S-1069, Kuppanoor Primary Agricultural Co-op Credit Society Ltd., Salem V. ITO, Salem

ITA 445/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77339 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 09-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-02-2014
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAMJCIT
• Assessee Lawyers: T VASUDEVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHE NNAI . . . , !' , # $! % BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. ASSESSMENT YEAR '& APPELLANT '('& RESPONDENT 444/MDS/2014 2008-09 S-6749 UMAYALPURAM PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY LTD., UMAYALPURAM POST, ATTUR TK., SALEM DIST., [PAN: AACAS 2874 B] INCOME TAX OFFICER, WARD-II(3), SALEM 445/MDS/2014 2007-08 S-1069, KUPPANOOR PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY LTD., 1/44, KUPPANOOR POST, SUKKAMPATTI (VIA), SALEM TK, SALEM DIST.-636 122 [AAEAS 6578 C] INCOME TAX OFFICER, WARD-II(3), SALEM 446/MDS/2014 2008-09 447/MDS/2014 2007-08 S-1276, T.VALAYACHETTIPALAYAM PRIMARY AGRICULTURAL CO- OPERATIVE CREDIT SOCIETY LTD., PAPPANAIKKNOOR, VADUGAPATTY POST, SANKARI TK., SALEM DIST.-637 301 [AAEAS 8810 M] INCOME TAX OFFICER, WARD-II(4), SALEM 448/MDS/2014 2008-09 / APPELLANT BY : SHRI T.VASUDEVAN , ADVOCATE / RESPONDENT BY : SHRI GURU BHASHYAM,JCIT / DATE OF HEARING : 09-06-2014 !' / DATE OF PRONOUNCEMENT : 09-06-2014 $) / O R D E R PER VIKAS AWASTHY, J.M: THE APPEALS HAVE BEEN FILED BY THE ASSESSEES AGAINS T THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-SALEM, ALL DATED ITA. NOS. 444, 445, 446 447 & 448/MDS/2014 2 31-12-2013 IN THEIR RESPECTIVE CASES. THE COMMON I SSUE IN ALL THE APPEALS IS DENIAL OF DEDUCTION U/S. 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEES ARE PRIMARY AGRICULTURE CO-OPERATI VE CREDIT SOCIETIES REGISTERED UNDER THE TAMIL NADU CO-OPERAT IVE SOCIETIES ACT, 1983 (HEREIN AFTER REFERRED TO AS THE SOCIETI ES ACT). THE SOCIETIES FOR THE ASSESSMENT YEARS (AYS) UNDER CONS IDERATION IN THEIR RESPECTIVE RETURN OF INCOME CLAIMED DEDUCTION U/S.80P(2) OF THE ACT. THE ASSESSING OFFICER IN SCRUTINY ASSESSM ENT PROCEEDINGS HELD THAT ALTHOUGH THE ASSESSEES ARE RE GISTERED AS PRIMARY AGRICULTURE SOCIETY BUT THE ASSESSEES ARE E NGAGED IN THE ACTIVITIES AKIN TO COMMERCIAL BANKING AND HAVE EARN ED INCOME AT PAR WITH COMMERCIAL BANKS. THE ASSESSING OFFICER HE LD THAT SINCE THE ASSESSEES ARE EXTENDING LOAN FOR NON-AGRICULTUR AL ACTIVITIES, THEY ARE NOT ELIGIBLE TO CLAIM DEDUCTION U/S.80P OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDERS IN THEIR RESPECT IVE CASES, THE ASSESSEES PREFERRED APPEALS BEFORE THE C IT(APPEALS). THE CIT(APPEALS) VIDE IMPUGNED ORDERS HELD THAT THE EXEMPTION U/S.80P IS AVAILABLE TO CO-OPERATIVE SOCIETIES ENGA GED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. BUT THE ASSESSEES ARE PROVIDING CREDIT FACILITIES TO NON-ME MBERS I.E., CLASS ITA. NOS. 444, 445, 446 447 & 448/MDS/2014 3 B MEMBERS OR ASSOCIATE MEMBERS WHO ARE NOT RECOGN IZED AS MEMBERS OF THE SOCIETY. THEREFORE, THE ASSESSEES A RE NOT ELIGIBLE TO CLAIM DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. T HE CIT(APPEALS) DISMISSED THE APPEALS OF THE ASSESSEES. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE AS SESSEES HAVE COME IN SECOND APPEAL BEFORE THE TRIBUNAL ASSA ILING THE FINDINGS OF THE CIT(APPEALS). 3. SHRI T.VASUDEVAN, APPEARING ON BEHALF OF THE AS SESSEES SUBMITTED THAT, THE CIT(APPEALS) HAS DIS-ALLOWED DE DUCTION U/S.80P(2)(A)(I) ON THE GROUND THAT THE ASSESSEES H AVE EXTENDED CREDIT FACILITIES TO ASSOCIATE MEMBERS I.E., CLASS- B MEMBERS AND THE INCOME EARNED FROM THEM IS NOT ELIGIBLE FOR DED UCTION. THE LD.COUNSEL CONTENDED THAT THE ASSESSEES ARE ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS ONLY. THE ASSESSEES HAVE TWO TYPES OF MEMBERS CLASS-A AND CL ASS-B. THE CLASS-A MEMBERS OR NORMAL MEMBERS ENJOY CERTAIN PRIVILEGES SUCH AS VOTING RIGHTS ETC. THE OTHER MEMBERS ARE C LASSIFIED AS CLASS-B MEMBERS OR ASSOCIATE MEMBERS. BOTH CLASS-A AND CLASS- B MEMBERS ARE SHAREHOLDERS OF THE SOCIETY. SECTIO N 2(16) OF THE TAMIL NADU CO-OPERATIVE SOCIETIES ACT, 1983 DEFINES MEMBER WHICH INCLUDES ASSOCIATE MEMBER. THE LD.AR FURTHER SUBMITTED ITA. NOS. 444, 445, 446 447 & 448/MDS/2014 4 THAT THE CASE OF THE ASSESSEES IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.292/MDS/2014 IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY LTD., VS. ITO DECIDED ON 17-03-2014. IN THE SAID CASE, THE TRIBUNAL HAS HELD THAT FOR AV AILING DEDUCTION U/S.80P, CLASSIFICATION OF MEMBERS AS A AND/OR B IS IRRELEVANT. 4. ON THE OTHER HAND, SHRI GURU BHASHYAM, APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE IMPU GNED ORDERS AND PRAYED FOR THE DISMISSAL OF THE APPEALS OF THE ASSESSEES. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF TH E CO-ORDINATE BENCH OF THE TRIBUNAL RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEES. IN ALL THE APPEALS, THE ASSESSEES HAVE IMPUGNED THE FINDINGS OF THE CIT(APPEALS) FOR REJECTING THE CLAI M OF DEDUCTION U/S.80P(2)(A)(I). THE CIT(APPEALS) IN HIS ORDER HA S HELD THAT THE ASSESSEE-SOCIETIES ARE NOT CO-OPERATIVE BANKS, THER EFORE, THE PROVISIONS OF SECTION 80(P)(4) ARE NOT ATTRACTED. HOWEVER, THE CIT(APPEALS) HAS DENIED THE DEDUCTION ON THE GROUND THAT THE ASSESSEES HAVE EXTENDED CREDIT FACILITIES TO CLASS- B MEMBERS, ITA. NOS. 444, 445, 446 447 & 448/MDS/2014 5 WHO ARE NOT REGULAR MEMBERS OF THE SOCIETY AND THUS THE ASSESSEES ARE NOT ENTITLED FOR CLAIMING DEDUCTION U /S.80P(2)(A)(I). 6. SECTION 2(16) OF THE SOCIETIES ACT, 1983 DEFINES MEMBER AS UNDER: MEMBER MEANS A PERSON JOINING IN THE APPLICATION F OR THE REGISTRATION OF SOCIETY AND A PERSON ADMITTED TO ME MBERSHIP AFTER REGISTRATION IN ACCORDANCE WITH THE PROVISION S OF THIS ACT, THE RULES AND BYLAWS AND INCLUDES AN ASSOCIATE MEMB ER. A PERUSAL OF DEFINITION OF THE TERM MEMBER CLEARL Y SHOWS THAT THE TERM MEMBER INCLUDES ASSOCIATE MEMBER. A REFER ENCE TO CLASS B MEMBERS BY CIT(APPEALS) IS WITH RESPECT TO ASSO CIATE MEMBERS. THE CIT(APPEALS) HAS DENIED DEDUCTION TO THE ASSESSEES FOR THE REASON, THAT CREDIT FACILITIES H AVE BEEN EXTENDED TO A PARTICULAR CLASS OF MEMBERS, WHO ARE NOT NORMA L MEMBERS OF THE SOCIETY. WE DO NOT AGREE WITH THE CIT(APPEALS) ON THE ISSUE. THE AUTHORITIES UNDER THE ACT CANNOT GO BEYOND THEI R JURISDICTION AND MAKE CLASSIFICATION WITHIN A CLASSIFICATION OF MEMBERS TO DENY THE BENEFIT OF DEDUCTION. THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO- OPERATIVE CREDIT SOCIETY LTD., VS. ITO (SUPRA) HAS DEALT WITH THIS ISSUE. THE FINDINGS OF THE TRIBUNAL ARE AS UNDER: 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, THE CI T(A) HAS ITA. NOS. 444, 445, 446 447 & 448/MDS/2014 6 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 C LASS NOMINAL MEMBERS WHOSE LIABILITY IS LIMITED, AT THE BEST; TO THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS MEMBERS WHO HAV E 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 S OCIETIES ACT, 1983, GOVERNING THE ASSESSEE-SOCIETY, IT IS EV IDENT FROM THE DEFINITION OF MEMBER U/S 2(16) THAT THE SAME INCLUDES AN ASSOCIATE MEMBER U/S 2(6) APPENDED THEREIN. IN OT HER WORDS, THE NOMINAL MEMBERS ALSO ENJOY STATUTORY RECOGNIT ION AS PER THE ACT. THE NET RESULT IS THAT ONCE THE NOMINAL MEMBERS OR NON-VOTING MEMBERS ARE THEMSELVES INCLUDED IN THE D EFINITION OF MEMBERS, THEY SATISFY THE RELEVANT CONDITION I MPOSED BY THE LEGISLATURE U/S 80P(2)(A)(I). WE MAKE IT CLEAR THAT WE ARE DEALING WITH A DEDUCTION PROVISION TO BE INTERPRETE D LIBERALLY. IN OUR CONSIDERED OPINION, THE OBJECTIONS OF THE REVEN UE THAT THE MEMBERS DEFINED IN SUB-CLAUSE(I) OF SECTION 80P(2 ) SHOULD ONLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A CLASS IFICATION WITHIN CLASSIFICATION WHICH IS BEYOND THE PURVIEW O F TAX STATUTE; UNLESS PROVIDED SPECIFICALLY BY THE LEGISLATURE. MO REOVER, WE FIND THAT THE CASE LAW OF HON'BLE PUNJAB & HARYANA HIGH COURT (SUPRA) ALSO SUPPORTS THE ASSESSEES CASE WHEREIN I T HAS BEEN HELD UNDER THE VERY PROVISION THAT FOR THE PURPOSE OF IMPUGNED DEDUCTION, IT IS IRRELEVANT SO FAR AS CLASSIFICATIO N OF THE MEMBERS IN A OR B CATEGORY IS CONCERNED. WE FOL LOW THE SAME AND ACCEPT CONTENTIONS OF THE ASSESSEE. 7. SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE CO- ITA. NOS. 444, 445, 446 447 & 448/MDS/2014 7 OPERATIVE BANK LTD., REPORTED AS 300 ITR 24, WHEREIN THE HONBLE HIGH COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE. 8. THE ISSUE IN PRESENT SET OF APPEALS IS SIMILAR T O THE ONE ADJUDICATED BY THE CO-ORDINATE BENCH IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIV E CREDIT SOCIETY LTD., VS. ITO (SUPRA). ACCORDINGLY, WE HOLD THAT THE ASSESSEES ARE ELIGIBLE TO CLAIM BENEFIT OF DEDUCTIO N U/S.80P(2)(A)(I) OF THE ACT. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON MONDAY, THE 9 TH JUNE, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( !' ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) #$% / VICE PRESIDENT & '( / JUDICIAL MEMBER )& /CHENNAI, *' /DATED: 9 TH JUNE, 2014 TNMM '+ ,-.- /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. /01 /CIT(A) 4. / /CIT 5. -23 4 /DR 6. 356 /GF