ITO WARD 5, NAMAKKAL V. M/S SL. SPL 140 TIRUCHENGODU CO OPERATIVE HOUSING SOCIETY LTD, NAMAKKAL

ITA 527/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9153 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 13-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Section: 80P

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , $% & , ) BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ./ ITA NO.527/CHNY/2018 /ASSESSMENT YEAR: 2014-15 THE INCOME TAX OFFICER, WARD-5, NAMAKKAL, NO.138/3, LMR SHOPPING ARCADE, SALEM ROAD, NAMAKKAL-637 001. VS. M/S.SL.SPL 140, TIRUCHENGODE CO-OPERATIVE HOUSING SOCIETY LTD., NO.37, CHB COLONY, VELUR ROAD, TIRUCHENGODE TALUK, NAMAKKAL-637 211. [PAN: AAHAS 6497 B] ( + /APPELLANT) ( ,-+ /RESPONDENT) DEPARTMENT BY : MR.SRIDHAR DORA, JCIT ASSESSEE BY : MR. S.SRIDHAR, ADV. / /DATE OF HEARING : 04.07.2019 / /DATE OF PRONOUNCEMENT : 04.07.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM, IN ITA NO.281/2016-17 DATED 20.11.2017 FOR THE AY 2014-15. 2. MR. SRIDHAR DORA, JCIT, REPRESENTED ON BEHALF OF T HE REVENUE AND MR. S.SRIDHAR, ADV., REPRESENTED ON BEHALF OF THE A SSESSEE. ITA NO.527/CHNY/2018 :- 2 -: 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED TH E FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A PPEALS) IS CONTRARY TO LAW AND AGAINST THE FACTS AND THE CIRCUMSTANCES OF THE CASE . 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80P(2)(A )(I). 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) OUGHT TO HAVE CONSIDERED THAT THE HON'BLE ITAT, PANAJI BENCH IN SHRI CHANDRA PRABHU URBAN CO. OPERATIVE CREDIT SOCIETY LTD., (2014) (45 TAXMAN 14) CLEARLY BROUGHT OUT THE DEFINITION OF 'BANKING BUSINESS'. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) OUGHT TO HAVE DISTINGUISHED THE FACT THAT ASSESSEE SOCIETY CATERS TO THE NEEDS OF 'RESIDENT MEMBERS' AND ' NOMINAL MEMBERS;' AND THAT THE LOANS TO THE 'NOMINAL MEMBERS' AND RECEIPT OF INTEREST THEREOF, TANTAMOUNT TO THE ASSESSEE SOCIETY CONDUCTING BUSINESS DEALINGS. 5. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT IN THE TAMILNADU CO-OPERATIVE SOCIETIES ACT, 1983 THE TERM 'MEMBERS' IS DEALT IN SECTIONS 4, 5, 6, 8, 13, 14, 15, 20, 21, 23, 24, 25 , 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 38, 40, 41, 42, 44, 46, 51, 66, 69, 72, 81, AND 85. IN ALL THESE SECTIONS THE TERM 'MEMBER' MEANS ONLY SHARE HOLDER - MEMBER. HENCE THE INTENTION OF THE LEGISLATURE IS THAT ASSOCIATE MEMBER WILL NO T BE TREATED AS MEMBER. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) OUGHT TO HAVE CONSIDERED THAT THE STATUTORY AUDITOR FOR CO-OPERATIVE SOCIETY , IN HIS REPORT, DISCLOSES ONLY SHARE HOLDER MEMBERS AS MEMBERS AND DID NOT INCLUDE THE ASSOCIATE MEMBER IN THE REPORT. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN ALLOWING THE ASSESSEE DEDUCTION U/S.80P(2)(A)(I) WHEN THE AFORES AID ACTIVITY IS MERELY THAT OF A FINANCE BUSINESS AND CANNOT BE TREATED AS A CO-OPER ATIVE SOCIETY SO AS TO BE ELIGIBLE FOR THE SAID DEDUCTION. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO TAKE COGNIZANCE OF THE LATEST DECISION OF THE HON'BLE APEX COURT IN THE CASE OF THE CITIZEN CO- OPERATIVE LIMITED REPORTED IN 84 TAXMANN.COM 114 (S C) (2017), WHEREIN THE FACTS ARE IDENTICAL AND SQUARELY APPLICABLE TO THE FACT O F THE INSTANT CASE. 9. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) FAILED TO NOTE THAT THE PRINCIPLES OF MUTUALITY WAS MISSING BETWEEN THE SOC IETY AND THE NOMINAL MEMBERS WHO DO NOT HAVE ANY SHARE IN VOTING ETC. AND RECEIP T OF INTEREST FROM THOSE MEMBERS WILL AUTOMATICALLY BE IN VIOLATION OF THE M UTUALLY AIDED CO-OPERATIVE SOCIETIES ACT, 1995 (MACS) UNDER WHICH THE ASSESSEE SOCIETY IS FORMED. 10. FOR THESE GROUNDS AND ANY OTHER GROUNDS THAT MA Y BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE CANCELLED AND THAT THE ASSESSING O FFICER RESORTED. ITA NO.527/CHNY/2018 :- 3 -: 4. IT WAS SUBMITTED BY THE LD.DR THAT IN THE COURSE O F THE ASSESSMENT, THE AO HAD DENIED THE ASSESSEE THE BENEFIT OF DEDUC TION U/S.80P(2)(A)(I) OF THE ACT ON THE GROUND THAT THE BASIC ELEMENT OF MUTUALITY AND EQUALITY AMONG THE MEMBERS WERE MISSING IN SO FAR AS THERE W ERE MEMBERS AND ASSOCIATE MEMBERS IN THE ASSESSEES CO-OPERATIVE SO CIETY. IT WAS A SUBMISSION THAT THE SOCIETY ADMITTED THE ASSOCIATE MEMBERS FOR THE PURPOSE OF AVAILING LOAN AND THE INCOME EARNED FROM SUCH ASSOCIATE MEMBERS WAS BY WAY OF INTEREST AND THE PROFIT WAS S HARED BY ONLY SHAREHOLDER MEMBERS AND NOT ALL THE MEMBERS. CONSE QUENTLY, THE AO HAD HELD THAT THE ASSESSEE HAS NOT ENTITLED THE BEN EFIT OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. IT WAS A SUBMISSION T HAT ON APPEAL, THE LD.CIT(A) HAD FOLLOWED THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPA TTY PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETY IN ITA NO.292/MDS /2014 DATED 17.03.2014 AND HAD GIVEN RELIEF TO THE ASSESSEE. IT WAS A FURTHER SUBMISSION THAT THE LD.CIT(A) HAD FOLLOWED THE DECI SION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.S-1308, A MMAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD., IN ITA NO.825/ MDS/2015 DATED 23.09.2015. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) WAS LIABLE TO BE REVERSED IN VIEW OF THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF M/S.THE CITIZEN CO-OPERATIVE SOCIETY LTD., REPORTED IN [2017] 84 TAXMANN.COM 114 (SC). ITA NO.527/CHNY/2018 :- 4 -: 5. IN REPLY, THE LD.AR SUBMITTED THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.S-1308, AMMAPET PRIMARY AGRICULTURAL CO- OPERATIVE BANK LTD., IN ITA NO.2338/MDS/2017 DATED 28.02.2018, HAD CONSIDERED THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF M/S.THE CITIZEN CO-OPERATIVE SOCIETY LTD., AND HAD HELD THAT IN PARA NO.6.2 AS FOLLOWS: ..6.2 ON CAREFULLY GOING THROUGH THE ABOVE FACT S AND OBSERVATIONS OF THE HONBLE COURT, WE FIND THAT THE ABOVE JUDGMENT OF T HE HONBLE SUPREME COURT HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. BE CAUSE, IN THE PRESENT ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS, THE COORDINA TE BENCHES OF THE TRIBUNAL HAS CLEARLY HELD THAT THE ASSESSEES ARE NOT COOPERATIVE BANK AND THAT THEIR ACTIVITIES IN THE NATURE OF ACCEPTING DEPOSITS, ADVANCING LOANS E TC., CARRIED ON BY THE ASSESSEES ARE CONFINED TO ITS MEMBERS ONLY AND THAT TOO IN A PARTICULAR GEOGRAPHICAL AREA. THEREFORE, THE ASSESSEE SOCIETIE S ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A) (I) OF THE ACT. THE CONTENT ION OF THE REVENUE 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 ADMINISTRATION OR TO ATTEND ANY MEETING ETC., BECAUSE THEY ARE ADMITT ED AS ASSOCIATE MEMBERS FOR AVAILING LOAN ONLY AND WAS ALSO CHARGING A HIGHER R ATE OF INTEREST AT THE RATE OF 14%, IS NOT A GROUND TO DENY THE EXEMPTION GRANTED UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE HONBLE JURISDICTIONAL HIGH COURT SUST AINED THE ABOVE FINDINGS OF THE TRIBUNAL. IF THE DEPARTMENT HAS NOT ACCEPTED THE JU DGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT AND PREFERRED SLP BEFORE THE HONBLE SUPREME COURT, THE TRIBUNAL CANNOT TAKE DIFFERENT VIEW, SINCE, THE DEC ISION OF THE HONBLE HIGH COURT IS BINDING ON THE TRIBUNAL. IN VIEW OF THE ABOVE FA CTS AND CIRCUMSTANCES, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 6. IT WAS A SUBMISSION THAT THIS ORDER WAS A SUBJECT MATTER OF THE APPEAL BEFORE THE HONBLE MADRAS HIGH COURT IN TAX CASE APPEAL NO.882 & 891 OF 2018 VIDE AN ORDER DATED 06.12.2018, THE HON BLE MADRAS HIGH COURT HAD ALSO CONSIDERED THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF M/S.THE CITIZEN CO-OPERATIVE SOCIETY LT D., AND HELD AS FOLLOWS: ..15. FURTHER, FOR THE ASSESSMENT YEAR 2014-15, T HE DECISION IN THE CASE OF CITIZEN COOPERATIVE SOCIETY LIMITED WAS RELIED UPON BY THE REVENUE BEFORE THE TRIBUNAL, WHICH, IN PARAGRAPH 6.1 OF ITS ORDER DATE D 28.2.2018 FOR THE ASSESSMENT YEAR 2014-15, EXTRACTED THE OPERATIVE PORTION OF TH AT JUDGMENT. IN THAT CASE, THE HON'BLE SUPREME COURT FOUND THAT THE SOCIETY CARRIE D ON CERTAIN ACTIVITIES, WHICH WERE CONTRARY TO THE PROVISIONS OF THE ANDHRA PRADE SH MUTUALLY AIDED COOPERATIVE ITA NO.527/CHNY/2018 :- 5 -: SOCIETIES ACT, 1995 AND THAT THEY ACCEPTED DEPOSITS FROM THIRD PARTIES, WHO WERE NOT MEMBERS IN THE REAL SENSE AND WERE USING THOSE DEPOSITS TO ADVANCE GOLD LOANS. THEREFORE, THE HON'BLE SUPREME COURT POINTED OUT THAT SUCH AN ACTIVITY OF THE SAID SOCIETY WAS THAT OF A FINANCE BUSINESS AND COULD NOT BE TERMED AS A COOPERATIVE SOCIETY AND THAT THE LOANS, WHICH WERE DISBURSED, WERE WITHOUT THE APPROVAL FROM THE REGISTRAR OF MUTUALLY AIDED COOPE RATIVE SOCIETIES, RANGA REDDY DISTRICT. THE HON'BLE SUPREME COURT FOUND THAT THE SAID SOCIETY WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 80P OF THE ACT. 16. IT IS NOTEWORTHY TO POINT OUT THAT THE HON'BLE SUPREME COURT IN THE DECISION IN THE CASE OF CITIZEN COOPERATIVE SOCIETY LIMITED ALS O OBSERVED THAT IN THE LIGHT OF INSERTION OF SUB-SECTION (4) TO SECTION 80P OF THE ACT BY THE FINANCE ACT, 2006, SUCH DEDUCTION SHOULD NOT BE ADMISSIBLE TO A COOPER ATIVE BANK AND THAT IF IT IS A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO OPERATIVE AGRICULTURE AND RURAL DEVELOPMENT BANK, THE DEDUCTION WOULD STILL BE PROV IDED. 17. IN THE PRECEDING PARAGRAPHS, WE HAVE POINTED OU T THE DEFINITIONS OF THE EXPRESSIONS 'MEMBERS' AND 'ASSOCIATE MEMBER' UNDER THE TNCS ACT AND HELD THAT AN 'ASSOCIATE MEMBER' IS ALSO A 'MEMBER' IN TERMS O F SECTION 2(16) OF THE TNCS ACT. FURTHERMORE, THE ASSESSING OFFICER HIMSELF FOU ND THAT THE ASSOCIATE MEMBERS ARE ALSO ADMITTED AS MEMBERS OF THE SOCIETY. IN SUC H CIRCUMSTANCES, THE ASSESSING OFFICER FELL INTO AN ERROR IN NOT GRANTIN G ANY RELIEF TO THE ASSESSEE SOCIETY, WHICH WAS RIGHTLY GRANTED BY THE CIT (A) A S CONFIRMED BY THE TRIBUNAL. IN ADDITION TO THAT, THE ASSESSING OFFICER HAS NOT POI NTED OUT THAT LOANS HAVE BEEN DISBURSED TO ALL AND SUNDRY IN TERMS OF THE PROVISI ONS OF THE TNCS ACT AND IN TERMS OF CLAUSE (B) TO SUB-SECTION (4) OF SECTION 8 0P OF THE ACT, THE SOCIETY HAS AN AREA OF OPERATION, OPERATES WITHIN THE TALUK AND WILL PROVIDE LONG TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES A S WELL. THE CIT (A) RIGHTLY GRANTED THE RELIEF TO THE ASSESSEE AS CONFIRMED BY THE TRIBUNAL. WE DO NOT FIND ANY GOOD GROUND TO ENTERTAIN THESE APPEALS. 7. IT WAS A SUBMISSION THAT THE HONBLE MADRAS HIGH C OURT HAS UPHELD THE FINDINGS OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN HOLDING THAT UNDER THE TAMIL NADU CO-OPERATIVE SOCIETIES ACT, AN ASSOC IATE MEMBER IS ALSO A MEMBER IN TERMS OF SEC.2(16). IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) WAS LIABLE TO BE CONFIRMED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 9. AS IT IS NOTICED THAT THE ISSUE AS TO WHETHER THE ASSOCIATE MEMBER IS TO BE CONSIDERED AS A MEMBER IN TERMS OF THE TAMIL NADU CO-OPERATIVE ITA NO.527/CHNY/2018 :- 6 -: SOCIETIES ACT IS CONCERNED, THE ISSUE IS SETTLED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.S-1308, AMMAPET PRIMA RY AGRICULTURAL CO- OPERATIVE BANK LTD., IN TAX CASE APPEAL NOS.882 & 8 91 OF 2018 DATED 06.12.2018, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.S-1308, AMMAPET PRIMA RY AGRICULTURAL CO- OPERATIVE BANK LTD., THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED. ORDER PRONOUNCED ON THE 04 TH DAY OF JULY, 2019 IN CHENNAI. SD/- SD/- ( $% & ) ( VIKRAM SINGH YADAV ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 4 /DATED: 04 TH JULY, 2019. TLN / ,&$ 5$ /COPY TO: 1. + /APPELLANT 4. 6 /CIT 2. ,-+ /RESPONDENT 5. $ , /DR 3. 6 ( ) /CIT(A) 6. /GF