S 1911 A.N.Pudur PACCS Ltd., Salem V. ITO Ward 2(3), Salem

CO 180/CHNY/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3549 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 18-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Search and seizure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , , $ BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 2327/CHNY/2017 / ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER, WARD-1(4), SALEM. VS. M/S. S. 681 CHINNATHIRUPATHI PACB LIMITED , CHINNATHIRUPATHI, SALEM 636008. [PAN: AAATT 5833A] ( / APPELLANT) ( / RESPONDENT) REVENUE BY : SHRI SHAJI P JACOB, ADDL. CIT ASSESSEE BY : SHRI A.S. SRIRAMAN, ADVOCATE /. I.T.A. NO. 2331/CHNY/2017 & CO NO. 180/CHNY/2017 / ASSESSMENT YEAR: 2014-15 INCOME TAX OFFICER, WARD-2(3), SALEM. VS. M/S. S. 1911, A.N. PUDUR PACCS LTD., A.N. MANGALAM POST, SALEM 636 106 [PAN: AAEAS 8711R] ( / APPELLANT) ( CROSS OBJECTOR/ RESPONDENT) REVENUE BY : SHRI SHAJI P JACOB, ADDL. CIT ASSESSEE BY : SHRI M. NARAYANAN, RTD. ADDL. CIT :-2-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 /. I.T.A. NO. 2332/CHNY/2017 / ASSESSMENT YEAR: 2014-15 INCOME TAX OFFICER, WARD-2(1), SALEM. VS. M/S. S. 1234 UDYAPATTI PACCS LTD., UDAYAPATTI P.O., SALEM 636 140. [PAN: AAFAS 8771G] ( / APPELLANT) ( / RESPONDENT) REVENUE BY : SHRI SHAJI P JACOB, ADDL. CIT ASSESSEE BY : SHRI M. BALU, CA ITP + /DATE OF HEARING : 07.02.2018 + /DATE OF PRONOUNCEMENT : 27.03.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: ITA NO. 2327/2017 IS THE APPEAL FILED BY THE R EVENUE AGAINST THE ORDER OF THE CIT(A), SALEM IN ITA NO: 173/2016-17 D ATED 20.06.2017 FOR ASSESSMENT YEAR 2011-12. ITA NO. 2331/2017 IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), SALEM IN I TA NO: 179/2016-17 DATED 21.06.2017 FOR ASSESSMENT YEAR 2014-15, WHILE , THE ASSESSEE FILED THE CO NO. 180/CHNY/2017 FOR THE SAME ASSESSMENT YEAR. ITA NO. 2332/2017 IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER O F THE CIT(A), SALEM IN ITA NO: 207/2016-17 DATED 22.06.2017 FOR ASSESSMENT YEA R 2014-15. :-3-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 2. ALL THE ABOVE ASSESSEES ARE PRIMARY AGRICULTURA L CO-OPERATIVE CREDIT SOCIETY REGISTERED UNDER TAMILNADU CO-OPERATIVE SOC IETIES ACT, 1983. ALL OF THEM CLAIMED DEDUCTION U/S. 80P(2)(A)(I). IN ALL T HESE CASES, WHILE THE MAKING THE ASSESSMENTS FOR THE RESPECTIVE ASSESSMEN T YEARS, THE AO ANALYSED THE PROVISIONS OF THE STATE CO-OPERATIVE A CT, EXAMINED THE BOOKS OF ACCOUNTS AND FOUND THAT THE SOCIETY HAD ADVANCED LO ANS TO NON-VOTING/NON- PROFIT SHARING MEMBERS AND EARNED PROFIT FROM THEM. HOWEVER, THE PROFIT WAS SHARED ONLY WITH THE VOTING MEMBERS/SHAREHOLDING ME MBERS, HENCE, PRINCIPLES OF MUTUALITY DID NOT EXIST AMONG ALL TH E CLASSES OF MEMBERS AND ACCORDINGLY HELD THAT EACH OF THE ASSESSEE IS NOT E LIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) AND COMPLETED THE RESPECTIVE ASSESSMEN TS. AGGRIEVED, EACH OF THE ASSESSEE FILED APPEALS BEFORE THE CIT(A) . THE CIT (A) ALLOWED EACH OF THE APPEAL. AGGRIEVED, THE REVENUE FILED THE ABOVE APPEALS AGAINST ALL THE ABOVE CASES .M/S. S. 1911, A.N. PUDUR PACCS LTD. AL ONE FILED A CO. SINCE THE ISSUES INVOLVED ARE COMMON FOR ALL OF THEM , ALL THESE APPEALS ARE HEARD TOGETHER AND DISPOSED TOGETHER FOR CONVENIENCE SAK E . 3. THE DR SUBMITTED THAT AN ASSESSEE WOULD BE ELIGI BLE FOR RELIEF ONLY IF IT FALLS WITHIN TWO CATEGORIES OF CO-OPERATIVE BANKS I .E., 'PRIMARY AGRICULTURAL CO- OPERATIVE SOCIETY' AND 'PRIMARY CO- OPERATIVE AQRIC ULTURAL AND RURAL DEVELOPMENT BANK'. FROM THE DETAILS FURNISHED BY T HE ASSESSES AND ON GOING THROUGH THE BOOKS ETC. THE FOLLOWING FACTS EMERGED: :-4-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 (A). EVEN THOUGH THE BANK IS REGISTERED AS A PRIMAR Y AGRICULTURE CO- OPERATIVE SOCIETY, IT HAS NOT CARRIED OUT ANY ACTIVITIES IN C ONNECTION WITH THE AGRICULTURE ACTIVITIES/PURPOSES AS PROVIDED UNDER EXPLANATIONS OF SECTION 80(P)(4). THE ACTIVITY OF THE BANK IS ENTIRELY THAT OF COMMERCIAL BANKING AND IT HAS EARNED INTEREST INCOME AT PAR WITH OTHER COMMERCIAL BANKS. DURING THE FINANCIAL YEAR RELEVANT TO THE ABOVE ASSESSMENT YEAR, THE SOCIETY HAS ADVANCED LOANS, WHICH INCLUDES JEWEL LOANS, PAY LOAN, MICROCREDIT LOANS, DEPOSIT LOANS, CONSUMER LOANS, SHORT- TERM LOANS, HOUSING LOAN ETC. ON PERU SAL OF THE JEWEL LOAN APPLICATIONS, WHICH IS THE MAJOR CHUNK OF LENDING O F THE ABOVE BANK, IT IS NOTED THAT ALL SUCH LOANS HAVE BEEN GIVEN FOR THE P URPOSES OTHER THAN AGRICULTURAL ACTIVITIES. THIS IS PURELY A COMMERCIA L BANKING ACTIVITY. FURTHER, DURING THE COURSE OF HEARING, IT WAS STATED THAT TH E RATE OF INTEREST DURING THE PERIOD RELEVANT TO THE ABOVE ASSESSMENT YEAR ON VAR IOUS LOANS IS 12% TO 14% WHICH IS AT PAR WITH OTHER COMMERCIAL BANKS. FOR AG RICULTURAL ACTIVITY, THE SOCIETY HAS TO CHARGE INTEREST AT THE RATE NOT ABOV E 7 % WHEREAS THE PREVAILING RATE IS 12% TO 14%. (B). THE CIRCUMSTANCES CLEARLY INDICATE THAT THE AC TIVITIES OF THE SOCIETY ARE NEVER INTENDED TO HELP THE AGRICULTURISTS BY PROVID ING CHEAP MONEY FOR PROMOTION OF AGRICULTURE. THE ACTIVITIES ARE CLEARL Y CARRIED OUT WITH PROFIT MOTIVE. MERELY NAMING THE SOCIETY AS 'PRIMARY AGRIC ULTURE CO-OPERATIVE SOCIETY' IS NOT SUFFICIENT FOR CLAIMING DEDUCTION U NDER SECTION 80P(2)(A)(1), BUT THE PRINCIPAL OR PREDOMINANT ACTIVITIES OF THE BANK SHOULD BE IN CONNECTION :-5-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 WITH AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTE D WITH AGRICULTURAL ACTIVITIES. CONSIDERING THE ABOVE DISCUSSIONS, IT I S HELD THAT THE BANK IS NOT ELIGIBLE FOR CLAIMING DEDUCTIONS UNDER THE PROVISIO NS OF THE SECTION 80P(2)(A)(I). (C) SEC.80P(2)(A)(I) PROVIDES FOR DEDUCTION TO A S OCIETY ENGAGED IN CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO I TS 'MEMBERS'. HERE THE 'MEMBER' MEANS 'SHARE-HOLDING MEMBERS' (ALSO CALLED A-CLASS MEMBER) ONLY. ON PERUSAL OF THE DETAILS OF INTEREST INCOME, IT IS SEEN THAT A MAJOR PORTION OF THE INTEREST RECEIPTS ARE ON ACCOUNT OF JEWEL LOAN GRANTED TO 'ASSOCIATE MEMBERS' (ALSO CALLED B-CLASS MEMBERS). ANYONE CAN BECOME AN ASSOCIATE MEMBER OF THE SOCIETY ON PAYMENT OF A NOMINAL TOKEN FEE. THE 'ASSOCIATE MEMBERS' ARE NOT ENTITLED TO RECEIVE ANY DIVIDEND O R HAVING ANY VOTING RIGHTS AND ALSO DO NOT HAVE ANY RIGHT TO PARTICIPATE IN GE NERAL ADMINISTRATION AND TO ATTEND ANY MEETING ETC. ONLY A-CLASS MEMBERS ARE AL LOWED THE ABOVE PRIVILEGES. B-CLASS MEMBERS ARE ADMITTED FOR THE LI MITED PURPOSE OF AVAILING LOANS ONLY. SUBSEQUENTLY, ON DISCHARGING OF THEIR L OAN LIABILITY, THEY SIMPLY RELINQUISH THEIR MEMBERSHIP AND DO NOT HAVE ANY FUR THER ROLE TO PLAY IN THE SOCIETY. ON THE OTHER HAND, SHARE-HOLDING MEMBERS A RE ENJOYING ALL THESE RIGHTS IN ADDITION TO OTHER RIGHTS AND LIABILITIES' IN THE SOCIETY AS SPECIFIED IN THE BYE-LAW. 'ASSOCIATE MEMBERS' CANNOT BE REGARDED AS MEMBERS OF THE SOCIETY. (D) THE CO-OPERATIVE SOCIETIES FUNCTION UNDER THE STATE CO-OPERATIVE SOCIETIES ACT. IN THE STATE CO-OPERATIVE SOCIETIES ACT, THE WORD 'MEMBER' IS :-6-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 USED IN VARIOUS SECTIONS, TO MEAN 'SHARE-HOLDING ME MBERS' ONLY. SECTION 2(7) OF STATE CO-OPERATIVE SOCIETIES ACT DEFINES 'ASSOCI ATE MEMBER' AS THE 'ONE WHO POSSESS ONLY SUCH PRIVILEGES AND RIGHTS AND SUB JECT TO ONLY SUCH LIABILITIES AS MAY BE SPECIFIED IN THE BYE-LAWS'. AS PER THE BY E-LAW OF THE SOCIETY, THE DIFFERENCE IN RIGHT AND PRIVILEGE BETWEEN THE SHARE HOLDING MEMBER AND ASSOCIATE MEMBER CAN BE DISTINGUISHED AS BELOW: PARTICULARS MEMBER ASSOCIATE MEMBER PAYMENT TOWARDS SHARE CAPITAL YES NO RIGHT TO VOTE YES NO RIGHT TO BE AN OFFICE BEARER YES NO RIGHT TO PARTICIPATE IN GENERAL BODY YES NO RIGHT TO PROFITS OR LOSSES YES NO RIGHT OVER THE ASSETS OF THE SOCIETY YES NO RIGHT TO REFUND THE MEMBERSHIP FEE PAID YES NO PERIOD UPTO WHICH MEMBERSHIP IS VALID TILL THE DEATH OR TILL SUCH PERIOD THE MEMBERSHIP IS NOT REVOKED DUE TO INSOLVENCY, INSANITY ETC., MEMBERSHIP IS VALID UP TO A PERIOD OF 3 YEARS OR TILL THE EXISTENCE OF LOAN WHICHEVER IS EARLIER RENEWAL OF MEMBERSHIP YES NO FROM THE ABOVE, IT IS CLEAR THAT THE ASSOCIATE ME MBER IS ADMITTED IN TO THE SOCIETY FOR THE PURPOSE OF AVAILING LOAN AND DON'T HAVE ANY OTHER RIGHTS /OBLIGATIONS AS ENDOWED TO A 'MEMBER. THE DR RELI ED ON THE DECISION OF THE HONBLE SC IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LIMITED, THROUGH ITS MANAGING DIRECTOR, HYDERABAD VS ACIT DATED 08.0 8.2017 IN CIVIL APPEAL NO. 10245 OF 2017. PER CONTRA, THE ARS SUBMITTED T HAT THE CIT(A) IS RIGHT IN :-7-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 HOLDING THAT THE ASSESSEES ARE ENTITLED FOR DEDUCTI ON U/S. 80P(2)(A)(I). AS PER SECTION 2(16) OF THE TAMILNADU CO-OPERATIVE SOCIETI ES ACT, 1983, MEMBER MEANS A PERSON JOINING IN THE APPLICATION FOR THE R EGISTRATION OF A SOCIETY AND A PERSON ADMITTED TO THE MEMBERSHIP AFTER REGISTRAT ION IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, THE RULES AND BY-LAWS INCLU DES AN ASSOCIATE MEMBERS. IT ENVISAGES THE ASSOCIATE MEMBER ENROLLED AS PER BYE LAW IS A MEMBER. THUS, THE RESPONDENT SOCIETY HAS BEEN ENGAGED IN CA RRYING OUT BUSINESS OF CREDIT FACILITIES TO ITS MEMBERS. SINCE, THE RESPO NDENT SOCIETY HAS SATISFIED THIS CONDITION, IT BECOMES ELIGIBLE FOR THE DEDUCTI ON U/S. 80P(2)(A)(I). THE SOCIETY ACCEPTS DEPOSITS ONLY FROM MEMBERS WHO SHAL L BE REGULAR MEMBERS HAVING VOTING RIGHTS AND THE ASSOCIATE MEMBERS WHO ARE MEMBERS WITHOUT VOTING RIGHTS RESPECTIVELY AND THE MOST IMPORTANT F ACT TO BE UNDERSTOOD WAS THE SOCIETY DOES NOT ACCEPT ANY DEPOSITS FROM GENER AL PUBLIC OTHER THAN ITS MEMBERS AND THE ASSOCIATE MEMBERS. IT IS NOT DOING ANY BANKING BUSINESS, NOR IT HAS ANY LICENSE FROM RBI. SINCE, THE ASSOC IATE MEMBER SHALL BE CONSTRUED AS A MEMBER AS PER SECTION 2(16) OF THE TN CO-OPERATIVE SOCIETIES ACT, ALL THE DEPOSITORS AND THE BORROWERS OF THE RESPONDENT SOCIETY ARE HAVING A CAPACITY AND CHARACTERS OF EITHER MEMB ERS OR ASSOCIATE MEMBERS, EXCEPT IN TERMS OF THE VOTING RIGHTS, AND HENCE THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80P(2)(A)(I). FURTHER, THE ARS TRIED TO DISTINGUISH THE RATIO OF THE SUPREME COURT RELIED ON BY THE DR. :-8-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 4. WE HEARD THE RIVAL SUBMISSIONS. THE AO ANALYSED THE PROVISIONS OF THE STATE CO-OPERATIVE ACT AND FOUND THAT THE 'ASSOCIAT E MEMBERS' ARE NOT ENTITLED TO RECEIVE ANY DIVIDEND OR HAVING ANY VOTI NG RIGHTS, THEY DO NOT HAVE ANY RIGHT TO PARTICIPATE IN GENERAL ADMINISTRATION AND TO ATTEND ANY MEETING ETC. ONLY A-CLASS MEMBERS ARE ALLOWED THE ABOVE PRI VILEGES. B-CLASS MEMBERS ARE ADMITTED FOR THE LIMITED PURPOSE OF AVAILING LO ANS ONLY. SUBSEQUENTLY, ON DISCHARGING OF THEIR LOAN LIABILITY, THEY SIMPLY RE LINQUISH THEIR MEMBERSHIP AND DO NOT HAVE ANY FURTHER ROLE TO PLAY IN THE SOCIETY . ON THE OTHER HAND, SHARE- HOLDING MEMBERS ARE ENJOYING ALL THESE RIGHTS IN AD DITION TO OTHER RIGHTS AND LIABILITIES' IN THE SOCIETY AS SPECIFIED IN THE BYE -LAW. 'ASSOCIATE MEMBERS' CANNOT BE REGARDED AS MEMBERS OF THE SOCIETY ETC , AS EXTRACTED SUPRA , IN A TABLE FORM. THE AO EXAMINED THE BOOKS OF ACCOUNTS A ND FOUND THAT THE SOCIETY HAD ADVANCED LOANS TO NON-VOTING/NON-PROFIT SHARING MEMBERS AND EARNED PROFIT FROM THEM. HOWEVER, THE PROFIT WAS S HARED ONLY WITH THE VOTING MEMBERS/SHAREHOLDING MEMBERS AND HENCE, PRINCIPLES OF MUTUALITY DID NOT EXIST AMONG ALL THE CLASSES OF MEMBERS AND ACCORDIN GLY HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2) (A)(I) AND COMPLETED THE RESPECTIVE ASSESSMENTS. THESE FINDINGS HAVE NOT BEE N DISPUTED. THUS, WHEN THE PROFITS OF THE ASSESSEES ARE NOT SHARED WITH AS SOCIATE MEMBERS AS IS DONE WITH THE MEMBERS, IT IS CLEAR THAT THESE ASSESSEES CASES FAIL ON THE PRINCIPLES OF MUTUALITY. LET US EXAMINE THE RELEVANT PORTION OF THE DECISION OF THE SUPREME COURT IN THE CASE OF THE CITIZEN CO-OPERATI VE SOCIETY LIMITED, :-9-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 THROUGH ITS MANAGING DIRECTOR, HYDERABAD VS ACIT DA TED 08.08.2017 IN CIVIL APPEAL NO. 10245 OF 2017, RELIED ON BY THE DR, AS U NDER: 23) WITH THE INSERTION OF SUB-SECTION (4) BY THE FINANCE ACT, 2006, WHICH IS IN THE NATURE OF A PROVISO TO THE AFORESAID PROVISION, IT IS MADE CLEAR THAT SUCH A DEDUCTION SHALL NOT BE ADMISSIBLE TO A CO-OPERATIVE BANK. HOWEVER, IF IT IS A PRIMARY AGRICULTURE CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURE AND R URAL DEVELOPMENT BANK, THE DEDUCTION WOULD STILL BE PROVIDED. THUS, CO-OPERATIVE BANKS A RE NOW SPECIFICALLY EXCLUDED FROM THE AMBIT OF SECTION 80P OF THE ACT. 24) UNDOUBTEDLY, IF ONE HAS TO GO BY THE AFORESAID DEFINITION OF 'CO-OPERATIVE BANK', THE APPELLANT DOES NOT GET COVERED THEREBY. IT IS A LSO A MATTER OF COMMON KNOWLEDGE THAT IN ORDER TO DO THE BUSINESS OF A CO-OPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENCE FROM THE RESERVE BANK OF INDIA, WHICH THE APPELLANT DOES NOT POSSESS. NOT ONLY THIS, AS NOTICED ABOVE, THE RESERVE BANK OF INDIA HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE APPELLANT DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. THE APPELLANT, THEREFORE, WOULD NOT COME WITHIN THE MISCHIEF OF SUB-SECTION ( 4) OF SECTION 80P. 25) SO FAR SO GOOD. HOWEVER, IT IS SIGNIFICANT TO POINT OUT THAT THE MAIN REASON FOR DISENTITLING THE APPELLANT FROM GETTING THE DEDUCTI ON PROVIDED UNDER SECTION 80P OF THE ACT IS NOT SUB-SECTION (4) THEREOF. WHAT HAS BEEN N OTICED BY THE ASSESSING OFFICER, AFTER DISCUSSING IN DETAIL THE ACTIVITIES OF THE APPELLAN T, IS THAT THE ACTIVITIES OF THE APPELLANT ARE IN VIOLATIONS OF THE PROVISIONS OF THE MACSA UNDER WHICH IT IS FORMED. IT IS POINTED OUT BY THE ASSESSING OFFICER THAT THE ASSESSEE IS CATERING TO TWO DISTINCT CATEGORIES OF PEOPLE. THE FIRST CATEGORY IS THAT OF RESIDENT MEMBERS OR O RDINARY MEMBERS. THERE MAY NOT BE ANY DIFFICULTY AS FAR AS THIS CATEGORY IS CONCERNED . HOWEVER, THE ASSESSEE HAD CARVED OUT ANOTHER CATEGORY OF 'NOMINAL MEMBERS'. THESE ARE TH OSE MEMBERS WHO ARE MAKING DEPOSITS WITH THE ASSESSEE FOR THE PURPOSE OF OBTAI NING LOANS, ETC. AND, IN FACT, THEY ARE NOT MEMBERS IN REAL SENSE. MOST OF THE BUSINESS OF THE APPELLANT WAS WITH THIS SECOND CATEGORY OF PERSONS WHO HAVE BEEN GIVING DEPOSITS W HICH ARE KEPT IN FIXED DEPOSITS WITH A MOTIVE TO EARN MAXIMUM RETURNS. A PORTION OF THES E DEPOSITS IS UTILISED TO ADVANCE GOLD LOANS, ETC. TO THE MEMBERS OF THE FIRST CATEGORY. I T IS FOUND, AS A MATTER OF FACT, THAT HE DEPOSITORS AND BORROWERS ARE QUIET DISTINCT. IN REA LITY, SUCH ACTIVITY OF THE APPELLANT IS THAT OF FINANCE BUSINESS AND CANNOT BE TERMED AS CO -OPERATIVE SOCIETY. IT IS ALSO FOUND THAT THE APPELLANT IS ENGAGED IN THE ACTIVITY OF GR ANTING LOANS TO GENERAL PUBLIC AS WELL. ALL THIS IS DONE WITHOUT ANY APPROVAL FROM THE REGISTRA R OF THE SOCIETIES. WITH INDULGENCE IN SUCH KIND OF ACTIVITY BY THE APPELLANT, IT IS REMAR KED BY THE ASSESSING OFFICER THAT THE ACTIVITY OF THE APPELLANT IS IN VIOLATION OF THE CO -OPERATIVE SOCIETIES ACT. MOREOVER, IT IS A :-10-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 CO-OPERATIVE CREDIT SOCIETY WHICH IS NOT ENTITLED T O DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 26) IT IS IN THIS BACKGROUND, A SPECIFIC FINDING I S ALSO RENDERED THAT THE PRINCIPLE OF MUTUALITY IS MISSING IN THE INSTANT CASE. THOUGH TH ERE IS A DETAILED DISCUSSION IN THIS BEHALF IN THE ORDER OF THE ASSESSING OFFICER, OUR P URPOSE WOULD BE SERVED BY TAKING NOTE OF THE FOLLOWING PORTION OF THE DISCUSSION: 'AS VARIOUS COURTS HAVE OBSERVED THAT THE FOLLOWING THREE CONDITIONS MUST EXIST BEFORE AN ACTIVITY COULD BE BROUGHT UNDER THE CONCE PT OF MUTUALITY; THAT NO PERSON CAN EARN FROM HIM; THAT THERE A PROFIT MOTIVATION; AND THAT THERE IS NO SHARING OF PROFIT. IT IS NOTICED THAT THE FUND INVESTED WITH BANK WHIC H ARE NOT MEMBER OF ASSOCIATION WELFARE FUND, AND THE INTEREST HAS BEEN EARNED ON SUCH INVESTMENT FOR EXAMPLE, ING MUTUAL FUND [AS SAID BY THE MD VID E HIS STATEMENT DATED 20.12.2010]. [THOUGH THE BANK FORMED THE THIRD PART Y VIS-A-VIS THE ASSESSEE ENTITLED BETWEEN CONTRIBUTOR AND RECIPIENT IS LOST IN SUCH CASE. THE OTHER INGREDIENTS OF MUTUALITY ARE ALSO FOUND TO BE MISSI NG AS DISCUSSED IN FURTHER PARAGRAPHS]. IN THE PRESENT CASE BOTH THE PARTIES TO THE TRANSAC TION ARE THE CONTRIBUTORS TOWARDS SURPLUS, HOWEVER, THERE ARE NO PARTICIPATOR S IN THE SURPLUSES. THERE IS NO COMMON CONSENT OF WHATSOEVER FOR PARTICIPATORS AS T HEIR IDENTITY IS NOT ESTABLISHED. HENCE, THE ASSESSEE FAILS TO SATISFY T HE TEST OF MUTUALITY AT THE TIME OF MAKING THE PAYMENTS THE NUMBER IN REFERRED AS ME MBERS MAY NOT BE THE MEMBER OF THE SOCIETY AS SUCH THE AOP BODY BY THE S OCIETY IS NOT COVERED BY CONCEPT OF MUTUALITY AT ALL.' 27) THESE ARE THE FINDINGS OF FACT WHICH HAVE REMA INED UNSHAKEN TILL THE STAGE OF THE HIGH COURT. ONCE WE KEEP THE AFORESAID ASPECTS IN MIND, THE CONCLUSION IS OBVIOUS, NAMELY, THE APPELLANT CANNOT BE TREATED AS A CO-OPE RATIVE SOCIETY MEANT ONLY FOR ITS MEMBERS AND PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. WE ARE AFRAID SUCH A SOCIETY CANNOT CLAIM THE BENEFIT OF SECTION 80P OF THE ACT. 28) THIS APPEAL, THEREFORE, FAILS AND IS HEREBY D ISMISSED WITH COSTS. 5. FROM THE ABOVE, IT IS CLEAR THAT THE HONBLE SUP REME COURT REJECTED THE ABOVE ASSESSEES CLAIM HOLDING THAT THE PRINCIPLES O F MUTUALITY WAS MISSING IN THAT CASE. ALTHOUGH, BOTH THE MEMBERS TO THE TRANS ACTIONS OF THESE ASSESSEES :-11-: ITA NOS.2327, 2331 & 2332/CHNY/2017 & CO NO. 180/CHNY/2017 ARE THE CONTRIBUTORS TOWARDS SURPLUS, HOWEVER, THE ASSOCIATE MEMBERS ARE NOT ENTITLED TO THE BENEFITS OF SURPLUS OF THESE AS SESSEES AND HENCE, THE PRINCIPLES OF MUTUALITY IS MISSING IN THESE CASES. THESE ASSESSEES CANNOT BE TREATED AS A CO-OPERATIVE SOCIETY MEANT ONLY FOR IT S MEMBERS AND PROVIDING CREDIT FACILITY TO ITS MEMBERS AND HENCE THEY ARE N OT ENTITLED TO THE BENEFIT OF SECTION 80P(2)(A)(I) OF THE ACT. THE REVENUES AB OVE APPEALS ARE ALLOWED AND THE CO IS DISMISSED. 6. IN THE RESULT, THE REVENUES APPEALS IN ITA NOS. 2327, 2331&2332/CHNY/2017 ARE ALLOWED AND CO FILED BY THE ASSESSEE IN 180/CHNY/2017 IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 27 TH DAY OF MARCH, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) '# /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 27 TH MARCH, 2018 JPV +23454 /COPY TO: 1. 6/ APPELLANT 2. 286 /RESPONDENT 3. 9 ) (/CIT(A) 4. 9 /CIT 5. 42 /DR 6. /GF