ITO Ward 2(4), Salem V. KK Pottaneri PACCS Ltd., Salem

ITA 2730/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5063 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 13-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N GOPIKRISHNA JCIT A
• Assessee Lawyers: M BALU IT PRACTITIONER

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 ./ ITA NO.2730/CHNY/2017 ' ' /ASSESSMENT YEAR: 2012-13 THE INCOME TAX OFFICER, WARD-2(4), SALEM-7. VS. M/S.KK-142 POTTANERI PRIMARY- AGRICULTURAL CO-OP. CREDIT SOCIETY LTD., POTTANERI POST, METTUR TK, SALEM-636 453. [PAN: AABAK 0355 J ] ( % /APPELLANT) ( &'% /RESPONDENT) DEPARTMENT BY : MR.N.GOPIKRISHNA, JCIT AASSESSEE BY : MR.M. BALU, IT PRACTITIONER 3 /DATE OF HEARING : 20.06.2018 3 /DATE OF PRONOUNCEMENT : 21.06.2018 / O R D E R PER ABRAHAM P.GEORGE , ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE DEPARTMENT, IT IS AGGR IEVED THAT THE LD.CIT(A) ALLOWED THE CLAIM MADE BY THE ASSESSEE U/S.80P(2)(A )(I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. LD. COUNSEL FOR THE REVENUE SUBMITTED THAT ASSE SSEE HAD NOMINAL OR ASSOCIATE MEMBERS, IN ADDITION TO ITS SHAREHOLDING MEMBERS. ACCORDING TO LD.D.R, THE ITA NO.2730/CHNY/2017 :- 2 -: HONBLE APEX COURT IN THE CASE OF CITIZENS CO-OPER ATIVE 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 WI THOUT VOTING RIGHTS AND THESE WERE VERY SIMILAR TO THE ASSOCIATE MEMBER. THEREFOR E, ACCORDING TO HIM, BY VIRTUE OF THE DECISION OF APEX COURT MENTIONED SUPRA, DEDUCTI ON 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 CREDIT SOCIETY LTD., VS.I TO (ITA NO.292/MDS./2014 DATED 17.03.2014) AND THAT OF I.T.O VS. S-1308 AMMAPET PR IMARY AGRICULTURAL CO-OPERATIVE 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 JUDGMEN T OF HONBLE APEX COURT IN THE CASE OF THE CITIZENS CO-OPERATIVE SOCIETY (SUPRA), THESE RULINGS WERE NO MORE GOOD LAW. 3. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRON GLY SUPPORTING THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) SUBMITTED THAT THIS WAS THE SECOND ROUND OF PROCEEDINGS BEFORE THE LD. ASSESSING OFFICER FOR ALL THESE ASSESSEES. ACCORDING TO HIM, THIS TRIBUNAL THROUGH AN EARLIER ORDER DATED 1 0.08.2016 IN ITA NO.1365/MDS/2016 HAD REMITTED THE ISSUE REGARDING C LAIM 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 T RADERS. (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 T RANSACTION. (VI) WHETHER THERE WERE ANY INSPECTION REPORTS OF R BI. ITA NO.2730/CHNY/2017 :- 3 -: AS PER THE LD. AUTHORISED REPRESENTATIVE, WHEN THE MATTER WAS RECONSIDERED BY THE LD. ASSESSING OFFICER, ASSESSEE HAD POINTED OUT THA T IT HAD NOT EARNED ANY INTEREST FROM LOANS GRANTED TO NONMEMBERS. DESPITE THIS, AS PER THE LD. AUTHORISED REPRESENTATIVE, LD. ASSESSING OFFICER HAD DENIED TH E CLAIM OF DEDUCTION. ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD NO BUSINESS WITH ANY NON-MEMBERS. FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, THERE WAS NO OPTION FOR THE ASSESSEE TO HAVE AN ASSOCIATE MEMBER UNDER THE ENAC TMENT UNDER WHICH IT WAS REGISTERED AS A COOPERATIVE SOCIETY. THEREFORE, AS PER THE LD. AUTHORISED REPRESENTATIVE, FINDING OF THE LD. ASSESSING OFFICE R THAT ASSESSEE HAD ASSOCIATE MEMBERS WERE INCORRECT. LD. AUTHORISED REPRESENTAT IVE ALSO PLACED 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/MD S/2017, DATED 28.02.2018). THUS, ACCORDING TO HIM, LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN HOLDING THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION CL AIMED BY IT U/S. 80P(2) (A) (I) OF THE ACT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE Q UESTION WHETHER DEDUCTION U/S.80P(2)(A)(I) OF THE ACT COULD BE GIVEN TO A SOC IETY, WHICH WAS HAVING BUSINESS WITH BOTH REGULAR MEMBERS AS WELL AS ASSOCIATE MEMB ERS HAD COME UP BEFORE THE HONBLE APEX COURT IN THE CASE OF THE CITIZEN CO-OP ERATIVE SOCIETY LTD VS. ACIT, (2017) 397 ITR 0001. THE HONBLE APEX COURT HAD CLE ARLY HELD THAT SUCH DEDUCTION WOULD NOT BE AVAILABLE TO A SOCIETY WHERE IT HAD BU SINESS WITH NOMINAL MEMBERS, WHO WERE NOT SHARE HOLDER MEMBER IN THE REAL SENSE. NOW THE ARGUMENT TAKEN BY THE ITA NO.2730/CHNY/2017 :- 4 -: LD.A.R BEFORE US IS THAT JUDGMENT OF HONBLE APEX C OURT IN THE CASE OF THE CITIZENS CO-OPERATIVE SOCIETY (SUPRA) WAS IN RELATION TO MAC SA WHEREAS THE ASSESSEES HERE WERE REGISTERED UNDER A DIFFERENT ENACTMENT WHICH D ID NOT ALLOW ANY ASSOCIATE MEMBERSHIP IN A SOCIETY. BE THAT AS IT MAY, THE JU DGMENT OF HONBLE APEX COURT IN THE CASE OF THE CITIZENS CO-OPERATIVE SOCIETY(SUPR A) WAS NOT AVAILABLE 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 ADEQUATE ENOUGH TO DECIDE WHETHER THE PROVISIONS UNDER MACSA AND PROVISIONS OF THE LAW UNDER WHICH ASSESSEES WE RE REGISTERED, IN RELATION TO VARIOUS CATEGORIES OF MEMBERS WERE PARI-MATERIA OR ENTIRELY DIFFERENT. NO DOUBT, LD. AUTHORISED REPRESENTATIVE STATED BEFORE US THAT ASS ESSEES HAD NO DIFFERENT CLASSES OF MEMBERS. HOWEVER, THE FINDINGS OF THE LD. ASSESS ING OFFICER AT PARA 5.1 OF HIS ORDER REVEAL A DIFFERENT SCENARIO. SAID PARA IS REP RODUCED HEREUNDER:- 5.1. AS REGARDS TO THE ANSWER PROVIDED TO THE QUE STION OF LOANS GRANTED, TO NON MEMBERS SEC.80P(2)(A)(I) PROVIDES FOR DEDUCTION TO A SOCIET Y ENGAGED IN CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS 'MEMBERS'. HERE THE 'MEMBER' MEANS 'SHARE-HOLDING MEMBERS' (ALSO CALLED A-CLASS MEMBER) ONLY. ON PERUSAL OF TH E DETAILS OF INTEREST INCOME, IT IS SEEN THAT A MAJOR PORTION OF THE INTEREST RECEIPTS ARE ON ACC OUNT OF JEWEL LOAN GRANTED TO 'ASSOCIATE MEMBERS' (ALSO CALLED 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 AN D ALSO DO NOT HAVE ANY RIGHT TO PARTICIPATE IN GENERAL ADMINISTRATION AND TO ATTEND ANY MEETING ET C. ONLY A-CLASS MEMBERS ARE ALLOWED THE ABOVE PRIVILEGES. 8-CLASS MEMBERS ARE ADMITTED FOR THE LIMITED PURPOSE OF AVAILING LOANS ONLY. SUBSEQUENTLY, ON DISCHARGING OF THEIR LOAN LIABILIT Y, THEY SIMPLY RELINQUISH THEIR MEMBERSHIP AND DO NOT HAVE ANY FURTHER ROLE TO PLAY IN THE SOC IETY. WHEREAS, ON THE OTHER HAND, SHARE- HOLDING MEMBERS ARE ENJOYING ALL THESE RIGHTS IN AD DITION TO OTHER RIGHTS AND LIABILITIES IN THE SOCIETY AS SPECIFIED IN THE BYE-LAW. 'ASSOCIATE MEM BERS' CANNOT BE REGARDED AS MEMBERS OF THE SOCIETY. THERE IS A CLEAR FINDING BY THE LD. ASSESSING OFFIC ER THAT ASSESSEE HAD GRANTED LOAN TO ASSOCIATE MEMBERS. 5. COMING TO THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF M/S. S-1308, AMMAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD (SUPRA) RELIED ON BY THE LD ITA NO.2730/CHNY/2017 :- 5 -: AUTHORISED REPRESENTATIVE, IN THE SAID CASE THERE W AS NO QUESTION REGARDING CATEGORY OF MEMBERSHIP AND IT WAS PROBABLY DUE TO T HIS REASON THAT THE TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE. CONSIDERING ALL THESE TH INGS, WE ARE OF THE OPINION THAT THE QUESTION WHETHER ASSESSEE WAS ELIGIBLE FOR CLAIMING 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 SOCIE TY LTD (SUPRA). NEEDLESS TO SAY THAT ASSESSEE SHALL BE GIVEN AN OPPORTUNITY TO DEMO NSTRATE THAT IT HAD ONLY ONE CLASS OF MEMBERS TO WHICH LOANS WERE GIVEN, WHO WERE ALL REGULAR MEMBERS WITH VOTE. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORI TIES AND REMIT THE ISSUE BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT IN JUNE 21, 201 8, IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) ( ABRAHAM P.GEORGE ) /ACCOUNTANT MEMBER /CHENNAI, 8 /DATED: JUNE 21, 2018. TLN 3 &9: ;: /COPY TO: 1. % /APPELLANT 4. < /CIT 2. &'% /RESPONDENT 5. : & /DR 3. < ( )/CIT(A) 6. ' /GF