Metro City Criminal Courts Employees Mutually Aided Co-op Credit Society Ltd., Hyderabad, Hyderabad V. ACIT, Circle-7(1), Hyderabad, Hyderabad

ITA 1581/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2300 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L R AMJI RAO
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Source of fund; Condonation of delay
• Section: 143(3)

Judgement Text

ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS.1581 & 1582/HYD/2016 (ASSESSMENT YEARS: 2012-13 & 2013-14) METRO CITY CRIMINAL COURTS EMPLOYEES MUTUALLY AIDED COOP. CREDIT SOCIETY LTD HYDERABAD PAN: AAABM 0284 E VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 7(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD FOR REVENUE : SHRI L. RAMJI RAO, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. BOTH THE ABOVE APPEALS ARE FILED BY THE ASSESSEE FO R THE A.YS 2012-13 & 2013-14 RESPECTIVELY. AT THE OUT SET IT IS NOTICED THAT THERE IS A DELAY OF 9 DAYS IN FILING O F THE ABOVE APPEALS AND THE ASSESSEE HAS FILED AN APPLICATION F OR CONDONATION OF DELAY ALONG WITH AN AFFIDAVIT OF THE COUNSEL FOR THE ASSESSEE, SHRI K.A. SAI PRASAD. IT IS STATED IN THE AFFIDAVIT THAT THE PAPERS OF THE ASSESSEES SOCIETY ALONG WITH CHALLANS WERE HAN DED OVER TO HIM ON 14/11/2016 BUT TO MISPLACEMENT OF THE RELEVA NT PAPERS IN HIS OFFICE, THE APPEAL COULD BE FILED ONLY ON 24 .11.2016 CAUSING A DELAY OF 9 DAYS. DATE O F HEARING : 25.07.2017 DATE OF PRONOUNCEMENT : 31.07.2017 ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 2 OF 9 2. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE ABOVE. WE HAVE GONE THROUGH THE CO PY OF THE CHALLANS AND FIND THAT THE PAYMENT OF APPEAL FEE WA S MADE ON 12.11.2016. THEREFORE, WE ACCEPT THE CONTENTIONS OF THE ASSESSEE AND CONDONE THE DELAY OF 9 DAYS IN FILING OF THE AP PEAL BEFORE US. 3. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CI T (A) IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED U/ S 80P OF THE I.T. ACT OF RS.2,08,70,799. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A COOPERATIVE SOCIETY DERIVING INCOME FROM THE ACTIVI TY OF PROVIDING CREDIT FACILITIES TO THE MEMBERS/NOMINAL MEMBERS, F ILED ITS RETURN OF INCOME FOR THE RELEVANT A.Y. DURING THE ASSESSMEN T PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASS ESSEE HAS ADMITTED NOMINAL MEMBERS IN VIOLATION OF THE RULES OF THE A.P. COOPERATIVE SOCIETIES ACT, 1964 AND FURTHER BY ACCE PTING THE DEPOSITS FROM THE NOMINAL MEMBERS, BUT NOT ALLOWING ANY LOANS TO THESE PEOPLE, THERE IS NO CO-OPERATIVE SPIRIT FOLLO WED BY THE ASSESSEE. HE THEREFORE, DISALLOWED THE CLAIM OF DED UCTION U/S 80P OF THE ACT AND BROUGHT THE ENTIRE AMOUNT TO TAX. AG GRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO DISMISSED THE SAME AND FURTHER AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI K.A. SAI PRASAD, SUBMITTED THAT THE ASSESSEE IS A REGISTERED COOPERATIVE SOCIETY AND HAS BEEN CARRYING ON THE BUSINESS OF BA NKING AND IS ALLOWING CREDIT FACILITY TO ITS MEMBERS. HE SUBMITT ED THAT THERE ARE ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 3 OF 9 THREE CATEGORIES OF MEMBERS I.E. (I) PERMANENT MEMB ERS; (II) ASSOCIATE MEMBERS & (III) NOMINAL MEMBERS. HE SUBMI TTED THAT THE NOMINAL MEMBERS ARE THE SURITIES OF THE ACCUSED FACING TRIALS BEFORE THE CRIMINAL COURTS, WHO DEPOSIT THE SURETY AMOUNT AS PRESCRIBED BY THE CRIMINAL COURT BY WAY OF FIXED DE POSITS AS THE CREDIT SOCIETY IS WITHIN THE COURT PREMISES. HE SUB MITTED THAT THE DEPOSITS SO COLLECTED FROM THE MEMBERS ARE USED FOR GIVING HOUSING LOANS/EDUCATION LOANS ETC., TO THE PERMANEN T MEMBERS BUT NO SUCH FACILITY IS EXTENDED TO THE NOMINAL MEM BERS AS NO RECOVERY CAN BE MADE FROM SUCH MEMBERS. HE SUBMITTE D THAT ONLY THE INTEREST INCOME RECEIVED FROM THE PERMANEN T MEMBERS AND ALSO THE INTEREST INCOME FROM OTHER COOPERATIVE SOCIETIES WITH WHOM THE ASSESSEE HAS DEPOSITED ITS FUNDS, HAS BEEN CLAIMED AS A DEDUCTION U/S 80P OF THE ACT. HE SUBMITTED THAT SIM ILAR ISSUE HAD ARISEN IN THE CASE OF RANGA REDDY JUDICIAL EMPLOYEE S MUTUALLY AIDED CO-OPERATIVE CREDIT SOCIETY LTD AND THE COORD INATE BENCH OF THIS TRIBUNAL VIDE ORDERS DATED 4.3.2015 AS REPO RTED IN (2015) 60 TAXMANN.COM 261 HAS CONSIDERED THE ISSUE AT LENG TH AND HAS ALLOWED THE APPEAL. HE ALSO PLACED RELIANCE UPON TH E DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SALEM AGRICULTURAL COOPERATIVE MARKETING SOCIETIES LTD WHEREIN SIMILAR ISSUE HAS BEEN CONSIDERED AND ALLOWED. THE OTHER DECISIONS RE LIED UPON BY HIM ARE AS UNDER: (I) ACIT VS. METROCITY CRIMINAL COURTS EMPLOYEES MUTUALLY AIDED COOPERATIVE CREDIT SOCIETY LTD (ITA NOS.1328, 1329 & 1330/HYD/2012 DATED 4.3.2015). (II) ACIT VS. THE ADVOCATES MUTUALLY AIDED COOP SOC IETY HYDERABAD (ITA NO.546, 547 & OTHERS DATED 20.02.2015) ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 4 OF 9 (III) ORDER BY THE CIT (A)-VI HYDERABAD DATED 28.12 .2011 IN THE CASE OF R.R. DISTT. JUDICIAL EMPLOYEES MUTUA LLY AIDED COOP. CREDIT SOCIETY LTD. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PLACED STRONG R ELIANCE ON THE FINDINGS OF THE CIT (A). 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE VERY SAME ISSUE HAD ARI SEN IN THE CASE OF RANGA REDDY JUDICIAL EMPLOYEES MUTUALLY AIDED CO OP. CREDIT SOCIETY LTD (CITED SUPRA) AND AT PARA 4 TO 11, THE COORDINATE BENCH OF THIS TRIBUNAL HELD AS UNDER: 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) H AVING NOTICED THAT THE ASSESSEE IS REGISTERED UNDER APMAC S ACT AND BYE LAWS PERMIT ACCEPTANCE OF DEPOSITS FROM THE NON-MEM BERS ALSO DID NOT FIND ANY MERIT IN THE ASSESSING OFFICER'S CONTE NTIONS. SINCE MOBILISATION OF FUNDS IS PERMITTED UNDER SECTION 14 (2) OF APMACS ACT, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS O F THE OPINION THAT MOBILISING FUNDS FROM OUTSIDERS IS NOT A VIOLA TION OF THE PROVISIONS OF GOVERNING ACT I.E., APMACS ACT. EVEN OTHERWISE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HELD T HAT THE ACCEPTANCE OF DEPOSITS FROM NON-MEMBERS CANNOT SAID TO DISQUALIFY THE ASSESSEE FROM THE BENEFITS OF SECTION 80P. SINC E SECTION 80P(2)(A)(I) SPECIFIES ONLY THAT THE ASSESSEE SHOUL D BE ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ; WHAT SHOULD BE THE SOURCE OF FUNDS OF SUCH CREDIT IS NOT SPECIFIED IN THE SECTION. THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) ALSO HELD THAT THE PRINCIPLE OF MUTUALITY RELIED ON BY T HE ASSESSING OFFICER IS NOT RELEVANT TO THE FACTS OF THE ASSESSE E'S CASE AS THE ASSESSEE HAS NOT CLAIMED ANY EXEMPTION ON ACCOUNT O F MUTUALITY. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AL SO HELD THAT THERE IS NO BAR TO CATEGORISE OF MEMBERS AS GENERAL , NOMINAL AND ASSOCIATE. BY VIRTUE OF SECTION 19(3) OF THE ACT, T HE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS OF THE OPI NION THAT THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS OF APMACS ACT AND ALSO NOT COVERED BY THE BANKING REGULATION ACT AS THE AS SESSEE IS NOT ENGAGED IN BANKING ACTIVITY BUT ONLY PROVIDING CRED IT FACILITIES TO ITS MEMBERS. ANALYSING THE ISSUE IN DETAIL, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE ASSESSEE IS E LIGIBLE FOR ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 5 OF 9 DEDUCTION UNDER SECTION 80P(2)(A)(I) ON ITS PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FA CILITIES TO ITS MEMBERS. THEREAFTER, THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS) WENT ON TO CALCULATE THE ELIGIBLE DEDUCTI ON VIDE PARA 9.1 AND DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTI ON UNDER SECTION 80P(2)(A)(I) AT RS. 14,66,822 AND SECTION 80P(2)(D) OF RS. 14,61,250 IN THE ASSESSMENT YEAR 2008-09. SIMILARLY , IN OTHER YEARS ALSO, THE DEDUCTIONS WERE QUANTIFIED AND DIRECTED T O BE ALLOWED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN THE ORD ER. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS COMMONLY F OR THE ASSESSMENT YEARS 2008-09 AND 2009-10 : '1. THE OBSERVATION OF THE LEARNED COMMISSIONER OF INCO ME- TAX (APPEALS) THAT THE ASSESSEE IS A CO- OPERATIVE SOCIETY DOES NOT EMANATE FROM THE ASSESSM ENT ORDER AS SHE HAS FAILED TO GIVE A CLEAR FINDING WHETHER THE ASSE SSEE IS A COOPERATIVE SOCIETY THOUGH IT HA S VIOLATED THE PRINCIPLES OF THE ANDHRA PRADESH MUT UALLY AIDED COOPERATIVE SOCIETIES ACT (APMACSA), 1995. 2. THE OBSERVATION OF THE COMMISSIONER OF INCOME- TAX (APPEALS) IS MISPLACED WITH REGARD TO DEDUCTION UNDER SECTION 80P(2)(A)(I), IS EVEN OTHERWISE GIVEN TO THE ASSESSEE EVEN IF IT ACCEPTS DEPOSITS FROM NON-MEMBE RS. 3. THE PRINCIPLE OF MUTUALITY RELIED UPON BY THE ASSES SING OFFICER EMANATE TO DISTINGUISH THAT THE ASSESSEE HAS VIOLATED THE PRINCIPLES OF MU TUALITY, WHICH THE COMMISSIONER OF INCOME-TA X (APPEALS) FAILS TO COMPREHEND. HAVING ESTABLISHED ON RECORD THAT THE ASSESSEE HAS DEPOSITED MONEY IN REGIONAL RURAL BANK S, THE STATUS OF WHICH IS NOT RECOGNISED IN THE INCOME-TAX ACT, AS CO- OPERATIVE BANK, CAN THE INTEREST ARISING OUT OF THE DEPOSIT OF T HIS REGIONAL RURAL BANK WOULD QUALIFY FOR DEDUCTION UNDER SECTION 80P(2)(D).' 5. AS CAN BE SEEN FROM THE ABOVE, THE GROUND NO. 1 IS MISPLACED. THE ASSESSEE-SOCIETY IS CLEARLY A CO-OPERATIVE SOCIETY AND THE ASSESSING OFFICER HERSELF HAS STATED THAT THE ASSESSEE IS A C O-OPERATIVE SOCIETY, BUT VIOLATED THE PROVISIONS OF THE CO-OPERATIVE SOC IETIES ACT. THEREFORE, GROUND NO. 1 IN OUR VIEW IS MISCONCEIVED . 6. GROUND NO. 2 IS ALSO NOT MAINTAINABLE AS THERE IS NO RESTRICTION OF GETTING ANY DEPOSITS FROM OUTSIDERS, LEAVE ALONE FR OM NOMINAL MEMBERS AND ASSOCIATE MEMBERS. AS RIGHTLY POINTED O UT BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), THE SOURCE OF FUNDS FOR DOING THE BUSINESS IS NOT A CRITERIA. WHAT IS REQUIRED TO BE EXAMINED BY THE ASSESSING OFFICER IS WHETHER THE DEDUCTION UNDER SE CTION 80P(2)(A)(I) IS FROM THE PROFITS AND GAINS OF PROVIDING CREDIT F ACILITIES TO ITS MEMBERS. TO THAT EXTENT THE ASSESSING OFFICER CAN E XAMINE THE ASSESSEE'S TRANSACTIONS. JUST BECAUSE THE ASSESSEE HAS DEPOSITS FROM NON-MEMBERS, IT DOES NOT PREVENT BEING A COOPERATIV E SOCIETY NOR IT PREVENTS CLAIMING DEDUCTION UNDER SECTION 80P(2)(A) (I), IF IT IS OTHERWISE ELIGIBLE ON THE SAID INCOMES. ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 6 OF 9 7. GROUND NO. 3 RAISED ON PRINCIPLE OF MUTUALITY IS A LSO DOES NOT APPLY BECAUSE THE ASSESSEE HAS NOT CLAIMED ANY EXEMPTION OF INCOME ON THE PRINCIPLE OF MUTUALITY. AS FAR AS DEDUCTION UNDER S ECTION 80P(2)(D) IS CONCERNED, THEY ARE ELIGIBLE UNDER THE ACT. THE ASS ESSEE CAN CLAIM DEDUCTION UNDER SECTION 80P(2)(D) ON THE DEPOSITS O F MONEY MADE IN REGIONAL RURAL BANKS, CO-OPERATIVE SOCIETIES ETC. A S PER THE PROVISIONS. THE RESTRICTIONS PLACED UNDER SECTION 80P(4) DOES N OT APPLY TO THE FACTS OF THE CASE AS THE SAID PROVISION IS APPLICAB LE ONLY IN THE CASE OF INCOMES RECEIVED BY A COOPERATIVE BANK AND NOT BY A CO-OPERATIVE SOCIETY. THIS ISSUE IS ALSO DISCUSSED IN THE COORDI NATE BENCH AT HYDERABAD DECISION IN THE CASE OF ASSTT. CIT V. ADV OCATES MUTUALLY AIDED CO-OPERATIVE SOCIETY [2015] 4 ITR (TRIB)-OL 3 13 (HYD.) PRONOUNCED ON FEBRUARY 20, 2015 AS UNDER (PAGE 326) : '28. THE GROUND NO. 3 REGARDING DEDUCTION UNDER SEC TION 80P(2)(D) IS IN RESPECT OF INTEREST RECEIVED FROM C O- OPERATIVE SOCIETIES AND THE CO-OPERATIVE BANKS. WE ARE UNABLE TO UNDERSTAND WHY THE CO-OPERATIVE BANKS ARE NOT CONSIDERED AS CO-OPERATIVE SOCIETIES IN BANKING BUS INESS. THE SUB-SECTION (4) INTRODUCED BY THE FINANCE ACT, 2006 WITH EFFECT FROM APRIL 1, 2007 IS AS UNDER : '(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 COOPERATIVE AGRICULTURAL AND RURAL DEVELOPM ENT 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 DEVELOP MENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AN D THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES.' 29. AS PER THIS SECTION, THE EXEMPTION PROVIDED UND ER SUB-SECTION (2) OR SUB-SECTION (3) DOES NOT APPLY T O THE INCOMES OF THE CO-OPERATIVE BANK OTHER THAN A PRIMA RY AGRICULTURAL CO-OPERATIVE SOCIETY OR A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. HOWEVER, THE ABOVE PROVISION APPLICABLE IN THE CASE OF CO-OPERATIVE BANK IS NOT IN RESPECT OF INTEREST REC EIVED FROM CO-OPERATIVE BANKS BY A CO-OPERATIVE CREDIT SOCIETY/CO-OPERATIVE SOCIETY. SECTION 80P(2)(D) IS APPLICABLE TO THE ASSESSEE-SOCIETY IN RESPECT OF INCOMES BY WAY OF INTEREST OR DIVIDENDS RECEIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY. THEREFORE, IN THE CASE OF THE ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 7 OF 9 ASSESSEE-SOCIETY, SUB-SECTION (4) IS NOT APPLICABLE AND DEDUCTION UNDER SECTION 80P(2)(D) IS CERTAINLY ELIG IBLE TO THE ASSESSEE. IN THE ASSESSMENT OF A CO-OPERATIV E BANK, THE INCOMES MAY NOT BE EXEMPT AFTER APRIL 1, 2007 BY VIRTUE OF SUB-SECTION (4), BUT THE ASSESSEE IS NOT A CO-OPERATIVE BANK. THEREFORE, THE REVENUE GROUND IS NOT ONLY ILLOGICAL BUT ALSO NOT SUPPORTED BY THE FACTS OF THE CASE. MOREOVER AS SEEN, THE RECOMMENDATION MADE BY THE ASSESSING OFFICER TO THE LEARNED COMMISSIONER OF INCOME-TAX IN THEIR INTERNA L CORRESPONDENCE IS EXTRACTED AS A GROUND. THIS ALSO INDICATES NON-APPLICATION OF MIND EITHER BY THE ASSESSING OFFICER OR BY HIGHER AUTHORITY LIKE COMMISSIONER OF INCOME-TAX. THIS SORRY STATE OF AFFAIRS SHOULD COME TO AN END AND OFFICERS SHOULD A CT RESPONSIBLY WHILE PREFERRING SECOND APPEAL ON THE ORDERS OF THE SENIOR OFFICER LIKE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). THE REVENUE'S APPEAL IS DISMISSED'. 8. IN VIEW OF THIS, WE DID NOT FIND ANY MERIT IN THE REVENUE'S GROUNDS, PER SE. 9. HOWEVER, WE ARE UNABLE TO APPROVE THE CALCULATIONS RESORTED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN QUANTIFYING AND ALLOWING THE DEDUCTIONS. WHILE HOLDING THAT THE ASS ESSEE HAS TRANSACTIONS WITH NON-MEMBERS, IT WAS INCUMBENT ON THE COMMISSIONER OF INCOME-TAX (APPEALS) TO EXAMINE WHE THER THE ASSESSEE HAS CLAIMED ANY DEDUCTION UNDER SECTION 80 P(2)(A)(I) ON THE TRANSACTIONS WITH NON-MEMBERS ALSO. THERE SEEMS TO BE NO EXAMINATION OF THE ABOVE ASPECT. 10. AS CAN BE SEEN FROM THE ORDER OF THE ASSESSING OFF ICER, MEMBERS ARE ALLOWED WITH ADMISSION OF MINIMUM NUMBER OF SHA RES AND FACE VALUE OF RS. 10, WHEREAS THE NOMINAL MEMBERS/ASSOCI ATE MEMBERS ARE ALLOWED WITH A SHARE VALUED AT RE. 1. MOREOVER, NOM INAL MEMBERS/ASSOCIATE MEMBERS DOES NOT HAVE ANY VOTING RIGHTS. THE LEARNED ASSESSING OFFICER DISCUSSED THE BYE LAWS OF THE SOCIETY BUT THE FULL TEXT OF THE BYE LAWS ARE NOT PLACED ON RECORD. WE HAD AN OCCASION TO EXAMINE THE BYE LAWS OF THE 'ADVOCATES MUTUALLY AIDED COOP SOCIETY, HYDERABAD', WHEREIN IT WAS NOTICED THAT BY E LAW (3)(IV)(B) DEFINES 'ASSOCIATE MEMBER' AND 'NOMINAL MEMBER' TO MEAN OTHER THAN SHAREHOLDER OF THE SOCIETY. EVEN THE LEARNED C OMMISSIONER OF INCOME-TAX (APPEALS) GIVES A FINDING THAT THE ASSOC IATE MEMBERS AND NOMINAL MEMBERS ARE NOT REGULAR MEMBERS, BUT THE DE POSITS FROM NON-MEMBERS DOES NOT PREVENT THE CO-OPERATIVE SOCIE TY IN CLAIMING DEDUCTION UNDER SECTION 80P. WHEN THE BYE LAWS DIST INGUISH A MEMBER AND NOMINAL MEMBER/ASSOCIATE MEMBER, THE LAT ER BEING NOT A SHAREHOLDER OF A SOCIETY, DEDUCTION UNDER SECTION 8 0P CANNOT BE ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 8 OF 9 ALLOWED TO THE EXTENT OF INCOMES/ PROFITS AND GAINS ON PROVIDING CREDIT FACILITIES TO ASSOCIATE MEMBERS AND NOMINAL MEMBERS. THERE MAY BE RESTRICTIONS THAT THE SOCIETY SHALL NOT INDU CT MORE THAN A CERTAIN NUMBER OF MEMBERS AS ASSOCIATE MEMBERS/ NOM INAL MEMBERS. WHEN THE BYE LAWS PERTAINING TO 'MEMBERSHIP' DEFINE THAT THE MEMBERS OF THE CO-OPERATIVE SOCIETY AND NOMINAL/ASS OCIATE MEMBERS CANNOT BE TREATED SHAREHOLDER/MEMBER, AS THEY HAVIN G ONLY A RIGHT TO PAY ADMISSION FEE AND TAKE LOANS FROM SOCIETY AND M AKE DEPOSITS WITH SOCIETY WITHOUT OTHER PRIVILEGES, THEY CANNOT BE CO NSIDERED EQUAL TO THE MEMBERS OF THE SOCIETY. THERE ARE CERTAIN JUDGM ENTS GIVEN UNDER THE CO-OPERATIVE SOCIETIES ACT IN THE CASE OF SOCIE TIES INVOLVED IN BANKING BUSINESS, BY VIRTUE OF WHICH DISTINCTION BE TWEEN MEMBERS AND NON-MEMBERS WAS NOT CONSIDERED MATERIAL AND THE IR EQUAL TREATMENT AS FAR AS BUSINESS OF BANKING IS CONCERNE D WAS ACCEPTED. HOWEVER, AS RIGHTLY POINTED OUT BY THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE IS NOT INVOLVED IN BUSINESS OF BANKING AND HAS ONLY INVOLVED IN PROVIDING CREDIT F ACILITIES TO THE MEMBERS OF THE SOCIETY. 11. IN VIEW OF THIS IT IS TO BE EXAMINED WHETHER THERE ARE INCOMES FROM THE CREDIT FACILITIES PROVIDED TO NON-MEMBERS I.E., NOMINAL/ASSOCIATE MEMBERS. IF SO, THE ASSESSEE IS N OT ELIGIBLE FOR DEDUCTION ON THOSE PROFITS. IN THE CASE OF ADVOCATE S MUTUALLY AIDED CO-OPERATIVE SOCIETY, (SUPRA) IT WAS NOTICED THAT T HE SAID CO- OPERATIVE SOCIETY WAS CLAIMING ONLY PROPORTIONATE D EDUCTION UNDER SECTION 80P EXCLUDING THE TRANSACTIONS WITH THE NON -MEMBERS. WE DID NOT FIND ANY SUCH WORKING IN THIS CASE. SINCE THE C OMMISSIONERS OF INCOME-TAX (APPEALS) TOOK OPEN THEMSELVES TO QUANTI FY SECTION 80P, WE ARE NOT SURE WHETHER, HAVING GIVEN A FINDING THA T NOMINAL/ASSOCIATE MEMBERS ARE NOT MEMBERS OF THE SO CIETY, THE INCOMES FROM THEM ARE EXCLUDED WHILE CALCULATING DE DUCTION UNDER SECTION 80P(2)(A)(I). 8. AS IT IS CLEARLY SEEN FROM THE FACTS OF THE CASE BEFORE US THAT THE ASSESSEE HAS CLAIMED INCOME OF INTEREST FR OM THE PERMANENT MEMBERS AND ALSO FROM THE OTHER COOPERATI VE SOCIETIES ONLY AS DEDUCTION U/S 80P OF THE ACT, THE CASE IS CLEARLY COVERED BY THE ABOVE DECISION. IN VIEW OF THE SAME, GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. ITA NOS 1581 AND 1582 OF 2016 METRO CITY CRIMINAL CO URTS EMPLOYEES MUTUALLY AIDED COOP CREDIT SOCIETY LTD HYDERABAD PAGE 9 OF 9 9. IN THE RESULT, ASSESSEES APPEALS FOR THE A.YS 20 12-13 & 2013-14 ARE THEREFORE, ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST JULY, 2017. VINODAN/SPS COPY TO: 1 C/O CH. PARTHASARATHY & CO. 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, STREET NO.1, ASHOKNAGAR, HYDERABA D 500020 2 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 7(1) SI GNATURE TOWERS, KONDAPUR, HYDERABAD 3 CIT (A)-3 HYDERABAD 4 PR. CIT 3 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER