Vainganga Nagari Sahakari Pat Sanstha Ltd , Bhandara V. Income Tax Officer , Ward-2, Bhandara

ITA 49/NAG/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2903 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 19-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80P; 201; 2(19); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR VIRTUAL COURT BEFORE SH RI R.S. SYAL, VICE PRESIDENT AND SH RI S.S. VISWANETHRA RAVI , J UDICIAL MEMBER I TA NO. 49 / NAG /20 20 / ASSESSMENT YEAR : 201 6 - 1 7 THE VAINGANGA NAGARI SAHAKAR I PAT SANSTHA LTD., NIRWAN BHAWAN, TILAK WARD, BHANDARA, MAHARASHTRA - 441904 PAN : AA BAT0078K VS. ITO WARD 2, BHANDARA APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (APPEALS) - 2 , NAGPUR ON 31 - 01 - 2020 IN RELATION TO THE ASSESSMENT YEAR 201 6 - 1 7 . 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DENIAL OF DE DUCTION U/S 80P (2)(A)(I) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE MAHARASHTRA CO - ASSESSEE BY SHRI MANOJ SONI REVENUE BY SMT. AGNES P THOMAS DATE OF HEARING 21 - 06 - 2021 DATE OF PRONOUNCEM ENT 21 - 06 - 2021 ITA NO .49 / NAG / 20 2 1 VAINGANGA NAGARI SAH. PAT SANSTHA LTD. 2 OPERATIVE SOCIETIES ACT, 1960 (HEREINA FTER CALLED `THE MAHARASHTRA ACT) . IT IS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. A R ETURN OF INCOME WAS FILED CLAIMING DEDUCTION U/S 80P(2)(A)(I) AMOUNTING TO RS.33,41,435. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICE R (AO) OBSERVED THAT THE ASSESSEE WAS CARRYING ON ITS ACTIVITIES IN VIOLATION OF PROVISIONS OF SECTION 80P(2)(A)(I) INASMUCH AS IT HAD ADVANCED LOANS TO PERSONS WHO WERE NOT MEMBERS OF THE SOCIETY . ON BEING CALLED UPON TO EXPLAIN ITS STAND, THE ASSESSEE S UBMITTED THAT THE LOANS WERE ADVANCED ONLY TO THE MEMBERS, BE IT R EGULAR (ORDINARY) MEMBERS OR N OMINAL MEMBERS. RELYING ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN CITIZEN CO - OPERATIVE SOCIETY LTD. VS. ACIT (2017) 84 TAXMANN.COM 114 (SC) , THE AO REPEL LED THE ASSESSEES CLAIM AND DISALLOWED THE DEDUCTION BY HOLDING THAT THE ASSESSEE VIOLATED THE PROVISIONS BY ACCEPTING DEPOSITS FROM AND MAKING ADVANCES TO SUCH MEMBERS , WHO THOUGH DESCRIBED AS NOMINAL MEMBERS, WERE NOT ENTITLED TO DIVIDEND OR SHAREHOLD ERS RIGHTS. THE L D. CIT(A) ECHOED THE ASSESSMENT ORDER ON THIS POINT , AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. ITA NO .49 / NAG / 20 2 1 VAINGANGA NAGARI SAH. PAT SANSTHA LTD. 3 4. WE HAVE HEARD THE RIVAL SUBMISSIONS THROUGH VIRTUAL COURT AND SCANNED THROUGH THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE CO - OPERATIVE SOCIETY IS ADMITTEDLY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES. SECTION 80P(2)(A)(I) PROVIDES THAT IN THE CASE OF C O - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVID ING CREDIT FACILITIES TO ITS MEMBERS, THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO SUCH ACTIVITIES SHALL BE DEDUCTIBLE IN THE COMPUTATION OF TOTAL INCOME. THE CLAIM OF ASSESSEE FOR DEDUCTION HAS BEEN NEGATED BY THE AUTHORITIES BELOW ON THE GROUND THAT IT HAD ADMITTED CERTAIN MEMBERS, DESCRIBED AS NOMINAL MEMBERS , WHO WERE N EITHER ENTITLED TO DIVIDEND N OR VOTING RIGHTS. IT IS RELEVANT TO NOTE THAT THE TERM MEMBER HAS BEEN DEFINED U/S 2(19) IN THE MAHARASHTRA ACT TO MEAN : A PERSON JOINING IN AN APPLICATION FOR THE REGISTRATION OF A CO - OPERATIVE SOCIETY WHICH IS SUBSEQUENTLY REGISTERED, OR A PERSON DULY ADMITTED TO MEMBERSHIP OF A SOCIETY AFTER REGISTRATION AND INCLUDES A N OMINAL, A SSOCIATE OR SYMPATHIZER M EMBER. ON GOING TH ROUGH THE ABOVE DEFINITION OF MEMBER , IT BECOMES OVERT THAT THE TERM MEMBER ALSO INCLUDES A NOMINAL MEMBER . ONCE IT IS ACCEPTED THAT THE ASSESSEE , GOVERNED ITA NO .49 / NAG / 20 2 1 VAINGANGA NAGARI SAH. PAT SANSTHA LTD. 4 BY THE MAHARASHTRA ACT , MADE ADVANCES TO CERTAIN NOMINAL MEMBERS FROM WHOM INTEREST INCOME WAS EARNED, THERE CAN BE NO DOUBT WHATSOEVER THAT THE DEDUCTION U/S 80P(2)(A)(I) HAS TO BE ALLOWED. THE DEPARTMENT HAS HEAVILY RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CITIZEN CO - OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA) . THAT WAS A CASE I N WHICH ANDHRA PRADESH MUTUALLY AIDED CO - OPERATIVE SOCIETY ACT, 1995 WAS UNDER CONSIDERATION , WHICH DID NOT ADMIT ` NOMINAL MEMBER WITHIN THE AMBIT OF THE TERM MEMBER . RECENTLY, THE HON'BLE SUPREME COURT IN MAVILAYI SERVICE CO - OPERATIVE BANK LTD. VS. CI T (2021) 123 TAXMANN.COM 161 (SC) CONSIDERED ITS EARLIER JUDGMENT IN CITIZEN CO - OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA) VIDE PARA 46 OF ITS ORDER . TAKING NOTE OF THE FACT THAT THE CITIZEN CO - OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA) JUDGMENT DEALT WITH THE ANDHRA ACT WHEREIN THE TERM MEMBER DID NOT INCLUDE NOMINAL MEMBER, THE HON'BLE SUPREME COURT IN MAVILAYI SERVICE (SUPRA) HELD THAT THE INTEREST ON LOANS GIVEN TO NOMINAL MEMBERS UNDER THE KERALA ACT WAS ELIGIBLE U/S 80P(2)(A)(I) OF THE ACT AS THE TERM M EMBER UNDER THE KERALA ACT INCLUDED NOMINAL MEMBERS. IN VIEW OF THE FOREGOING DISCUSSION, IT IS EVIDENT THAT WHEN THE LOANS ARE GIVEN TO NOMINAL ITA NO .49 / NAG / 20 2 1 VAINGANGA NAGARI SAH. PAT SANSTHA LTD. 5 MEMBERS AND THE RELEVANT STATE ACT INCLUDES, NOMINAL MEMBER PURVIEW OF MEMBER, THERE CAN BE NO QUESTIO N OF DENIAL OF BENEFIT U/S 80P(2)(A)(I) . 5. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT T HE PROVISIONS OF THE KERALA ACT AND T HE MAHARASH TRA ACT, IN SO FAR AS THE TERM ` MEMBER INCLUDING ` NOMINAL MEMBER IS CONCERNED, ARE SIMILAR. THE HON BLE JURISDICTIONAL HIGH COURT IN JALGAON DISTRICT CENTRAL CO - OPERATIVE BANK LTD. VS. UNION OF INDIA (2004) 134 TAXMAN 1 (BOM) HAS HELD THAT THE DEFINITION OF `MEMBER GIVEN IN SECTION 2(19) OF THE M AHARASH TRA ACT TAKES WITHIN ITS SWEEP EVEN A NOMINAL MEMB ER AND THERE IS NO DISTINCTION BETWEEN A DULY REGISTERED MEMBER AND NOMINAL MEMBER. IN VIEW OF THE ABOVE DISCUSSION, WE O VERTURN THE IMPUGNED ORDER AND DIRECT TO GRANT DEDUCTION U/S 80P(2)(A)(I), AS CLAIMED BY THE ASSESSEE. 6 . IN THE RESULT, THE APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE O PEN COURT ON 21 ST JUNE , 202 1 . SD/ - SD/ - ( S.S. VISWANETHRA RAVI ) ( R.S.SYAL ) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 21 ST JUNE , 202 1 GCVSR ITA NO .49 / NAG / 20 2 1 VAINGANGA NAGARI SAH. PAT SANSTHA LTD. 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(APPEAL) - 2 , NAGPUR 4. 5 . 6. THE PR. CIT - 2 , NAGPUR THE DR , ITAT, NAGPUR ; / GUARD FILE . / BY ORDER, / / TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 21 - 0 6 - 202 1 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 21 - 0 6 - 202 1 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *