ITO, Salem V. M/s. S. 172 Samudram PACCS Ltd., Salem

ITA 2491/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3913 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 26-08-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: M NARAYANAN ITP

Judgement Text

, A/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL A/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NO.2491 /MDS./2016 ( / ASSESSMENT YEARS :2012-13) ./ I.T.A.NO.2491 /MDS./2016 ( / ASSESSMENT YEARS :2012-13) THE ITO, WARD 2(2), SALEM. VS. M/S.S.172 SAMUDRAM PACCS LTD., NO.1,SAMUDRAM POST, EDAPPADI TALUK,SALEM 636 305. PAN AAEAS 7781 B ( / APPELLANT ) ( / RESPONDENT ) ! ' # / APPELLANT BY : MR.SHIVA SRINIVAS, JCIT, DR $% ! ' # / RESPONDENT BY : MR.M.NARAYANAN, ITP & ' ' ( ) / DATE OF HEARING : 01.12.2016 *+ ' ( ) /DATE OF PRONOUNCEMENT : 27.12.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A), SALEM DA TED 30.06.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. ITA NO.2491 /MDS/2016 2 2. THE GRIEVANCE OF THE REVENUE IS WITH REGARD TO G RANTING OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLA IMED DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE SAME WAS DISALLOW ED BY THE AO ON THE REASON THAT THE ASSESSEE IS NOT A CO-OPERATIVE CREDIT SOCIETY. ON THE OTHER HAND, IT IS A CO-OPERATIVE BANK CARRYI NG ON ALL BANKING ACTIVITIES. HOWEVER, ON APPEAL, THE LD.CIT(A) GRAN TED THE DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. AGAINST THIS, THE REVE NUE IS IN APPEAL BEFORE US. 4. LD.D.R SUBMITTED THAT THE ASSESSEE IS CARRYIN G ON BANKING ACTIVITIES, AS SUCH PROVISIONS OF THE SECTION 80P(2 )(A)(I) OF THE ACT IS NOT APPLICABLE. PROVISIONS OF THE SECTION 80P(4) IS APPLICABLE. AS SUCH, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTI ON U/S.80P(2)(A)(I) OF THE ACT. 5. ON THE OTHER HAND, LD.A.R SUBMITTED THAT THE ASSESSEE IS LENDING MONEY TO VARIOUS MEMBERS WHO IS HAVING VOTI NG RIGHTS AND NON-VOTING MEMBERS DEDUCTION U/S.80P(2)(A)(I) OF TH E ACT ALSO. LD.A.R RELIED ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS TIRUCHENGODE AGRICULTURAL PRODUCERS COOPERATIVE MARKETING ITA NO.2491 /MDS/2016 3 SOCIETY LTD AND IN S-1308 AMMAPET PRIMARY AGRICULTU RAL COOPERATIVE BANK LTD IN TAX CASE APPEAL NOS. 484 TO 487 AND 490 OF 2016, DATED 2.8.2016. 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. I HAVE CAREFULLY GONE THROUGH THE JUDGEMENT OF MADRAS HIGH COURT CITED BY THE LD.A.R. THE JURISDICTIONAL HIGH COURT IN THE CASE OF ABOVE JUDGMENT HELD THAT:- 9. IN THE INSTANT CASE, WHILE ALLOWING THE APPEAL S FILED BY THE ASSESSEE, THE COMMISSIONER OF INCOME TAX (APPEALS), HAD RELIED UPON, THE FOLLOWING PORTION OF THE DECISION OF THE TRIBUN AL ARRIVED IN I.T.A.NO. 292/CHNY/2014: 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH TH E CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, THE C IT(A) HAS PROCEEDED TO ENHANCE THE ASSESSMENT (SUPRA) ONLY ON THE GROUND THAT THE ASSESSEES CREDIT AND VARIOUS OTHE R LOAN FACILITIES HAVE BEEN ALLOWED TO BE AVAILED BY B CL ASS NOMINAL MEMBERS WHOSE LIABILITY IS LIMITED, AT TH E BEST, TO THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS M EMBERS 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 T HE ASSESSEE-SOCIETY IT IS EVIDENT FROM THE DEFINITION OF MEMBER U/S 2(16) THAT THE SAME INCLUDES AN ASSOCIATE MEMB ER RECOGNITION AS PER THE ACT. THE NET RESULT IS THAT ONCE THE NOMINAL MEMBERS ALSO ENJOY STATUARY CONDITION IMP OSED BY THE LEGISLATURE U/S 90P(2)(A)(I). WE MAKE IT CLEA R THAT WE ARE DEALING WITH THE DEDUCTION PROVISION TO BE INTE RPRETED LIBERALLY. IN OUR CONSIDERED OPINION, THE OBJECTIO NS OF THE REVENUE THAT THE MEMBERS DEFINED IN SUB CLAUSE(I) OF SECTION 80P SHOULD ONLY INCLUDE VOTING MEMBERS WOUL D ITA NO.2491 /MDS/2016 4 AMOUNT TO A CLASSIFICATION WITHIN CLASSIFICATION WH ICH 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 B EEN HELD UNDER THE VERY PROVISION THAT FOR THE PURPOSE OF IM PUGNED DEDUCTION, IT IS IRRELEVANT SO FAR AS CLASSIFICATIO N 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 INCOME TAX A PPELLATE TRIBUNAL, HAS PASSED THE ORDER IMPUGNED. 10. THE APPELLATE AUTHORITY, NAMELY, THE COMMISSIO NER OF INCOME TAX (APPEALS) AND THE INCOME TAX APPELLATE T RIBUNAL HAS CLEARLY HELD THAT THE ASSESSEES ARE NOT CO-OPE RATIVE BANK AND THAT THEIR ACTIVITIES IN THE NATURE ACCEPTING D EPOSITS, ADVANCING LOANS ETC., CARRIED ON BY THE ASSESSEES ARE CONFINED TO ITS MEMBERS ONLY AND THAT TOO IN A PARTICULAR GE OGRAPHICAL AREA. THEREFORE, THE RESPONDENT SOCIETIES ARE ELIG IBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. T HE CONTENTION OF THE APPELLANTS 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 ADMINISTRATI ON 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 GROUN D TO DENY THE EXEMPTION GRANTED UNDER SECTION 80P (2)(A) (I) OF T HE ACT. 11. THE DECISION RENDERED BY THIS COURT IN TCA 735, 755 OF AND 460 OF 2015 DATED 05.07.2016, SQUARELY COVERS THE P RESENT FACTS OF THE CASE, SO FAR AS IT RELATES TO THE INEL IGIBILITY OF THE RESPONDENT SOCIETIES, UNDER SECTION 80P (2)(A)(I). IN THE LIGHT OF THE ABOVE DISCUSSION AND THE DECISIONS, WE ARE OF THE VIEW THAT THE SUBSTANTIAL QUESTIONS O F LAW RAISED IN THE INSTANT APPEALS ARE ANSWERED AGAINST THE REVENU E. 6.1 THE AO MENTIONED IN HIS ASSESSMENT ORDER THAT THE ASSESSEE IS CARRYING ON BANKING ACTIVITIES, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT AND THE ASSES SEE IS HIT BY ITA NO.2491 /MDS/2016 5 SEC.80P(4) OF THE ACT. ACCORDINGLY, IF THE ASSESSEE IS CARRYING ON ANY BANKING ACTIVITIES BY ACCEPTING THE DEPOSITS AND PE RMITTING THE MEMBERS TO WITHDRAW BY WAY OF CHEQUE AND PROVIDING ANY BANKING ACTIVITIES TO ITS MEMBERS, THEN IT IS TO BE CONSIDE RED AS BANKING ACTIVITIES AND PROVISIONS 80P(4) OF THE ACT IS APPL ICABLE. ACCORDINGLY, THE ASSESSEE IS TO BE CALLED AS CO-OPERATIVE BANK A ND IT IS NOT ENTITLED FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THUS, W E REMIT THE ISSUE TO THE FILE OF LD. ASSESSING OFFICER TO VERIFY THE ACT IVITIES CARRIED BY THE ASSESSEE AND DECIDE IT IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 27/12/2016 AT CHENNAI. ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 27/12/2016 K S SUNDARAM. , ' $(-. /.( / COPY TO: 1 . ! / APPELLANT 3. & 0( () / CIT(A) 5. .3 4 $(5 / DR 2. $% ! / RESPONDENT 4. & 0( / CIT 6. 4 6 7 ' / GF