ITO, Salem V. S-6608 Narasingapuram Primary Agricultural Co-op Credit Society Ltd., Salem

ITA 1874/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7789 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 17-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: M NARAYANAN CITRETD
• Section: 260A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBE R AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./I.T.A .NO. 1874/MDS/2015 / ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER, WARD 2(3) SALEM 7 VS. S-6608 NARASINGAPURAM PRIMARY AGRICULTURAL CO-OP CREDIT SOCIETY LTD, NARASINGAPURAM P.O. ATTUR TK, SALEM 636 108. [PAN AAAAP 3472C ] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. $% ! ' # /RESPONDENT BY : SHRI. M. NARAYANAN, ADDL. CIT (RETD) & ' ' ( /DATE OF HEARING : 22.02.2016 ) ' ' ( /DATE OF PRONOUNCEMENT : .03.2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE REVENUE FILED AN APPEAL AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS), SALEM IN ITA NO.180/2014-15, DATED 28.05.2015 FOR THE ASSESSMENT YEAR 2007-2008 PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961. ITA NO.1874/MDS/2015 :- 2 -: 2. THE REVENUE HAS RAISED THE GROUNDS OF APPEAL:- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT THE HON'BLE ITAT, PANAJI BENCH IN S HRI CHANDRAPRABHU URBEN CO.OPERATIVE CREDIT SOCIETY LTD . (2014)(45 TAXMANN 14) CLEARLY BROUGHT OUT THE DEFIN ITION OF 'BANKING BUSINESS'. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO H AVE CONSIDERED THAT THE HON'BLE ITAT 'B' BENCH, CHENNAI IN THE CASE OF M/S. SL(SPL) 151 KARKUDALPATTY PACCS LTD. V S ITO WHICH HAS BEEN RELIED UPON BY HIM HAS NOT BECOM E FINAL AS AN APPEAL HAS BEEN FILED U/S 260A BEFORE T HE HON'BLE MADRAS HIGH COURT. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO H AVE CONSIDERED THAT IN THE TAMILNADU CO-OPERATIVE SOCIE TIES ACT, 1983 THE TERM 'MEMBER' IS DEALT IN SECTIONS 4,5,6,8,13,14,15, 20,21,23,24,25,26,27,28,29,30,31, 32, 33, 34,35,38,40,41,42, 44,46,51,66,69,72,81 AND 85. IN ALL THESE SECTION THE TERM 'MEMBER' MEANS ONLY SHARE HOLDER- MEMBER. HENCE THE INTENTION OF THE LEGISLAT URE- IS THAT ASSOCIATE MEMBER WILL NOT BE TREATED AS MEM BER. 4 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT THE STATUTORY AUDITOR FOR CO-OPERAT IVE SOCIETY, IN HIS REPORT, DISCLOSES ONLY SHARE HOLDER - MEMBERS AS MEMBERS AND DID NOT INCLUDE THE ASSOCIAT E MEMBER IN THE REPORT.. 3. THE BRIEF FACTS OF THE CASE, THE ASSESSEE IS A CO-O PERATIVE BANK FILED RETURN OF INCOME ON 29.10.2007 ADMITTED NIL I NCOME AFTER CLAIM OF DEDUCTION U/S.80P OF THE ACT. THE RETURN OF INCOME WAS PROCESSED ITA NO.1874/MDS/2015 :- 3 -: U/S.143(1) OF THE ACT AND SUBSEQUENTLY, THE CASE WA S SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) OF THE AC T WAS ISSUED ON 15.09.2009. IN COMPLIANCE TO NOTICE, THE LD. AUTHO RISED REPRESENTATIVE AND SECRETARY OF THE SOCIETY APPEARED FROM TIME TO TIME FILED DETAILS AND PRODUCED BOOKS OF ACCOUNTS FOR EXAMINATION. THE LD . ASSESSING OFFICER ON VERIFICATION OF BOOKS OF ACCOUNTS FOUND THE ASSE SSEE SOCIETY ENGAGED IN COMMERCIAL BANKING ACTIVITIES AND DERIVING INTER EST INCOME FROM OTHER BUSINESS ACTIVITIES REFEREED PAGE NO.2 OF THE ORDE R:- 01 INTEREST INCOME FROM CROP LOAN 7,61,281/- 02 INTEREST INCOME FROM MT LOAN 4,03,631/- 03 INTEREST RECEIPTS FROM NFS MT LOAN 28,97,439/- 04 CONSUMER LOAN 1,43,062/- 05 CONSUMPTION LOAN ----- 06 DEPOSIT LOAN 4,65,620/- 07 NSC/KVP PLEDGE LOAN 1,05,125/- 08 JEWEL LOAN 79,91,402/- 09 STAFFS LOAN 24,678/- TOTAL INTEREST RECEIPTS 1,21,92,238/- FURTHER IN ADDITION TO THE AGRICULTURAL FARM SECTOR LOANS, THE ASSESSEE IS HAVING OTHER INCOMES WHICH ARE NOT COVERED UNDER FA RM SECTOR. UPON PERUSAL OF THE AMENDMENT TO PROVISIONS TO SEC.80P( 4) OF THE ACT AND CBDT CIRCULAR NO.14/2006, DATED 28.12.2006. THE BE NEFITS AVAILABLE TO CO-OPERATIVE BANKS ARE WITHDRAWN FROM ASSESSMENT YE AR 2007-08 AS CO- OPERATIVE BANK ARE FUNCTIONING ON PAR WITH COMMERCI AL BANKS. THE AMENDED PROVISIONS SHALL NOT APPLY TO ANY CO-OPERA TIVE BANK OTHER THAN ITA NO.1874/MDS/2015 :- 4 -: PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANKS. AND THE PROFIT AND G AINS OF ANY BUSINESS OF BANKING INCLUDING CREDIT FACILITIES CARRIED ON B Y THE CO-OPERATIVE SOCIETY WITH ITS MEMBERS. THE ASSESSING OFFICER PR ESUMED THAT ACTIVITIES OF THE SOCIETY ARE NOT IN ACCORDANCE WITH THE PROVI SIONS OF SEC.80P(4) OF THE ACT AND ISSUED SHOW CAUSE NOTICE TO THE ASSESS EE SOCIETY. IN COMPLIANCE TO NOTICE, THE ASSESSEE SOCIETY HAS FILE D EXPLANATION ON 27.10.2009 AT PAGE NO.3 IS AS UNDER:- THE ASSESSEE SOCIETY HAS GIVEN LOAN FOR VARIOUS PURPOSES DURING THE PREVIOUS YEAR WHICH ARE AS UNDER:- 1. AGRICULTURAL CROP LOAN. 2. AGRICULTURAL JEWEL LOAN. 3. LOAN AGAINST KVP. 4. LOANS AGAINST DEPOSITS. 5. MEMBERS JEWEL LOAN IT IS BROUGHT TO NOTICE THAT THE BANKS ACTIVITY AND AREA OF OPERATION IS CONFINED TO ATTUR TALUK, ALL O F THEM ARE REMOTE VILLAGES AND PEOPLE LIVING IN THESE VILLAGES ARE ONLY AGRICULTURIST AND THEY ARE ECONOMICALLY VERY POOR. THE SOCIETY IS NOT ENGAGED IN REGULAR COMMERCIAL BANKING ACTIVITIES. THEY HAVE L ENT LOANS AGAINST OWN DEPOSITS AGRICULTURAL LOAN AND MEMBERS JEWEL LOAN. THE MAJOR CHUNK OF LENDING OF THE BANK IS ONLY JEWEL LOAN WHICH CARRIES INTEREST AT 7% AND AT 11% IN TWO CATEGORIES. BOTH THESE LOANS WERE GIVEN PURELY FOR AGRICULTURAL PURPOSES. FROM T HE ABOVE IT IS CLEAR THAT THE DEDUCTION U/S.80P CANNOT BE DENIED. THE ASSESSING OFFICER ON PERUSAL OF THE PROVISIONS AND SUBMISSIONS FOUND THE FARM SECTOR AGRICULTURAL CROP LOANS AND AGRICULTURAL JEWEL LOANS ITA NO.1874/MDS/2015 :- 5 -: ARE LESS COMPARED WITH OTHER LOANS. THE ASSESSING OFFICER MADE ELABORATE FINDINGS ON THE WORKING SYSTEM OF SOCIETY ACTIVITIES AND DEALT ON DEFINITION AND PROVISIONS APPLICABLE TO CO-OPER ATIVE BANK AND PRIMARY AGRICULTURAL SOCIETY. THE CO-OPERATIVE SOCIETY, PR IMARY OBJECT OR PRINCIPAL BUSINESS IS TO PROVIDE FINANCIAL ACCOMMODATION TO MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTED WIT H AGRICULTURAL ACTIVITIES INCLUDING MARKETING OF CROPS. THE LD. A SSESSING OFFICER ASSUMED THAT THE ASSESSEE CANNOT ENJOY THE BENEFIT OF DEDUCTION U/S.80P OF THE ACT BY NAMING AS PRIMARY AGRICULTUR AL CO-OPERATIVE SOCIETY AND SHALL FULFIL THE CONDITIONS OF PROVISI ONS OF SEC.80P(4) OF THE ACT. THE LD. ASSESSING OFFICER HAS FOUND THAT SOC IETY COULD NOT COMPLY THE CONDITIONS AND CLAIMED DEDUCTION U/S.80P OF THE ACT AND PERUSED THE ACTIVITIES OF SOCIETY ON PAR WITH COMMERCIAL BANK A ND LIMITED THE DEDUCTION U/S.80P OF THE ACT TO THE EXTENT OF INCOM E EARNED FROM FARM SECTOR OUT OF BANKING BUSINESS AND INCOME FROM CRED IT FACILITIES EXTENDED TO ITS MEMBERS BY CALCULATING PROPORTIONATE PROFIT AND ALLOWED PROPORTIONATE DEDUCTION U/S.80P OF THE ACT AND ASSE SSED TOTAL INCOME OF C.36,02,190/-. AND RAISED DEMAND. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEF ORE THE COMMISSIONER OF INCOME TAX (APPEALS). ITA NO.1874/MDS/2015 :- 6 -: 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED RE PRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEF ORE THE ASSESSING OFFICER AND DEMONSTRATED THE APPLICABILITY OF PROVI SIONS TO THE ASSESSEE SOCIETY PROVIDING AGRICULTURAL CROP LOANS AND JEWEL RY LOANS TO ITS MEMBERS. THE LD. AUTHORISED REPRESENTATIVE RELIE D ON THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 2009- 10 IN ITA NO.919/MDS/2013, DATED 23.05.2014. THE L D. COMMISSIONER OF INCOME TAX (APPEALS) HAS DEALT ON CO-ORDINATE BENCH DECISION IN DETAIL AT PARA NO. 3 TO 6 OF THE ORDER AND HAVING SATISFIE D WITH COMPLIANCE OF PROVISIONS OF SEC. 80P OF THE ACT RELIED PUNJAB AND HARYANA HIGH COURT DECISION IN CIT VS. PUNJAB STATE CO-OPERATIVE BANK LTD 300 I TR 24 AND CO-ORDINATE BENCH DECISION IN THE CASE OF M/S. SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CR EDIT SOCIETY LTD VS. ITO IN ITA NO.292/MDS/2014, DATED 17.03.2014. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE BASIS OF THE SUBMISS IONS OF LD. AUTHORISED REPRESENTATIVE AND THE ORDERS OF THE TR IBUNAL FOUND THE ASSESSEE SOCIETY IS ELIGIBLE FOR DEDUCTION U/SEC.80 P(2)(A)(I) OF THE ACT AND ALLOWED THE APPEAL. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE HAS ASSAILED AN A PPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE REI TERATED HIS SUBMISSIONS ON THE GROUNDS OF APPEAL AND CONTESTED THE JUDICIAL ITA NO.1874/MDS/2015 :- 7 -: DECISIONS RELIED BY THE COMMISSIONER OF INCOME TA X (APPEALS) WERE THE DEPARTMENT HAS FILED AN APPEAL IN JURISDICTIONAL H ONBLE HIGH COURT AGAINST ITAT ORDER AND RAISED OTHER GROUNDS WHICH A RE NOT SUBJECT MATTER OF DISPUTE BEFORE ASSESSING OFFICER IN ASSES SMENT PROCEEDINGS AND PRAYED FOR SET ASIDE OF THE ORDER OF COMMISSION ER OF INCOME TAX (APPEALS). 6. CONTRA, THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND JUDICIAL D ECISIONS AND OPPOSED TO THE GROUNDS OF THE REVENUE. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. DEPARTMENT AL REPRESENTATIVE CONTESTED THE DECISIONS RELIED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS THEY HAVE NOT REACHED FINALITY AND APP EAL IS PENDING IN JURISDICTIONAL HIGH COURT, DOES NOT HAVE MERIT BY M ERE FILING THE PROCEEDINGS BEFORE THE TRIBUNAL CANNOT BE STOPPED A ND ALSO URGED ON DEFINITION OF THE MEMBER BASED ON THE AUDIT REPORT AS MEMBER MEANS SHARE HOLDER AND DOES NOT INCLUDE ASSOCIATE MEMBER WHICH IS NOT SUBJECT MATTER OF DISPUTE IN ASSESSMENT ORDER. THE ASSESSEE SOCIETY IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILIT IES TO ITS MEMBERS AND ACTIVITIES OF PRIMARY AGRICULTURE CO-OPERATIVE CRED IT SOCIETY ARE NOT AT PAR WITH CO-OPERATIVE BANKS AND RELY ON CO-ORDINATE ITA NO.1874/MDS/2015 :- 8 -: BENCH DECISION OF TRIBUNAL IN ITO VS VEERAKERALAM PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY IN ITA NO.197/MDS/2013 , DATED 11.02.2014 AND ASSESSEES OWN CASE IN ITA NO.919/MDS/2013 DAT ED 23.05.2014 WHERE THE TRIBUNAL HAS OBSERVED AT PARA 8 OF THE OR DER THE ISSUE IN APPEAL IS SIMILAR TO THE ONE ADJUDIC ATED BY THE CO-ORDINATE BENCH IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CRE DIT SOCIETY LTD., VS. ITO (SUPRA). ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) & (IV) OF THE ACT. WE RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DEC ISION, DISMISS THE GROUNDS OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON WEDNESDAY THE 09 TH DAY OF MARCH, 2016 AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) # $% / ACCOUNTANT MEMBER ( & . ' ( ) (G. PAVAN KUMAR) ) $% / JUDICIAL MEMBER *& / CHENNAI + / DATED: 09 TH MARCH, 2016 KV , ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT 3. 1' () / CIT(A) 5. /4 5 $'6 / DR 2. $% ! / RESPONDENT 4. 1' / CIT 6. 5 7 8 & / GF