNED BY THE TAMIL NADU CO - OPERATIVE SOCIETIES ACT 1964. A CO - OPERATIVE BANK AS DEFINED IN SECTION 5(CCI) OF THE BANKING REGULATION ACT 1949 MEANS A PRIMARY CO - OPERATIVE BANK. A PRIMARY CO - OPERATIVE BANK IS A CO - OPERATIVE SOCIETY OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY. THEREFORE A PR IMARY AGRICULTURAL CREDIT SOCIETY NEED NOT BE TREATED AS A PRIMARY CO - OPERATIVE BANK. THE TERMS CO - OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY FOR THE PURPOSE OF SUBSECTION (4) OF SECTION 80P ACT SHALL HAVE THE MEANINGS AS ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT 1949; GOING BY EXPLANATION (A) OCCURRING AFTER SECTION 80P(4) . FOR THE PURPOSE OF THAT SUB - SECTION PRIMA RY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK IS DEFINED TO MEAN WHAT IS STATED IN EXPLANATION (B) TO SECTION 80P (4) OF THE INCOME TAX ACT . THEREFORE PRIMARY AGRICULTURAL CREDIT SOCIETY MEANS A CO - OPERATIVE SOCIETY . 13. SUB - SECTION (4) OF SECTION 80P OF THE INCOME TAX ACT 1961 IS EXTRACTED BELOW: (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. EXPLANATION - FOR THE PURPOSES OF THIS SUB - SECTION (A) CO - OPERATIVE BANK AND PR IMARY AGRICULTURAL CREDIT SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT 1949 (10 OF 1949); I.T.A. NOS. 475 /M/1 2 & 2830/M/14 10 (B) PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERA TION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG - TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. IT IS SEEN THAT THE PRIMARY OBJECT OF THE SOCIETY IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS TO ME ET ALL THE AGRICULTURAL REQUIREMENTS AND TO PROVIDE CREDIT FACILITIES TO THE MEMBERS AS PER THE BYE - LAWS AND AS LAID DOWN IN SECTION 5 (CCIV) OF THE B ANKING REGULATION ACT 1949. FURTHER FROM THE CPT CIRCULAR DATED 12.03.2008 IT IS EVIDENT THAT A CREDIT CO - OPERATIVE SOCIETY IS NOT A CO - OPERATIVE BANK AS DEFINED IN PART V OF THE BANKING REGULATION ACT 1949. THE OBJECT OF A CO - OPERATIVE BANK IS TO ACCEPT DEPOSITS FROM THE PUBLIC FOR LENDING OR INVESTMENT OF MONEY. ON PERUSAL OF THE FINDINGS OF THE APPELLATE AUTHORITY AS WELL AS THE APPELLATE TRIBUNAL IT IS CATEGORICALLY MADE CLEAR THAT THE ASSESSEE SOCIETY WILL NOT COME UNDER THE OBJECT OF THE PRI NCIPAL BUSINESS OF A CO - OPERATIVE BANK WHICH IS A BANKING BUSINESS. THE BENEFIT OF SECTION 80P IS EXCLUDED FOR DEDUCTIONS BY CO - OPERATIVE BANKS WHEREAS THE PRIMARY AGRICULTURAL CREDIT SOCIETIES ARE EN TITLED FOR THE SAID DEDUCTION. 14. THE ASSESSEE SOCIETY DOES NOT SATISFY THE OBJECT AS DEFINED UNDER SECTION 5(CCIV) OF THE BANKING REGULATION ACT 1949 FOR BECOMING A CO - OPERATIVE BANK. THE DECISIO NS ACIT VS. M/S. BANGALORE COMMERCIAL TRANSPORT CREDIT CO - OPERATIVE SOCIETY LTD. IN ITA NO.1069/BANG/2010 (AY 2007 - 08) DECIDED ON 08.04.2011 ITO VS. M/S. YESWANTHPUR CREDIT CO - OPERATIVE SOCIETY LTD . IN ITA NO.737/BANG/2011 (AY 2007 - 08) DECIDED ON 11.04.2012 ITO VS. THE KASIPALAYAM PRIMARY AGRICULTURAL CO - OPERATIVE BANK LTD. IN ITA NO.174/MDS/2013 DECIDED ON 23.08.2013 AND ALSO THE RECENT JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD . DECIDED ON 15.01.2014 REPORTED AS 2014 (2) TMI 28 WERE RELIED UPON BY THE ASSESSEE SOCIETY BEFORE THE TRIBUNAL. BY CONSIDERING THE AFORESAID DECISIONS THE APPEAL WAS REJECTED BY THE TRIBUNAL AND HELD THAT THE SUBSECTION 4 OF SECTION 80 P OF THE INCOME TAX ACT WILL NOT BE APPLICABLE TO THE ASSESSEE SOCIETY SINCE IT IS NOT A CO - OPERATIVE BANK. THEREFORE IT IS MAD E CLEAR THAT THE ASSESSEE SOCIETY IS ADMITTEDLY NOT A CO - OPERATIVE BANK BUT A CREDIT CO - OPERATIVE SOCIETY. 15. IN THE RECENT DECISION OF THE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERA TIVE BANK LTD. KANNUR VS. THE COMMISSIONER OF INCOME TAX REPORTED IN (2016) 68 TAXMANN.COM.298 (KERALA) THE HIGH COURT CONSIDERED SIMILAR SUBSTANTIAL QUESTIONS OF LAW (ISSUE NO.A) RAISED BY THE ASSESSEE REGARDING THE ENTITLEMENT FOR EXEMPTION UNDER SU B SECTION (4) OF SECTION 80P . BY CONSIDERING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL SOCIETY THE KERALA HIGH COURT HAS ANSWERED THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE ASSESSEE AN D I.T.A. NOS. 475 /M/1 2 & 2830/M/14 11 HELD 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. THEREFORE THE AFORESAID DECISIONS IS APPLICABLE TO THE INSTANT CASE. 1 6. IN THE LIGHT OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE SUBSTANTIAL QUESTION OF LAW FRAMED IN THE INSTANT APPEALS IS ANSWERED AGAINST THE REVENUE. THE EXCEPTION BARRED OUT IN SECTION 80P (4) OF THE INCOME TAX ACT 1961 IS APPLICABLE TO THE ASSESSEE CREDIT SOCIETY. HENCE THE APPEALS ARE ACCORDINGLY DISMISSED. 9. RESPECTFULLY FOLLOWING THE ABOVE DECISION O F THE HON BLE JURISDICTIONAL HIGH COURT THE DISALLOWANCE MADE UNDER SECTION 80P(4) OF THE ACT IS HEREBY DELETED. THUS THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 10. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO SUSTAINING THE DISALLOWANC E OF PROVISION MADE FOR BAD DEBTS. THE ASSESSEE MADE A PROVISION FOR BAD DEBTS AMOUNTING TO .79 85 573/ - AND VIDE ITS LETTER DATED 09.10.2010 THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT FOLLOWS THE GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA TO BE FOLLOWED BY ALL SCHEDULED COMMERCIAL BANKS FOR INCOME RECOGNITION. HOWEVER THE ASSESSING OFFICER MADE DISALLOWANCE OF THE PROVISION MADE FOR BAD DEBTS ON THE GROUND THAT IT WAS NOT WRITTEN OFF IN THE ACCOUNTS. BEFORE THE LD. CIT(A) THE ASSESSEE HAS SUBMITTED THAT AS PER THE PRACTICE OF COOPERATIVE SOCIETIES WITHOUT ALTERING TH E INDIVIDUAL ACCOUNTS A PROVISION IS MADE INSTEAD OF WRITING OFF IN THE ACCOUNTS AND PLEADED THAT THE ADDITION UNDER THIS HEAD IS NOT WARRANTED. THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE IS COOPERATIVE SOCIETY AND NOT A SCHEDULED COMMERCIAL BANK TO FO LLOW RBI GUIDELINES FOR INCOME RECOGNITION AND MOREOVER BAD DEBT IS ALLOWABLE UNDER SECTION 36(1)(VII) ONLY IF THE ASSESSEE IS I.T.A. NOS. 475 /M/1 2 & 2830/M/14 12 WRITTEN OFF THE BAD DEBTS AS IRRECOVERABLE IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR IN WHICH THE CLAIM FOR DEDUCTION WA S MADE HE CONFIRMED THE DISALLOWANCE OF THE CLAIM OF PROVISIONS FOR BAD DEBT MADE BY THE ASSESSING OFFICER. THE RELEVANT PROVISIONS OF SECTION 36(1)(VII) OF THE ACT IS REPRODUCED HEREUNDER: (VII) SUBJECT TO THE PROVISIONS OF SUB - SECTION (2) THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE DURING THE PREVIOUS YEAR: FROM THE ABOVE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT IT IS VERY CLEAR THAT THE BAD DEBT IS ALLOWABLE ONLY IF IT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF THE ASSESSEE. THEREFORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS RIGHTLY CONFIRMED BY THE LD. CIT(A) AND WE FIND NO REASON TO INT ERFERE WITH THE ABOVE FINDINGS OF THE LD. CIT(A). THUS THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. I.T.A. NO. 2830/MDS/2014 [A.Y. 2007 - 08] 11. THE ASSESSEE HAS RAISED FOLLOWING EFFECTIVE GROUNDS: (I) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISA LLOWANCE OF THE CLAIM OF DEDUCTION UNDER SECTION 80P(4) OF THE INCOME TAX ACT. (II) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR BONUS AND EX - GRATIA AS WELL AS THE PROVISION FOR GRATUITY FOR THE PURPOSE OF COMPUTATION OF TAXABL E INCOME. (III) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. (IV) THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ORDER OF REASSESSMENT UNDER CONSIDERATION WAS PASS ED OUT OF TIME INVALID PASSED WITHOUT JURISDICTION AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. I.T.A. NOS. 475 /M/1 2 & 2830/M/14 13 11.1 FOR THE ASSESSMENT YEAR 2007 - 08 THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 16.04.2008 ADMITTING INCOME OF .1 21 040/ - AFTER CLAIMING DEDUCTION UNDER SECTION 80P OF THE ACT TO AN EXTENT OF .1 92 61 501/ - . THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 BY ISSUE OF NOTICE UNDER SECTION 148 DATED 15.02.2012. THEREAFTER NOTICE UNDER SECTION 143(2) OF TH E ACT DATED 01.02.2013 WAS ISSUED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT AFTER MAKING VARIOUS ADDITIONS. IT IS NOT CLEAR FROM THE ASSESSMENT ORDER AS TO WHETHER PROPER NOT ICES HAVE BEEN SERVED ON THE ASSESSEE BEFORE REOPENING OF ASSESSMENT OR ASSESSEE S OBJECTION IF ANY HAS BEEN CONSIDERED BY THE ASSESSING OFFICER OR NOT. 11.2 ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE HAS RAISED VARIOUS GROUNDS WHICH WAS DULY REPR ODUCED IN THE APPELLATE ORDER DATED 08.09.2014 IN WHICH SPECIFIC GROUND HAS BEEN RAISED BY THE ASSESSEE THAT (1) THE ORDER OF THE LEARNED INCOME TAX OFFICER U/S 143(3) IS NOT LEGAL AND PROPER CONSIDERING THE FACT AND CIRCUMSTANCES OF THE CASE . HOWEVER THE LD. CIT(A) HAS NOT ADJUDICATED THIS LEGAL ISSUE OF REOPENING OF ASSESSMENT AND PROCEEDED TO DECIDE THE DISALLOWANCE MADE UNDER SECTION 80P(4) OF THE ACT. UNDER THESE FACTS AND CIRCUMSTANCES WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND REMIT TH E MATTER BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE LEGAL ISSUE AFTER GIVING SUFFICIENT OPPORTUNITIES OF HEARING TO THE ASSESSEE. IN PURSUANCE TO THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. VEERAKERALAM PRIMARY AG RICULTURAL COOPERATIVE CREDIT SOCIETY IN I.T.A. NOS. 475 /M/1 2 & 2830/M/14 14 T.C.A. NOS. 735 755 OF 2014 AND 460 OF 2015 VIDE ORDER DATED 05.07.2016 THE COMPLETE ORDER IS REPRODUCED HEREINABOVE FOR READY REFERENCE AS WELL AS THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSE SSMENT YEAR 2008 - 09 DECIDED HEREINABOVE THE LD. CIT(A) IS DIRECTED TO DECIDE OTHER ISSUES AFRESH BY PASS ING A SPEAKING ORDER. THUS THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 12 . IN THE RESULT THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09 IS PARTLY ALLOWED AND THE APPEAL FOR THE ASSESSMENT YEAR 2007 - 08 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 26 TH OCTOBER 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDD Y ) JUDICIAL MEMBER CHENNAI DATED THE 26 . 1 0 .201 6 VM/ - / COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR & 6. / GF.