M/s. AA-534 Sinniampalayam Primay Agricultural, Erode V. ACIT, Erode

CO 170/CHNY/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9807 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: S SRIDHAR
• Keywords: Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1838/MDS/2013 & C.O. NO. 170/MDS/2013 ( IN ITA NO. 1838/MDS/2013 ) ASSESSMENT YEAR : 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX , CIRCLE -II, ERODE VS M/S.AA-534 SINNIAMPALAYAM PRIMARY AGRICULTURAL CO-OP. SOCIETY, 2/15, SINNIAMPALAYAM, ERODE-638 104 [PAN: AAAAT 5153 C] (APPELLANT) (RESPONDENT/CROSS OBJECTOR) REVENUE BY : SHRI GURU BHASHYAM , J CIT ASSESSEE BY : SHRI S.SRIDHAR, ADVOCATE / DATE OF HEARING : 18-08-2014 / DATE OF PRONOUNCEMENT : 18-08-2014 #% / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-I, COIMBATOR E DATED 10-07-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 9-10. I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 2 -: 2. IN APPEAL, THE REVENUE HAS ASSAILED THE FINDINGS OF CIT(APPEALS) IN HOLDING THAT THE ASSESSEE IS ELIGIB LE FOR CLAIMING DEDUCTION U/S.80P(4) OF THE INCOME TAX ACT, 1961 (H EREIN AFTER REFERRED TO AS THE ACT) AND IN DELETING THE DIS-A LLOWANCE MADE BY ASSESSING OFFICER U/S.80P(2)(A)(I) OF THE ACT. THE ASSESSEE HAS FILED CROSS-OBJECTIONS SUPPORTING THE FINDINGS OF CIT(APPEALS). 3. THE FACTS AS EMANATING FROM THE RECORDS ARE AS U NDER: THE ASSESSEE IS A PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY REGISTERED UNDER THE TAMIL NADU CO-OPERATIV E SOCIETIES ACT, 1983 (HEREIN AFTER REFERRED TO AS THE SOCIETI ES ACT). THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY UNDE R CONSIDERATION ON 23-09-2009 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF ` 44,52,103/- U/S.80P(2) OF THE ACT. THE ASSESSING O FFICER IN ASSESSMENT PROCEEDINGS HELD THAT ALTHOUGH THE ASSES SEE IS REGISTERED AS PRIMARY AGRICULTURAL CO-OPERATIVE CRE DIT SOCIETY BUT IN FACT THE ASSESSEE IS A CO-OPERATIVE BANK AND IS ENGAGED IN THE ACTIVITIES SIMILAR TO COMMERCIAL BANKING AND IS EAR NING INCOME AT PAR WITH COMMERCIAL BANKS. THE ASSESSEE WAS IN FAC T A PRIMARY I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 3 -: AGRICULTURE CO-OPERATIVE BANK. DURING FY.2008-09, THE ASSESSEE CHANGED ITS NAME AND NOMENCLATURE TO PRIMARY AGRICU LTURE CO- OPERATIVE CREDIT SOCIETY FOR CLAIMING DEDUCTION U/S .80P(2) OF THE ACT. THE ASSESSING OFFICER FURTHER HELD THAT THE A SSESSEE IS EXTENDING DIFFERENT TYPES OF LOANS AND ADVANCES TO NON-MEMBERS FOR NON-AGRICULTURAL ACTIVITIES. THEREFORE, THE AS SESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S.80P(2) OF THE ACT. THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 80P(2)(A)(I) . THE ASSESSING OFFICER MADE ADDITION OF ` 20,20,293/- IN THE INCOME RETURNED BY THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDER DT.15-12-2011, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS ). THE CIT(APPEALS) VIDE IMPUGNED ORDER HELD THAT THE ASSE SSEE IS NOT A CO-OPERATIVE BANK, THEREFORE, THE ASSESSEE WILL NOT FALL WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 80P(4). THE CIT (APPEALS) FURTHER DELETED THE DIS-ALLOWANCES MADE BY ASSESSIN G OFFICER U/S.80P(2)(A)(I) AND ALLOWED THE APPEAL OF THE ASSE SSEE. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 4 -: 4. SHRI S.SRIDHAR, APPEARING ON BEHALF OF THE ASSES SEE AT THE OUTSET SUBMITTED THAT THE CASE OF THE ASSESSEES IS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.292/MDS/2014 IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CRE DIT SOCIETY LTD., VS. ITO DECIDED ON 17-03-2014. IN THE SAID CASE, THE TRIBUNAL HAS HELD THAT FOR AVAILING DEDUCTION U/S.8 0P, CLASSIFICATION OF MEMBERS AS A AND/OR B IS IRRELEVANT. THE SA ID DECISION IS CONSISTENTLY BEING FOLLOWED BY THE TRIBUNAL IN VARI OUS SUBSEQUENT SIMILAR CASES. 5. ON THE OTHER HAND, SHRI GURU BHASHYAM, APPEARING ON BEHALF OF THE REVENUE REITERATED THE GROUNDS RAISED IN THE APPEAL AND STRONGLY SUPPORTED THE ASSESSMENT ORDER. THE L D.DR PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER AND RESTORING THE FINDINGS OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECI SIONS ON WHICH I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 5 -: THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE . THE REVENUE IN ITS APPEAL HAS IMPUGNED THE FINDINGS OF CIT(APPEALS) FOR ACCEPTING THE CLAIM OF ASSESSEE AND ALLOWING DE DUCTION U/S.80P. THE CIT(APPEALS) IN HIS ORDER HAS HELD TH AT THE ASSESSEE-SOCIETY IS NOT A CO-OPERATIVE BANK, THEREF ORE, THE PROVISIONS OF SECTION 80P(4) ARE NOT ATTRACTED. TH E CIT(APPEALS) HAS FURTHER DELETED DIS-ALLOWANCE MADE BY THE ASSES SING OFFICER IN RESPECT OF DEDUCTION U/S. 80P(2)(A)(I) FOR THE R EASONS THAT THE ASSESSEE-SOCIETY IS NOT CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ALONE. 7. WE FIND THAT THE ISSUE IN APPEAL IS SQUARELY COV ERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N ITA NO.292/MDS/2014 IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY LT D., VS. ITO (SUPRA). THE TRIBUNAL IN THE SAID CASE HAS HELD: 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, THE CI T(A) HAS PROCEEDED TO ENHANCE THE ASSESSMENT(SUPRA) ONLY ON THE GROUND THAT THE ASSESSEES CREDIT AND VARIOUS OTHER LOAN FACILITIES HAVE BEEN ALLOWED TO BE AVAILED BY B C LASS NOMINAL MEMBERS WHOSE LIABILITY IS LIMITED, AT TH E BEST; TO I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 6 -: THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS M EMBERS WHO HAVE VOTING RIGHTS AND DIVIDEND CLAIM, AND ALSO THAT THE LATTER MEMBERS ARE JOINTLY AND SEVERELY LIABLE. IN THIS BACKDROP, WHEN WE PERUSE THE RELEVANT PROVISIONS OF THE STATE CO-OPERATIVE SOCIETIES ACT, 1983, GOVERNING T HE ASSESSEE-SOCIETY, IT IS EVIDENT FROM THE DEFINITION OF MEMBER U/S 2(16) THAT THE SAME INCLUDES AN ASSOCIATE MEMB ER U/S 2(6) APPENDED THEREIN. IN OTHER WORDS, THE NOMINAL MEMBERS ALSO ENJOY STATUTORY RECOGNITION AS PER THE ACT. THE NET RESULT IS THAT ONCE THE NOMINAL MEMBERS OR NO N-VOTING MEMBERS ARE THEMSELVES INCLUDED IN THE DEFINITION O F MEMBERS, THEY SATISFY THE RELEVANT CONDITION IMPO SED BY THE LEGISLATURE U/S 80P(2)(A)(I). WE MAKE IT CLEAR THAT WE ARE DEALING WITH A DEDUCTION PROVISION TO BE INTERPRETE D LIBERALLY. IN OUR CONSIDERED OPINION, THE OBJECTIONS OF THE RE VENUE THAT THE MEMBERS DEFINED IN SUB-CLAUSE(I) OF SECTION 8 0P(2) SHOULD ONLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A CLASSIFICATION WITHIN CLASSIFICATION WHICH IS BEYON D THE PURVIEW OF TAX STATUTE; UNLESS PROVIDED SPECIFICALLY BY THE LEGISLATURE. MOREOVER, WE FIND THAT THE CASE LAW OF HON'BLE PUNJ AB & HARYANA HIGH COURT (SUPRA) ALSO SUPPORTS THE ASSESS EES CASE WHEREIN IT HAS BEEN HELD UNDER THE VERY PROVIS ION THAT FOR THE PURPOSE OF IMPUGNED DEDUCTION, IT IS IRRELE VANT SO FAR AS CLASSIFICATION OF THE MEMBERS IN A OR B CATE GORY IS CONCERNED. WE FOLLOW THE SAME AND ACCEPT CONTENTION S OF THE ASSESSEE. 8. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARIMOMIN VIKAS CO-OP. CREDIT SOCIETY LTD., DECIDED ON I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 7 -: 15-01-2014 WHILE DEALING WITH A SIMILAR ISSUE HAD H ELD THAT THE PROVISIONS OF SECTION 80P(4) WOULD NOT APPLY TO CRE DIT CO-OPERATIVE SOCIETIES. THE HON'BLE COURT HELD: 4. AS PER SECTION 80P(4), THE PROVISIONS OF SECTI ON 80P WOULD NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER TH AN PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. AS PER THE EXPLANATION, THE TERMS 'CO- OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL CREDIT SO CIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949. 5. ASSESSING OFFICER HELD THAT BY VIRTUE OF SECTION 80P(4), THE RESPONDENT ASSESSEE WOULD NOT BE ENTITLED TO BENEFI TS OF DEDUCTION UNDER SECTION 80P. CIT(APPEALS) AS WELL AS THE TRIB UNAL REVERSED THE DECISION OF THE ASSESSING OFFICER ON THE PREMIS E THAT THE RESPONDENT ASSESSEE NOT BEING A BANK, EXCLUSION PRO VIDED IN SUB- SECTION(4) OF SECTION 80P WOULD NOT APPLY. THIS, IR RESPECTIVE OF THE FACT THAT THE RESPONDENT WOULD NOT FALL WITHIN THE EXPRESSION 'PRIMARY AGRICULTURAL CREDIT SOCIETY'. 6. HAD THIS BEEN THE PLAIN STATUTORY PROVISIONS UND ER CONSIDERATION IN ISOLATION, IN OUR OPINION, THE QUESTION OF LAW COUL D BE STATED TO HAVE ARISEN. WHEN, AS CONTENDED BY THE ASSESSEE, BY VIRT UE OF SUB- SECTION(4) ONLY CO-OPERATIVE BANKS OTHER THAN THOSE MENTIONED THEREIN WERE MEANT TO BE EXCLUDED FOR THE PURPOSE O F DEDUCTION UNDER SECTION 80P, A QUESTION WOULD ARISE WHY THEN LEGISLATURE SPECIFIED PRIMARY AGRICULTURAL CREDIT SOCIETIES ALO NG WITH PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANKS FOR EXCLUSION I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 8 -: FROM SUCH EXCLUSION AND IN OTHER WORDS, CONTINUED T O HOLD SUCH ENTITY AS ELIGIBLE FOR DEDUCTION. HOWEVER, THE ISSU E HAS BEEN CONSIDERABLY SIMPLIFIED BY VIRTUE OF CBDT CIRCULAR NO.133 OF 2007 DATED 9.5.2007. CIRCULAR PROVIDES AS UNDER:- 'SUBJECT: CLARIFICATION REGARDING ADMISSIBLY OF DED UCTION UNDER SECTION 80P OF THE INCOME-TAX ACT, 1961. 1. PLEASE REFER TO YOUR LETTER NO.DCUS/30688/2007, DATED 28.03.2007 ADDRESSED TO CHAIRMAN, CENTRAL BOARD OF DIRECT TAXES, ON THE ABOVE GIVEN SUBJECT. 2. IN THIS REGARD, I HAVE BEEN DIRECTED TO STATE TH AT SUB-SECTION(4) OF SECTION 80P PROVIDES THAT DEDUCTION UNDER THE SAID SECTION SHALL NOT BE ALLOWABLE TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATI VE AGRICULTURAL AND RURAL DEVELOPMENT BANK. FOR THE PURPOSE OF THE SAID SUB-SECTION, CO-OPERATIVE BANK SHALL HAVE THE MEANING ASSIGNED T O IT IN PART V OF THE BANKING REGULATION ACT, 1949. 3. IN PART V OF THE BANKING REGULATION ACT, 'CO-OPE RATIVE BANK' MEANS A STATE CO-OPERATIVE BANK, A CENTRAL CO-OPERA TIVE BANK AND A PRIMARY CO-OPERATIVE BANK. 4. THUS, IF THE DELHI CO OP URBAN T & C SOCIETY LTD . DOES NOT FALL WITHIN THE MEANING OF 'CO-OPERATIVE BANK' AS DEFINE D IN PART V OF THE BANKING REGULATION ACT, 1949, SUB- SECTION(4) O F SECTION 80P WILL NOT APPLY IN THIS CASE. 5. THE ISSUES WITH THE APPROVAL OF CHAIRMAN, CENTRA L BOARD OF DIRECT TAXES.' 7. FROM THE ABOVE CLARIFICATION, IT CAN BE GATHERED THAT SUB- SECTION(4) OF SECTION 80P WILL NOT APPLY TO AN ASSE SSEE WHICH IS NOT A CO-OPERATIVE BANK. IN THE CASE CLARIFIED BY CBDT, D ELHI COOP URBAN THRIFT & CREDIT SOCIETY LTD. WAS UNDER CONSIDERATIO N. CIRCULAR CLARIFIED THAT THE SAID ENTITY NOT BEING A CO- OPER ATIVE BANK, SECTION I.T.A. NO. 1838/MDS/13 & C.O. NO. 170/MDS/13 :- 9 -: 80P(4) OF THE ACT WOULD NOT APPLY TO IT. IN VIEW OF SUCH CLARIFICATION, WE CANNOT ENTERTAIN THE REVENUE'S CONTENTION THAT S ECTION 80P(4) WOULD EXCLUDE NOT ONLY THE CO-OPERATIVE BANKS OTHER THAN THOSE FULFILLING THE DESCRIPTION CONTAINED THEREIN BUT AL SO CREDIT SOCIETIES, WHICH ARE NOT CO- OPERATIVE BANKS. IN THE PRESENT C ASE, RESPONDENT ASSESSEE IS ADMITTEDLY NOT A CREDIT CO-OPERATIVE BA NK BUT A CREDIT CO- OPERATIVE SOCIETY. EXCLUSION CLAUSE OF SUB-SECTION( 4) OF SECTION 80P, THEREFORE, WOULD NOT APPLY. IN THE RESULT, TAX APPE ALS ARE DISMISSED. IN VIEW OF THE AFORESAID DECISIONS, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF FIRST APPELLATE AUTHORITY. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSED A ND THE CROSS-OBJECTIONS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON MONDAY, THE 18 TH AUGUST, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT / JUDICIAL MEMBER /CHENNAI, /DATED: 18 TH AUGUST, 2014 TNMM !'#$ %&$ /COPY TO: 1. %'#() /APPELLANT 2. !*() /RESPONDENT 3. + (%'#) /CIT(A) 4. + /CIT 5. $./' !01 /DR 6. /23 4# /GF