ITO, Namakkal V. M/s. SL (SPL) 151, Karkoodalpatty Primary Agricultural Co-op. Credit Society, Rasipuram

ITA 2273/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8081 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-08-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: T VASUDEVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , !.. # $% , & '( ) [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2273/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE INCOME TAX OFFICER WARD 3 NAMAKKAL VS. M/S SL(SPL) 151, KARKOODALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY KARKOODALPATTY, KAMRAJ NAGAR POST RASIPURAM TALUK 636 202 [PAN AAAJK 0601 K ] ( *+ / APPELLANT) ( ,-*+ /RESPONDENT) / APPELLANT BY : SHRI SUPRIYO PAL, JCIT /RESPONDENT BY : SHRI T. VASUDEVAN, ADVOCATE / DATE OF HEARING : 20 - 10 - 2016 ! / DATE OF PRONOUNCEMENT : 10 - 11 - 2016 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), SALEM, D ATED 6.5.2016 FOR ASSESSMENT YEAR 2012-13. 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO DEDUCTION U/S 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961. ITA NO. 2273/16 :- 2 -: 3. THE ASSESSEE IS A PRIMARY AGRICULTURAL CO-OPERATIV E CREDIT SOCIETY REGISTERED UNDER CO-OPERATIVE SOCIETIES ACT , PROVIDING LONG TERM AND SHORT TERM LOANS TO ITS MEMBERS. FOR THE ASSESSMENT YEAR 2012-13, THE ASSESSEE FILED THE RETURN OF INCOME D ECLARING TOTAL INCOME OF ` 93,46,343/- INCLUDING THE DEDUCTION U/S 80(2)(A)( D) OF RS 35,12,779/- AND CLAIMED THE ENTIRE AMOUNT AS DEDUCT ION U/S 80P. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OF FICER ALLOWED THE DEDUCTION OF ` 35,12,779/- AND THE REMAINING AMOUNT OF ` 58,33,564/- WAS BROUGHT TAX. IN THE ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS CARRYING ON BANKING ACTIVITIE S AND IT IS NOT CARRYING ON ANY AGRICULTURAL ACTIVITIES. EVEN THOU GH THE SOCIETY IS REGISTERED AS PRIMARY AGRICULTURAL CO-OPERATIVE SOC IETY BUT NOT CARRIED OUT ANY ACTIVITIES RELATED TO THE AGRICULTURE PROVI DED IN EXPLANATION TO SEC. 80P OF THE ACT. THE ASSESSEE-SOCIETY WAS GIV ING JEWEL LOANS AND CHARGING INTEREST RANGING FROM 12-14%. THE A.O FURT HER OBSERVED THAT THE JEWEL LOANS WERE NOT GIVEN PURELY FOR AGRICULTU RAL PURPOSES AND GIVEN FOR OTHER THAN AGRICULTURAL PURPOSES ALSO. FU RTHER THE ASSESSING OFFICER OBSERVED FROM THE DETAILS OF INTEREST INCO ME, MAJOR PORTION OF THE INTEREST RECEIVED WAS ON ACCOUNT OF JEWEL LOAN. JEWEL LOANS WERE ISSUED TO ASSOCIATE MEMBER OF SOCIETY ON PAYMENT OF TOKEN AMOUNT. THE ASSOCIATE MEMBERS ARE NEITHER ENTITLED TO RECE IVE ANY DIVIDEND NOR HAVING VOTING RIGHTS AND DO NOT HAVE ANY RIGHT TO PARTICIPATE IN ITA NO. 2273/16 :- 3 -: GENERAL ADMINISTRATION AND TO ATTEND THE MEETINGS E TC. THEY ARE ADMITTED AS ASSOCIATE MEMBERS FOR THE LIMITED PURPO SE OF AVAILING LOANS AND ARE SIMPLY REGISTERED THROUGH MEMBERSHIP AND DO NOT HAVE ANY ROLE TO PLAY IN THE SOCIETY, THEREFORE, THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR DED UCTION U/S 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, THE ASSESSIN G OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE U/S 80P(2)(A)(I) OF THE ACT. 4. AGGRIEVED, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE F OLLOWING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF M/S SL (SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CRE DIT SOCIETY LTD VS ITO IN I.T.A.NO. 292/MDS/2014 DATED 17.3.2014, AND M/S S- 1308,AMMANPET PRIMARY AGRICULTURAL COOPERATIVE BANK LTD IN ORDER NO.825/MDS/2015 DATED 23/09/2015 OF ITAT D BENCH CHENNAI. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. DR ARGUED THAT THE CIT(A) HAS DELETED THE A DDITION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BANKING BUSINESS AND CHARGING INTEREST AT COMMERCIA L RATES. THE SOCIETY IS GIVING JEWEL LOANS TO ASSOCIATE MEMBERS AND THE ASSOCIATE MEMBERS ARE NEITHER ENTITLED TO RECEIVE ANY DIVIDE ND NOR HAVING VOTING RIGHTS AND ALSO DO NOT HAVE ANY RIGHT TO PAR TICIPATE IN GENERAL ITA NO. 2273/16 :- 4 -: ADMINISTRATION AND TO ATTEND THE MEETINGS ETC. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS ENGAGED IN COMMERCIA L BANKING AND NO AGRICULTURAL ACTIVITIES ARE CARRIED ON. THEREFORE T HE LD. D.R. VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER HAS RIGHTLY DISA LLOWED THE DEDUCTION CLAIMED U/S 80P(2)(A)(I) OF THE ACT AND THE SAME B E CONFIRMED. 7. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE A SSESSEE IS A PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETY ENGA GED IN PROVIDING LOANS TO ITS MEMBERS. THE SOCIETY HAS BOTH A CLA SS MEMBERS AND ASSOCIATE MEMBERS. FOR THE ASSESSMENT YEAR 2012-13 , IT FILED RETURN OF INCOME ADMITTING NIL INCOME AFTER CLAIMING DEDUC TION U/S 80P(2)(A)(I), (C) AND (D) TO THE EXTENT OF ` 93,46,343/- INCLUDING 80P(2)(D) OF ` 35,12,779/- . THE A.O DISALLOWED THE DEDUCTION U/S80(P)(A)(I) ON THE GROUND THAT ASSESSEE WAS ENG AGED IN BANKING ACTIVITIES CHARGING COMMERCIAL RATE OF INTEREST ON JEWEL LOAN AND HENCE, NOT ELIGIBLE FOR EXEMPTION. THE LD A.R FURTHER SUBM ITTED THAT A.O WRONGLY TREATED THE SOCIETY AS BANK INSTEAD OF AGR ICULTURAL CO- OPERATIVE CREDIT SOCIETY 8. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATE RIAL PLACED BEFORE US. THE ISSUE REGARDING JEWEL LOAN G IVEN TO ASSOCIATE MEMBERS WAS CONSIDERED BY THE CO-ORDINATE BENCH IN THE CASE OF M/S S-39 GAJALNAICKENPATTY PACCS LTD, SALEM IN ITA NO.1 079/MDS/2016 ITA NO. 2273/16 :- 5 -: DATED 30 TH SEPTEMBER 2016 BY ITATA BENCH AND ALLOWED THE A PPEAL PLACING RELIANCE ON THE ON THE JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF CIT VS TIRUCHENGODE AGRICULTURAL PRODUCERS COOPERATIVE MARKETING SOCIETY LTD AND IN S-1308 AMMAPET PRIMARY AGRICULTURAL COOPERATIVE BANK LTD IN TAX CASE APPEAL NOS. 484 TO 487 AND 490 OF 2016, DATED 2.8.2016, WHEREIN THE HIGH COURT AS HEL D AS UNDER: 9. IN THE INSTANT CASE, WHILE ALLOWING THE APPEAL S FILED BY THE ASSESSEE, THE COMMISSIONER OF INCOME TAX (APPE ALS), HAD RELIED UPON, THE FOLLOWING PORTION OF THE DECIS ION OF THE TRIBUNAL ARRIVED IN I.T.A.NO. 292/CHNY/2014: 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, THE CIT(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 CLASS NOMINAL MEMBERS WHOSE LIABILITY IS LIMITED, AT THE BEST, TO THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS MEMBERS 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 THE ASSESSEE-SOCIETY IT IS EVIDENT FROM THE DEFINITION OF MEMBER U/S 2(16) THAT THE SAME INCLUDES AN ASSOCIATE MEMBER RECOGNITION AS PER THE ACT. THE NET RESULT IS THAT ONCE THE NOMINAL MEMBERS ALSO ENJOY STATUARY CONDITION IMPOSED BY THE LEGISLATURE U/S 90P(2)(A)(I). WE MAKE IT CLEAR THAT WE ARE DEALING WITH THE DEDUCTION PROVISION TO BE INTERPRETED LIBERALLY. IN OUR CONSIDERED OPINION, THE OBJECTIONS OF THE REVENUE THAT THE MEMBERS DEFINED IN SUB CLAUSE(I) OF SECTION 80P SHOULD ONLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A ITA NO. 2273/16 :- 6 -: CLASSIFICATION WITHIN CLASSIFICATION WHICH IS BEYOND THE PURVIEW OF TAX STATUTE; UNLESS PROVIDED SPECIFICALLY BY THE LEGISLATURE. MOREOVER, WE FIND THAT THE CASE LAW OF HON'BLE PUNJAB AND HARYANA HIGH COURT (SUPRA) ALSO SUPPORTS THE ASSESSEES CASE WHEREIN IT HAS BEEN HELD UNDER THE VERY PROVISION THAT FOR THE PURPOSE OF IMPUGNED DEDUCTION, IT IS IRRELEVANT SO FAR AS CLASSIFICATION OF THE MEMBERS IN A OR B CATEGORY IS CONCERNED. FOLLOWING THE DECISION OF THE PUNJAB AND HARYANA HI GH COURT, THE APPELLATE AUTHORITY AS WELL AS THE INCOM E TAX APPELLATE TRIBUNAL, HAS PASSED THE ORDER IMPUGNED. 10. THE APPELLATE AUTHORITY, NAMELY, THE COMMISSIO NER OF INCOME TAX (APPEALS) AND THE INCOME TAX APPELLATE TRIBUNAL HAS CLEARLY HELD THAT THE ASSESSEES ARE N OT CO- OPERATIVE BANK AND THAT THEIR ACTIVITIES IN THE NAT URE ACCEPTING DEPOSITS, ADVANCING LOANS ETC., CARRIED O N BY THE ASSESSEES ARE CONFINED TO ITS MEMBERS ONLY AND THAT TOO IN A PARTICULAR GEOGRAPHICAL AREA. THEREFORE, THE RES PONDENT SOCIETIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE CONTENTION OF THE APP ELLANTS THAT THE MEMBERS OF THE ASSESSEE SOCIETIES ARE NOT ENTITLED TO RECEIVE ANY DIVIDEND OR HAVING ANY VOTING RIGHT OR NO RIGHT TO PARTICIPATE IN THE GENERAL ADMINISTRATION OR TO ATTEND ANY MEETING ETC. BECAUSE THEY ARE ADMITTED AS ASSOC IATE MEMBERS FOR AVAILING LOAN ONLY AND WAS ALSO CHARGIN G A HIGHER RATE OF INTEREST AT THE RATE OF 14%, IS NOT A GROUND TO DENY THE EXEMPTION GRANTED UNDER SECTION 80P (2)(A) (I) OF THE ACT. 11. THE DECISION RENDERED BY THIS COURT IN TCA 735, 755 OF AND 460 OF 2015 DATED 05.07.2016, SQUARELY COVERS T HE PRESENT FACTS OF THE CASE, SO FAR AS IT RELATES TO THE INELIGIBILITY OF THE RESPONDENT SOCIETIES, UNDER SE CTION 80P (2)(A)(I). IN THE LIGHT OF THE ABOVE DISCUSSION AND THE DECISIONS, WE ARE OF THE VIEW THAT THE SUBSTANTIAL QUESTIONS OF LAW RAISED IN THE INSTANT APPEALS ARE ANSWERED A GAINST THE REVENUE. ITA NO. 2273/16 :- 7 -: 9. WE HAVE ALSO GONE THROUGH THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF S-1308 AMMAPET PRIMARY AGRICUL TURAL COOPERATIVE BANK LTD.(SUPRA) AND IT IS SQUARELY APPLICABLE TO T HE ASSESSEES CASE. THE LD.D.R DID NOT PLACE ANY MATERIAL CONTROVERTING THE DECISIONS RELIED UP ON BY THE LD.CIT(A) IN HIS ORDER AND THE CITBLE MADRAS HIGH COURT JUDGMENT CITED SUPRA. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, UPHOLD THE SAME. 10. IN THE RESULT, THE APPEAL OF THE REVEN UE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1OTH NOVEMBER , 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . . # $% ) (D.S. SUNDER SINGH) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 10 TH NOVEMBER, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF