ITO Ward 2(3), Salem V. S 6608 Narasingapuram PACCS Ltd., Salem

ITA 2726/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5066 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 13-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANATH KUMAR RAHA
• Assessee Lawyers: M NARAYANAN CITRETD

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.2726/CHNY/17 / ASSESSMENT YEAR : 2012-03, THE INCOME TAX OFFICER, WARD 2(3) SALEM VS. M/S. S 6608 NARASIGAPURAM PACCS LTD, NARASINGAPURAM POST, ATTUR TALUK, SALEM 636 108 [PAN AAAAP 3472C] ./I.T.A. NO.2727/CHNY/17 / ASSESSMENT YEAR : 2012-03, THE INCOME TAX OFFICER, WARD 2(3) SALEM VS. M/S. S 55, KEERIPATTY PACCS LTD, KEERIPATTY POST, ATTUR TALUK, SALEM 636 107. [PAN AAAAK 5455E] ./I.T.A. NO.2728/CHNY/17 / ASSESSMENT YEAR : 2012-03, THE INCOME TAX OFFICER, WARD 2(3) SALEM VS. M/S. SA. 45, THALAIVASAL PACCS LTD, THALAIVASAL POST, ATTUR TALUK, SALEM 636 112. [PAN AACAS 2473A] ITA NO.2726-2729/CHNY-17. :- 2 -: ./I.T.A. NO.2729/CHNY/17 / ASSESSMENT YEAR : 2012-03, THE INCOME TAX OFFICER, WARD 2(3) SALEM VS. M/S. S 1299 V. MANNARPALAYAM PACCS LTD, MANNARPALAYAM POST, SALEM 636 115. [PAN AAEAS 8231N] / APPELLANT BY : SHRI. SANATH KUMAR RAHA, JCIT /RESPONDENT BY : SHRI. M. NARAYANAN, ADDL. CIT(RETD) /DATE OF HEARING : 14-06-2018 ! /DATE OF PRONOUNCEMENT : 18-06-2018 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE REVENUE DIRECTED AGAINST ORDERS DATED 27.09.2017 OF THE COMMISSIONER OF INC OME-TAX (APPEALS), SALEM. 2. GROUNDS TAKEN BY THE REVENUE IN ALL THESE APPEALS A SSAIL THE DIRECTION OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) TO ALLOW THE CLAIM OF DEDUCTION U/S.80P(2) (A) (I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.2726-2729/CHNY-17. :- 3 -: 3. LD. COUNSEL FOR THE REVENUE SUBMITTED THAT ALL THES E ASSESSEES HAD NOMINAL OR ASSOCIATE MEMBERS, IN ADD ITION TO ITS SHAREHOLDING MEMBERS. ACCORDING TO LD.D.R, THE HON BLE APEX COURT IN THE CASE OF CITIZENS CO-OPERATIVE SOCIETY VS. ACIT ( (2017) 397 ITR 1 HAD CLEARLY HELD THAT DEDUCTION U/S.80P(2)(A)(I) OF THE ACT COULD NOT BE ALLOWED TO A SOCIETY, WHICH WAS EARNING INTEREST FR OM NOMINAL AND ASSOCIATE MEMBERS. AS PER THE LD.D.R, ASSESSEE HAD MEMBERS WITHOUT VOTING RIGHTS AND THESE WERE VERY SIMILAR TO THE AS SOCIATE MEMBER. THEREFORE, ACCORDING TO HIM, BY VIRTUE OF THE DECIS ION OF APEX COURT MENTIONED SUPRA, DEDUCTION U/S.80P(2)(A)(I) OF THE ACT COULD NOT BE GIVEN TO THE ASSESSEES. SUBMISSION OF THE LD.D.R WAS THAT LD.CIT(A) HAD RELIED ON CERTAIN DECISIONS OF THE TRIBUNAL IN THE CASE OF KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CRE DIT SOCIETY LTD., VS.ITO (ITA NO.292/MDS./2014 DATED 17.03.2014) AND THAT OF I.T.O VS. S-1308 AMMAPET PRIMARY AGRICULTURAL CO-OPERATIV E BANK LTD.,SALEM (ITA NO.825/MDS./2017, DATED 23.09.2015) FOR GIVING RELIEF TO THE ASSESSEE. AS PER THE LD.D.R, IN VIEW OF THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF THE CITIZENS CO-OPERATIV E SOCIETY (SUPRA), THESE RULINGS WERE NO MORE GOOD LAW. 4. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTING THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) SUBMITTED ITA NO.2726-2729/CHNY-17. :- 4 -: THAT THESE WERE SECOND ROUND OF PROCEEDINGS BEFORE THE LD. ASSESSING OFFICER FOR ALL THESE ASSESSEES. ACCORDING TO HIM , THIS TRIBUNAL THROUGH AN EARLIER ORDER DATED 11.05.2016 IN ITA NO S. 517 TO 520/MDS/2016 HAD REMITTED THE ISSUE REGARDING CLAI M OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR VERIFYING THE FOLLOWING - (I) WHETHER LOANS WERE GRANTED TO NON-MEMBERS. (II) WHETHER ANY CURRENT ACCOUNTS WERE OPENED FOR TRADER S. (III) WHETHER THE SOCIETY WAS A MEMBER OF CLEARING HOUSE. (IV) WHETHER THE SOCIETY ISSUED GUARANTEE ON BEHALF OF CUSTOMERS. (V) WHETHER THE SOCIETY DEALT IN FOREIGN EXCHANGE TRAN SACTION. (VI) WHETHER THERE WERE ANY INSPECTION REPORTS OF RBI. AS PER THE LD. AUTHORISED REPRESENTATIVE, WHEN TH E MATTER WAS RE- CONSIDERED BY THE LD. ASSESSING OFFICER, ASSESSEES HAD POINTED OUT THAT IT HAD NOT EARNED ANY INTEREST FROM LOANS GRA NTED TO NON- MEMBERS. DESPITE THIS, AS PER THE LD. AUTHORISED R EPRESENTATIVE, LD. ASSESSING OFFICER HAD DENIED THE CLAIM OF DEDUCTION . ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE, ASSESSEES HAD NO BU SINESS WITH ANY NON-MEMBERS. FURTHER, AS PER THE LD. AUTHORISED RE PRESENTATIVE, THERE WAS NO OPTION FOR THE ASSESSEE TO HAVE AN ASS OCIATE MEMBER BY VIRTUE OF ANDHRA PRADESH MUTUALLY AIDED COOPERATIVE SOCIETIES ACT, 1995. THEREFORE, AS PER THE LD. AUTHORISED REPRESEN TATIVE, FINDING OF THE LD. ASSESSING OFFICER THAT ASSESSEE HAD ASSOCIA TE MEMBERS WERE ITA NO.2726-2729/CHNY-17. :- 5 -: INCORRECT. LD. AUTHORISED REPRESENTATIVE ALSO PLAC ED RELIANCE ON A DECISION OF CO-ORDINATE BENCH IN THE CASE OF ITO VS . M/S. S-1308, AMMAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD, (ITA NO.2338/MDS/2017, DATED 28.02.2018). THUS, ACCORDI NG TO HIM, LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN HOLDING THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION CLAIMED B Y IT U/S. 80P(2) (A) (I) OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. THE QUESTION WHETHER DEDUCTION U/S.80P(2)(A)(I) OF THE ACT COULD BE GIVEN TO A SOCIETY, WHICH WAS HAVING BUSINESS WITH BOTH REGULAR MEMBERS AS WELL AS ASSOCIATE MEMBERS HAD COME UP BEFORE THE HONBLE APEX COURT IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD VS. ACIT, (CIVIL APPEAL NO.10245 OF 2017, DATED 8.8.2017 . HONBLE APEX COURT HAD CLEARLY HELD THAT SUCH DEDUCTION WOULD NOT BE A VAILABLE TO A SOCIETY WHERE IT HAD BUSINESS WITH NOMINAL MEMBERS, WHO WERE NOT SHARE HOLDER MEMBER IN THE REAL SENSE. NOW THE ARGU MENT TAKEN BY THE LD.A.R BEFORE US IS THAT JUDGEMENT OF HONBLE A PEX COURT IN THE CASE OF THE CITIZENS CO-OPERATIVE SOCIETY (SUPRA) WAS IN RELATION TO MACSA WHEREAS THE ASSESSEES HERE WERE REGISTERED UN DER A DIFFERENT ENACTMENT WHICH DID NOT ALLOW ANY ASSOCIATE MEMBERS HIP IN A SOCIETY. ITA NO.2726-2729/CHNY-17. :- 6 -: BE THAT AS IT MAY, THE JUDGMENT OF HONBLE APEX COU RT IN THE CASE OF THE CITIZENS CO-OPERATIVE SOCIETY(SUPRA) WAS NOT A VAILABLE WITH THE LOWER AUTHORITIES, WHEN THEY CONSIDERED THE QUESTIO N WHETHER THE ASSESSEES WERE ELIGIBLE FOR CLAIMING EXEMPTION U/S. 80P(2)(A)(I) OF THE ACT. RECORDS MADE AVAILABLE BEFORE US IS NOT ADEQU ATE ENOUGH TO DECIDE WHETHER THE PROVISIONS UNDER MACSA AND PROV ISIONS OF THE LAW UNDER WHICH ASSESSEES WERE REGISTERED, IN RELATION TO VARIOUS CATEGORIES OF MEMBERS WERE PARI-MATERIA OR ENTIRELY DIFFERENT. NO DOUBT, LD. AUTHORISED REPRESENTATIVE STATED BEFOR E US THAT ASSESSEES HAD NO DIFFERENT CLASSES OF MEMBERS. HOWEVER, THE F INDINGS OF THE LD. ASSESSING OFFICER AT PARA 5.1 OF HIS ORDER REVEAL A DIFFERENT SCENARIO. SAID PARA IS REPRODUCED HEREUNDER:- 5.1. AS REGARDS TO THE ANSWER PROVIDED TO THE QUES TION OF LOANS GRANTED, TO NON MEMBERS SEC.80P(2)(A)(I) PROV IDES FOR DEDUCTION TO A SOCIETY ENGAGED IN CARRYING ON THE B USINESS OF PROVIDING CREDIT FACILITIES TO ITS 'MEMBERS'. HERE THE 'MEMBER' MEANS 'SHARE-HOLDING MEMBERS' (ALSO CALLED A-CLASS MEMBER) ONLY. ON PERUSAL OF THE DETAILS OF INTEREST INCOME, IT IS SEEN THAT A MAJOR PORTION OF THE INTEREST RECEIPTS ARE O N ACCOUNT OF JEWEL LOAN GRANTED TO 'ASSOCIATE MEMBERS' (ALSO CAL LED B-CLASS MEMBERS). ANYONE CAN BECOME AN ASSOCIATE MEMBER OF THE SOCIETY ON PAYMENT OF A NOMINAL TOKEN FEE. THE 'ASS OCIATE MEMBERS' ARE NOT ENTITLED TO RECEIVE ANY DIVIDEND OR HAVING ANY VOTING RIGHTS AND ALSO DO NOT HAVE ANY R IGHT TO PARTICIPATE IN GENERAL ADMINISTRATION AND TO ATTEND ANY MEETING ETC. ONLY A-CLASS MEMBERS ARE ALLOWED THE ABOVE PRI VILEGES. 8-CLASS MEMBERS ARE ADMITTED FOR THE LIMITED PURPOS E OF AVAILING LOANS ONLY. SUBSEQUENTLY, ON DISCHARGING O F THEIR LOAN LIABILITY, THEY SIMPLY RELINQUISH THEIR MEMBERSHIP AND DO NOT HAVE ANY FURTHER ROLE TO PLAY IN THE SOCIETY. WHERE AS, ON THE OTHER HAND, SHARE-HOLDING MEMBERS ARE ENJOYING ALL THESE RIGHTS IN ADDITION TO OTHER RIGHTS AND LIABILITIES IN THE SOCIETY AS ITA NO.2726-2729/CHNY-17. :- 7 -: SPECIFIED IN THE BYE-LAW. 'ASSOCIATE MEMBERS' CANNO T BE REGARDED AS MEMBERS OF THE SOCIETY. THERE IS A CLEAR FINDING BY THE LD. ASSESSING OFFI CER THAT ASSESSEE HAD GRANTED LOAN TO ASSOCIATE MEMBERS. 6. COMING TO THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF M/S. S-1308, AMMAPET PRIMARY AGRICULTURAL CO-OPERAT IVE BANK LTD (SUPRA) RELIED ON BY THE LD AUTHORISED REPRESENTATIVE, IN THE SAID CASE THERE WAS NO QUESTION REGARDING CATEGORY OF MEMBERS HIP AND IT WAS PROBABLY DUE TO THIS REASON THAT THE TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE. CONSIDERING ALL THESE THINGS, WE ARE OF T HE OPINION THAT THE QUESTION WHETHER ASSESSEES WERE ELIGIBLE FOR CLAIMI NG DEDUCTION U/S.80P(2)(A) (I) OF THE ACT REQUIRES A REVISIT BY THE LD. ASSESSING OFFICER, IN THE LIGHT OF THE JUDGMENT OF APEX COURT IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD (SUPRA ). NEEDLESS TO SAY THAT ASSESSEES SHALL BE GIVEN AN OPPORTUNITY TO DEMONSTR ATE THAT IT HAD ONLY ONE CLASS OF MEMBERS TO WHICH LOANS WERE GIVEN , WHO WERE ALL REGULAR MEMBERS WITH VOTE. WE THEREFORE SET ASIDE T HE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE BACK TO THE F ILE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCOR DANCE WITH LAW. ITA NO.2726-2729/CHNY-17. :- 8 -: 7. IN THE RESULT, THE APPEALS OF THE REVENUE ARE ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON MONDAY, THE 18TH DAY OF JUNE, 2 018, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:18TH JUNE, 2018. KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF