LLANDAND BANKBANK JOURNALJOURNAL VOLUME 54 DECEMBER 2015 ISSUE III NATIONAL CO-OPERATIVE AGRICULTURE AND RURAL DEVELOPMENT BANKS' FEDERATION LTD. Volume 54 Issue III LAND BANK JOURNAL (QUARTERLY) DECEMBER 2015 K. K. RAVINDRAN Managing Editor Published by: NATIONAL CO-OPERATIVE AGRICULTURE AND RURAL DEVELOPMENT BANKS' FEDERATION LIMITED 701, BSEL TECH PARK, 7th Floor, A-Wing, Opp. Railway Station, Vashi, Navi Mumbai-400 703 Phone No. (022) 27814114, 27814226, 27814426 E-mail : [email protected] Website : www.nafcard.org ! Price ` 15/- per copy CONTENTS Editorial I Innovative banking model of Primary Agricultural Credit Society (PACS) in Malappuram District, Kerala 1 - Dr P Selvaraj Feasibility analysis of areca nut + pepper mixed cropping system in Karnataka 13 - Praveen kumbar - S. S.Guledgudda - R. B. Belli - B. C. Rajur Influence of phosphorus and mycorrhizae on root colonization and spore count at different stages of sugarcane crop 27 - T. Usha Rani - D. Balaguravaiah - M. Bharata laxmi Biofertilizers: An eco-friendly fertilizer for agriculture 36 - Pavithra, A.H - Priya H.R - Avinalappa H.H - Nandini R. Social inclusion for rediscovery to new social order 43 - Brij Pal News & Notes 47 Agricultural News 69 The opinions/views expressed in the Land Bank Journal are not necessarily the official views of the National Cooperative Agriculture & Rural Development Banks' Federation. december 2015 land bank journal I EDITORIAL Section 80(P) of Income Tax Act 1961 gives income tax exemption to cooperatives. In 2008 Government amended this section by adding subsection 4 to it. The new subsection states that provisions in section 80(P) shall not apply to a 'cooperative bank' within its meaning as given in the BR Act 1949 except in the case of a Primary Agricultural Credit Society and a Primary Cooperative Agriculture & Rural Development Bank with jurisdiction not more than one taluk. Obvious purpose of subsection 4 is to exclude cooperative banks from the benefit of tax exemption as provided under section 80(P). However, when this subsection states that cooperative banks except a Primary ARDB with jurisdiction not more than one taluk, it implies that a Primary ARDB is also a cooperative bank coming under BR Act which is not correct. It appears that those who drafted this provision committed the mistake of presuming that ARDB is also a bank like a State Cooperative Bank, District Cooperative Bank or an Urban Cooperative Bank and therefore made an exception in the case of Primary ARDB only. It is an error of giving exception from a sector to an entity which does not belong to that sector. In other words, when subsection 4 deals with cooperative banks, an exception to this provision can be given only to an entity which is part of cooperative banks. BR Act defines a cooperative bank either as a State Cooperative Bank, District Central Cooperative Bank or a Primary Cooperative Bank (Urban Cooperative Banks). Moreover, BR Act itself makes a distinction between a Cooperative Bank and a Land Mortgage Bank (by which name ARDBs were known at the time of enacting BR Act). Section 56(c) of BR Act says that cooperative credit societies also include land mortgage banks. This implies that every Land Mortgage Bank irrespective of primary or apex is a cooperative credit society as defined december 2015 land bank journal II in section 5 (cci) of BR Act. Though the Federation had pointed out the drafting error in subsection 4 giving exception to Primary ARDB from cooperative banks as defined in BR Act to which a Primary ARDB does not belong, soon after the Budget, no action was taken by the Government to rectify the error. This has led to a large number of disputes between Income Tax Department and ARDBs across the nation. Income Tax Department started sending assessment notice to SCARDBs taking a view that all types of ARDBs except Primary ARDBs with jurisdiction not more than one taluk belong to the category of cooperative banks as per subsection 4 and therefore are excluded from tax exemption under section 80(P). SCARDBs in most of the States could convince income tax department of their status as cooperative credit society as per the definition of the cooperative credit society given in BR Act. However, in Kerala the matter could not be settled at the level of Department or Tribunal and went to the High Court which equated Kerala SCARDB with State Cooperative Bank for the purpose of applicability of subsection 4 in its final judgement. It is seen that the decision of High Court equating Kerala SCARDB with a State Cooperative Bank as defined in BR Act was the result of inept handling of the case by Bank's counsels right from the appellate level of income tax department. On Bank's appeal against the order of High Court, the Supreme Court of India has now given an interim order restraining income tax department from any action to recover tax from the bank till final decision on the appeal petition. K. K. Ravindran Managing Editor december 2015 land bank journal 1 Innovative banking model of Primary Agricultural Credit Society (PACS) in Malappuram District, Kerala. Dr P Selvaraj* Introduction Rural Banks (RRBs) but is a Banks play a crucial role in the herculean challenge for Cooperative socio economic development of any Banks. country. Though the Koudilya Arthasastra speaks about existence 2. Grass root level Cooperative of banking practises in India, the Institutions first bank, namely Bank of Bengal A co-operative institution which is was established in 1706. The sector a n a u t o n o m o u s d e m o c r a t i c has becomemore dynamic in recent association, is based on the self-help years. “India’s banking sector is set responsibility, equity and solidarity to transformative changes in the and believes in the ethical values, coming future accompanied by a social commitment of caring for pulsating derivatives market and IT- others. They are more than 100 years induced banking” says RBI Governor old in our country. As can be seen Dr. Raghuram Rajan. We are seeing from Annexure-1 the co-operative emergence of new institutions like Credit structure comprises of urban payments banks, small finance co-operative banks and rural co- banks etc., making the environment. operative Banks. Urban co- Now, every branch of the banks has operative banks consist of a single to prove their worth through fast and tier, namely Urban Co-operative quality services to retain the Banks (UCBs). The rural co- customers and have an eye on their operative credit structure has profitability also for survival. traditionally been bifurcated in to 2 Technological innovations has made parallel wings, ie., short-term and life of customers easier and hence long-term structures. Short-term co- faster and comfortable services operative credit institutions have a become order of the day. Customers federal 3-tier structure consisting of especially young customers, today a large number of Primary will walk into a bank only if there is Agricultural Credit Societies (PACS) ATM Card, Internet Banking, mobile at the grass-root level, District banking, Credit Card, Plastic money, Central Co-operative Banks (DCCBs) e - m o n e y e t c . T h e s e a r e at the district level and State Co- comparatively easy for the newly operative Banks (StCBs) at the started banks and even resource rich state/apex level. The long-term rural commercial banks and Regional co-operative structure has 2 tiers, * Deputy General Manager & faculty Member, Bankers Institute of Rural Development, a training establishment of NABARD in Mangalore, Karnataka. december 2015 land bank journal 2 n a m e l y S t a t e C o - o p e r a t i v e Loans; 96% preferring NBFCs for Agriculture and Rural Development Gold Loans; 97% had seriously Banks (SCARDBs) at the state level concern about safety and security in a n d P r i m a r y C o - o p e r a t i v e a Cooperative Bank and 95% had Agriculture and Rural Development reservations on technology banking B a n k s ( P C A R D B s ) a t t h e by Cooperative Bank. But today, due taluka/tehsil level. to the innovative business approach adopted, by designing products 3. PACSs in Kerala based on customer demand, the face In Kerala, where the cooperatives of the bank has changed to as a are very strong and vibrant, the p r o f i t - m a k i n g , p o p u l a r a n d PACS are also called as Banks. technology bank in the State. This During the year 2002 as many as PACS has become a successful ......banks (PACSs) were started in replicable model for similar the name of Service Cooperative institutions in the country, proving banks / Cooperative Rural Banks as the fact that new business approach per registered rules 15(11(A) 3(a), by and changed mindset is the need of the Kerala State government. One the hour for all banks and more s u c h b a n k i s T h e n h i p a l a m particularly for cooperative banks. Cooperative Rural Bank called TCR Bank located at Kohinoor village, 4. NABARD’s Farmers Club T h e n h i p a l a m p a n c h a y a t o f F a r m e r s c l u b , a c o n c e p t Malappuram district of Kerala.