ITO, Salem V. S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd., Salem

ITA 1845/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96273 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 13-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: M BALU

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.1845/MDS/2015 ( / ASSESSMENT YEAR: 2011-12) THE INCOME TAX OFFICER, WARD-1(1), SALEM. VS M/S.S-1308, AMMAPET PRIMARY AGRICULTURAL CO- OPERATIVE BANK LTD. AMMAPET, SALEM-636 003. PAN: AAALS0228A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. M.BALU, C.A. /DATE OF HEARING : 1 ST OCTOBER, 2015 /DATE OF PRONOUNCEMENT : 30 TH OCTOBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS),SALEM DATE D 28.05.2015 FOR THE ASSESSMENT YEAR 2011-12. THE O NLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING THE CLAIM FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN APPEAL HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR O F THE ASSESSEE IN ASSESSEES OWN CASE FOR THE IMMEDIATELY 2 ITA NO.1845/MDS/2015 PRECEDING ASSESSMENT YEAR I.E. 2010-11 IN ITA NO.825/MDS/2015 DATED 23 RD SEPTEMBER, 2015, COPY OF THE ORDER IS PLACED ON RECORD. 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. ON GOING THROUGH THE A BOVE CITED ORDER OF THIS TRIBUNAL, WE FIND THAT THE ISSUE IN A PPEAL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEE S OWN CASE FOR THE EARLIER ASSESSMENT YEAR I.E. 2010-11, WHEREIN THE TRIBUNAL HELD AS UNDER:- 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL:- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT THE TRIBUNAL IN THE CASE OF SR I CHANDRAPRABHU URBAN CO-OP. CREDIT SOCIETY LTD. (201 4) (45 TAXMAN 14) CLEARLY BROUGHT OUT THE DEFINITION OF BA NKING BUSINESS. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT T O HAVE CONSIDERED THAT THE TRIBUNAL IN THE CASE OF M/ S. SL (SPL) 151, KARKUDALPATTY PACCS LTD. VS. ITO WHICH HAS BEE N FILED U/S.260A BEFORE THE HONBLE MADRAS HIGH COURT. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT T O HAVE CONSIDERED THAT IN TAMILNADU CO-OP. SOCIETIES ACT, 1983 THE TERM MEMBER IS DEALT IN SECTIONS 4,5,6,8,13,14 ,15,20,21,23 TO 35 38,40TO 42, 44, 46, 51, 66, 69, 72, 81 AND 85 .. IN ALL THESE SECTIONS THE TERM MEMBER MEANS ONLY SHAREHOLDER MEM BER. 3 ITA NO.1845/MDS/2015 HENCE THE INTENTION OF LEGISLATURE IS THAT ASSOCIAT E MEMBER WILL NOT BE TREATED AS MEMBER. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT T O HAVE CONSIDERED THAT STATUTORY AUDITOR FOR CO-OP. S OCIETY IN HIS REPORT DISCLOSES ONLY SHARE HOLDER MEMBERS AS MEMBE RS AND DID NOT INCLUDE THE ASSOCIATED MEMBER IN THE REPORT . 5. FOR THE ABOVE REASONS IT IS PRAYED THAT ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE CANCELL ED AND THAT OF ASSESSING OFFICER BE RESTORED. 3. COUNSEL FOR THE ASSESSEE SUBMITS THE ISSUE IN APPEAL HAS BEEN DECIDED BY THE CO-ORDINATE BENCH I N ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 TO 2009-10 IN ITA NO.904 TO 906/MDS/2013 BY ORDER DAT ED 6.5.2014 , COPY OF WHICH IS PLACED ON RECORD. 4. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE CO- ORDINATE BENCH UPON CONSIDERING VARIOUS DECISIONS O N THE ISSUE HELD THAT ASSESSEE IS ENTITLED TO CLAIM BENEF IT OF DEDUCTION UNDER SECTION 80P OF THE ACT. HE SUBMITS THAT THE SAME MAY BE FOLLOWED. 5. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDER OF ASSESSING OFFICER. 6. ON GOING THROUGH THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NOS. 904 TO 906/MDS/20 13 DATED 06.05.2014, WE FIND THAT THE ISSUE OF WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 P(2) WAS CONSIDERED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 AND HELD THAT ASSESSEE IS ENTITLED TO CLAIM BENEFIT UNDER SECTION 80P(2) OBSERVING AS UNDER:- 2. THE ASSESSEE IS A PRIMARY AGRICULTURE CO-OPERAT IVE SOCIETY REGISTERED UNDER THE TAMIL NADU CO-OPERATIV E SOCIETIES ACT, 1983 (HEREIN AFTER REFERRED TO AS T HE SOCIETIES ACT). THE SOCIETY FOR THE AYS UNDER CONSIDERATION IN ITS RETURN OF INCOME CLAIMED DEDUC TION U/S.80P(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTE R REFERRED TO AS THE ACT). THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT PROCEEDINGS HELD THAT ALTHOUGH THE ASSES SEE IS REGISTERED AS PRIMARY AGRICULTURE SOCIETY BUT TH E ASSESSEE IS ENGAGED IN THE ACTIVITIES AKIN TO COMME RCIAL BANKING AND HAS EARNED INCOME AT PAR WITH OTHER COMMERCIAL BANKS. THE ASSESSING OFFICER HELD THAT T HE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S.80P OF THE 4 ITA NO.1845/MDS/2015 ACT. AGGRIEVED AGAINST THE ASSESSMENT ORDER FOR THE RESPECTIVE AYS, THE ASSESSEE PREFERRED APPEALS BEFO RE THE CIT(APPEALS). THE CIT(APPEALS) VIDE IMPUGNED ORDERS HELD THAT THE EXEMPTION U/S.80P IS AVAILABLE TO CO- OPERATIVE SOCIETIES ENGAGED IN THE BUSINESS OF PRO VIDING CREDIT FACILITIES TO ITS MEMBERS. BUT THE ASSESSEE IS PROVIDING CREDIT FACILITIES TO CLASS B MEMBERS OR ASSOCIATE MEMBERS WHO ARE NOT RECOGNIZED AS MEMBERS OF THE SOCIETY. THEREFORE, THE ASSESSEE IS NOT ENTI TLED TO DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE CIT(APPE ALS) FURTHER OBSERVED THAT THE PROFIT MOTIVE CANNOT BE D ENIED CONSIDERING THE BUSINESS ACTIVITIES OF THE ASSESSEE . THE CIT(APPEALS) DISMISSED THE APPEALS OF THE ASSESSEE FOR ALL THE THREE AYS. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS COME IN SECOND APPEA L BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF THE CIT(APPEALS). 3. SHRI M.BALU, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT, THE CIT(APPEALS) HAS DIS-ALLOWED DEDUCTION U/S.80P(2)(A)(I) ON THE GROUND THAT THE ASSESSEE HAS EXTENDED CREDIT FACILITIES TO ASSOCIAT E MEMBERS I.E., CLASS-B MEMBERS AND THE INCOME EARN ED FROM THEM IS NOT ELIGIBLE FOR DEDUCTION. THE LD.AR CONTENDED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE HAS TWO TYPES OF MEMBERS CLASS-A AND CLASS-B. THE CLASS-A MEMBERS OR NORMAL MEMBERS THEY ENJOY CERTAI N PRIVILEGES SUCH AS VOTING RIGHTS ETC. THE OTHER MEM BERS ARE CLASSIFIED AS CLASS-B MEMBERS OR ASSOCIATE MEMBERS. BOTH CLASS-A AND CLASS-B MEMBERS ARE SHAREHOLDERS OF THE SOCIETY. SECTION 2(16) OF THE T AMIL NADU COOPERATIVE SOCIETIES ACT, 1983 DEFINES MEMBE R WHICH INCLUDES ASSOCIATE MEMBER. THE LD.AR FURTHER SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.292/MDS/2014 IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LTD., VS. ITO DECIDED ON 17- 03-2014. IN THE SAID CASE, THE TRIBUNAL HAS HELD TH AT FOR AVAILING DEDUCTION U/S.80P, CLASSIFICATION OF MEMBE RS IN A AND B IS IRRELEVANT. THE LD.AR ALSO PLACED ON RECORD A COPY OF THE ORDER OF THE TRIBUNAL IN ITA NO.197/MDS/2013 IN THE CASE OF ITO VS. M/S.VEERAKERALAM PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY DECIDED ON 11-02-2014, WHEREIN THE TRIBUNAL HAD HELD THAT THE ACTIVITIES OF PRIMARY AG RICULTURAL CO-OPERATIVE CREDIT SOCIETIES ARE NOT AT PAR WITH C O- OPERATIVE BANKS. 5 ITA NO.1845/MDS/2015 4. ON THE OTHER HAND, SHRI ANIRUDH RAI, APPEARING O N BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE IMPUGNED ORDERS AND PRAYED FOR THE DISMISSAL OF THE APPEALS OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECI SIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL RELIED UPON B Y THE LD.AR OF THE ASSESSEE. IN ALL THE THREE APPEALS, TH E ASSESSEE HAS IMPUGNED THE FINDINGS OF THE CIT(APPEA LS) FOR REJECTING THE CLAIM OF DEDUCTION U/S.80P(2)(A)( I) TO THE ASSESSEE. THE CIT(APPEALS) IN HIS ORDER HAS ADMITTE D THE FACT THAT THE ASSESSEE-SOCIETY IS NOT A COOPERA TIVE BANK, THEREFORE, THE PROVISIONS OF SECTION 80(P)(4) ARE NOT ATTRACTED. HOWEVER, THE CIT(APPEALS) HAS DENIED THE DEDUCTION ON THE GROUND THAT THE ASSESSEE HAS EXTEN DED CREDIT FACILITIES TO CLASS-B MEMBERS, WHO ARE NOT R EGULAR MEMBERS OF THE SOCIETY. 6. SECTION 2(16) OF THE SOCIETIES ACT, 1983 DEFINES MEMBER AS UNDER: MEMBER MEANS A PERSON JOINING IN THE APPLICATION F OR THE REGISTRATION OF SOCIETY AND A PERSON ADMITTED TO ME MBERSHIP AFTER REGISTRATION IN ACCORDANCE WITH THE PROVISION S OF THIS ACT, THE RULES AND BYLAWS AND INCLUDES AN ASSOCIATE MEMB ER. A PERUSAL OF THE WORD DEFINITION CLEARLY SHOWS TH AT THE TERM MEMBER INCLUDES ASSOCIATE MEMBER. THE REFERENCE OF CLASS B MEMBERS BY CIT(APPEALS) IS W ITH RESPECT TO ASSOCIATE MEMBERS. THE CIT(APPEALS) HAS DENIED DEDUCTION TO THE ASSESSEE ONLY FOR THE REASO N, THAT CREDIT FACILITIES HAVE BEEN EXTENDED TO A PART ICULAR CLASS OF MEMBERS, WHO ARE NOT NORMAL MEMBERS OF THE SOCIETY. WE DO NOT AGREE WITH THE CIT(APPEALS) ON T HE ISSUE. THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF M/S.SL(SPL) 151,KARKUDALPATTY PRIMARY AGRICULTURAL CO- OPERATIVE CREDIT SOCIETY LTD., VS. ITO (SUPRA) HAS DEALT WITH THIS ISSUE. THE FINDINGS OF THE TRIBUNAL ARE A S UNDER: 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, THE CIT(A) H AS 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 THE BEST; TO THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS MEMBERS WHO HAV E VOTING RIGHTS AND DIVIDEND CLAIM, AND ALSO THAT THE LATTER MEMBERS ARE 6 ITA NO.1845/MDS/2015 JOINTLY AND SEVERELY LIABLE. IN THIS BACKDROP, WHEN WE PERUSE THE RELEVANT PROVISIONS OF THE STATE CO-OPERATIVE S OCIETIES ACT, 1983, GOVERNING THE ASSESSEE-SOCIETY, IT IS EVIDENT FROM THE DEFINITION OF MEMBER U/S 2(16) THAT THE SAME INCL UDES AN ASSOCIATE MEMBER U/S 2(6) APPENDED THEREIN. IN OT HER WORDS, THE NOMINAL MEMBERS ALSO ENJOY STATUTORY RECOGNIT ION AS PER THE ACT. THE NET RESULT IS THAT ONCE THE NOMINAL MEMBERS OR NON-VOTING MEMBERS ARE THEMSELVES INCLUDED IN THE D EFINITION OF MEMBERS, THEY SATISFY THE RELEVANT CONDITION I MPOSED 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 REVEN UE THAT THE MEMBERS DEFINED IN SUB-CLAUSE(I) OF SECTION 80P(2 ) SHOULD ONLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A CLASS IFICATION WITHIN CLASSIFICATION WHICH IS BEYOND THE PURVIEW O F TAX STATUTE; UNLESS PROVIDED SPECIFICALLY BY THE LEGISLATURE. MO REOVER, WE FIND THAT THE CASE LAW OF HON'BLE PUNJAB & HARYANA HIGH COURT (SUPRA) ALSO SUPPORTS THE ASSESSEES CASE WHEREIN I T HAS BEEN HELD UNDER THE VERY PROVISION THAT FOR THE PURPOSE OF IMPUGNED DEDUCTION, IT IS IRRELEVANT SO FAR AS CLASSIFICATIO N OF THE MEMBERS IN A OR B CATEGORY IS CONCERNED. WE FOL LOW THE SAME AND ACCEPT CONTENTIONS OF THE ASSESSEE. 7. SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE COOPERATIVE BANK LTD., REPORTED AS 300 ITR 24 , WHEREIN THE HONBLE HIGH COURT HAD DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE. THE LD.DR HAS NOT BEEN ABLE TO CONTROVERT THE CONTENTIONS OF THE AR. 8. THE ISSUE IN APPEAL IS SIMILAR TO THE ONE ADJUDI CATED BY THE CO-ORDINATE BENCH IN THE CASE OF M/S.SL(SPL) 15 1, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CRE DIT SOCIETY LTD., VS. ITO (SUPRA). ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ENTITLED TOCLAIM BENEFIT OF DEDUCTI ON U/S.80P OF THE ACT. 7. SINCE THE FACTS AND CIRCUMSTANCES ARE BEING IDEN TICAL FOR THIS ASSESSMENT YEAR ALSO, RESPECTFULLY FOLLOWING THE SA ID ORDER OF THIS TRIBUNAL, WE SUSTAIN THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 5. RESPECTFULLY FOLLOWING THE SAID DECISION, WE SUS TAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I N 7 ITA NO.1845/MDS/2015 ALLOWING THE CLAIM FOR DEDUCTION OF THE ASSESSEE UN DER SECTION 80P(2) OF THE ACT AND REJECT THE GROUNDS RA ISED BY THE REVENUE 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH OCTOBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .