No. 106, Tholur Primary Agricultural Co-operative Credit Society, Omalur V. ITO, Salem

ITA 668/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6278 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 19-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: M NARAYANAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. ASSESS -MENT YEAR APPELLANT RESPONDENT 6 6 4 /MDS/201 4 2008-09 S-6608, NARASINGAPURAM PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. NARASINGAPURAM PO ATTUR TALUK SALEM-636 115. PAN:AAAAP3472C INCOME TAX OFFICER, WARD-II(3), SALEM. 665 & 666/MDS/2014 2007-08 & 2008-09 S.S.39, GAJJALNAICKENPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY, GAJJAINAICKENPATTY P.O. SALEM-636 201. PAN:AAAJG0828Q INCOME TAX OFFICER, WARD-II(3), SALEM. 667 & 672/MDS/2014 2008-09 & 2007-08 S-186, A.KONDALAMPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY, A.KONDALAMPATTY POST SALEM-636 010. PAN: AABAA7085R INCOME TAX OFFICER, WARD-III(1), SALEM. 66 8 & 669/MDS/2014 2007-08 & 2008-09 NO.106, THOLUR PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY PAGALPATTI PO OMALURTALUK SALEM-636 304. PAN: AACAT0380M INCOME TAX OFFICER, WARD-II(2), SALEM. 6 7 0 & 671/MDS/2014 2007-08 & 2008-09 NO.43, PAGALPATTI PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY, PAGALPATTI PO OMALURTALUK SALEM-636 304. PAN: AABAP2516L INCOME TAX OFFICER, WARD-II(2), SALEM. 673 /MDS/2014 2007-08 S-1299, V.MANNARPALAYAM PRIMARY AGRICULTURAL INCOME TAX OFFICER, WARD-II(3), SALEM. 2 ITA NOS.664 TO 674 /MDS/2014 CO-OPERATIVE CREDIT SOCIETY, V.MANNARPALAYAM PO VALAPPADI TALUK, SALEM-636 115. PAN: AAEAS8231N 674 /MDS/2014 2007-08 S-1134, THENKUMARI PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD. THANKUMARI P.O. ATTUR TK SALEM-636 121 PAN: AACAS3223Q INCOME TAX OFFICER, WARD-II(3), SALEM. ASSESSEE BY : MR. M.NARAYANAN, A.R. REVENUE BY : MR. S.DAS GUPTA, JCIT / DATE OF HEARING : 12 TH JUNE, 2014 /DATE OF PRONOUNCEMENT : 20 TH JUNE, 2014 / O R D E R PER BENCH: ALL THESE APPEALS FILED BY DIFFERENT ASSESSES ARE TAKEN UP TOGETHER FOR HEARING AS THE ISSUE INVOLVED IN AL L THESE APPEALS IS COMMON I.E. DENYING DEDUCTION UNDER SECT ION 80P(2)(A)(I) OF THE ACT. 2. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT DENIED DEDUCTION UNDER SECTION 80P OF THE ACT ON T HE ENTIRE INCOME OF THE ASSESSEE ON THE GROUND THAT ASSESSES DID NOT FULFILL THE CONDITION OF BEING PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETY EXTENDING CREDIT FACILITIES TO ITS MEMBERS. THE 3 ITA NOS.664 TO 674 /MDS/2014 ASSESSING OFFICER FURTHER HELD THAT ASSESSEES ARE NOT BANKS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT. HOWEVER, THE ASSESSING OFFICER RESTRICTED THE DEDUC TION UNDER SECTION 80P TO THE INCOME EARNED FROM FARM S ECTOR OUT OF BANKING BUSINESS AND TO THE INCOME FROM THE CRED IT FACILITIES EXTENDED TO ITS MEMBERS. ASSESSING OFFI CER ALSO DENIED THE CLAIM OF THE ASSESSEES THAT THE ENTIRE I NCOME IS EXEMPT FROM TAXATION UNDER THE PRINCIPLES OF MUTUAL ITY. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) IN ALL THESE CASES HELD THAT ASSESSE IS NOT A BANK AND THEY ARE PRIMARY AGRICULTURAL CREDIT SOCIETIES AND SHOU LD BE CONSIDERED WHETHER THEY ARE CORRECT IN MAKING THE CLAIM FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ASSE SSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND ITS CLAIM IS ALLOWABLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER, COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ASSE SSEES ARE NOT ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY BUT EXTENDING LOANS TO CLASS B MEMBERS WHO ARE ALL NOMINAL MEMBERS AND NOT RECOGNI ZING 4 ITA NOS.664 TO 674 /MDS/2014 THEM AS MEMBERS FOR AUDIT. HENCE, ASSESSEE DOES NO T QUALIFY FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 3. COUNSEL FOR THE ASSESSEE REITERATING THE SUBMISS IONS MADE BEFORE COMMISSIONER OF INCOME TAX (APPEALS) SUBMITS THAT THERE IS NO BAR IN THE PROVISIONS OF T HE ACT THAT IF CREDIT FACILITIES ARE PROVIDED TO CLASS B MEMBERS D EDUCTION UNDER SECTION 80P(2) IS NOT ALLOWABLE. IN OTHER WOR DS, HE SUBMITS THAT THERE IS NO DISTINCTION BETWEEN CLASS A OR CLASS B MEMBERS, SO FOR AS THE CLAIM FOR DEDUCTION UNDER SECTION 80P(2) IS CONCERNED. COUNSEL FURTHER SUBMITS THAT THE ISSUE UNDER APPEAL IS SQUARELY COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF S-66 08 NARASINGAPURAM PACB LTD., VS. ITO IN ITA NO.919/MDS/2013 DATED 23.05.2014. THE COUNSEL ALSO RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF S-1 145 PERARIGNAR ANNA PRIMARY AGRICULTURAL C-OPERATIVE CR EDIT SOCIETY & OTHERS VS. ITO IN ITA NOS. 402 TO 417/ MDS/2014 DATED 8.5.2014 IN SUPPORT OF HIS CONTENTIONS. THIS TRIBUNAL IN THE CASE OF S-6608 NARASINGAPURAM PACB LTD. IN ITA NO.919/MDS/2013 (SUPRA) CONSIDERED A SIMILAR ISSUE AND 5 ITA NOS.664 TO 674 /MDS/2014 HELD THAT DEFINITION OF MEMBER AS PER SECTION 2(16) OF THE SOCIETIES ACT UNDER WHICH ASSESSEES ARE REGISTERED, THE TERM MEMBER INCLUDES ASSOCIATE MEMBER AND REFERS TO CLASS B MEMBERS BY THE APPELLATE AUTHORITY IS WITH RESPECT TO ASSOCIATE MEMBER. THEREFORE, CREDIT FACILITIES PROV IDED TO ASSOCIATE MEMBER IS ALSO ELIGIBLE FOR DEDUCTION UND ER SECTION 80P(2) OF THE ACT. 4. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISIONS RELIED ON. THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF S-6608 NARASINGAPURAM PACB LTD., VS. ITO IN ITA NO.919/MDS/2013 DATED 23.5.2014 CONSIDERED A SIMILAR ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 80P(2)(A)(I) OF THE ACT HOLD ING AS UNDER:- 3. SHRI M.NARAYANAN, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT, THE CIT(APPEALS) HAS DIS- ALLOWED DEDUCTION U/S.80P(2)(A)(I) ON THE GROUND TH AT THE ASSESSEE HAS EXTENDED CREDIT FACILITIES TO ASSOCIAT E MEMBERS I.E., CLASS-B MEMBERS AND THE INCOME EARN ED FROM THEM IS NOT ELIGIBLE FOR DEDUCTION. THE LD.AR CONTENDED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE HAS TWO TYPES OF MEMBERS CLASS-A AND CLAS S- 6 ITA NOS.664 TO 674 /MDS/2014 B. THE CLASS-A MEMBERS OR NORMAL MEMBERS THEY ENJOY CERTAIN PRIVILEGES SUCH AS VOTING RIGHTS ETC. THE OTHER MEMBERS ARE CLASSIFIED AS CLASS-B MEMBERS OR ASSOCIATE MEMBERS. BOTH CLASS-A AND CLASS-B MEMBERS ARE SHAREHOLDERS OF THE SOCIETY. SECTION 2(16) OF THE TAMIL NADU CO-OPERATIVE SOCIETIES ACT, 1983 DEFINES MEMBER WHICH INCLUDES ASSOCIATE MEMBER. THE LD.AR FURTHER SUBMITTED THAT THE CASE OF THE ASSESSEE 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 TRIBU NAL HAS HELD THAT FOR AVAILING DEDUCTION U/S.80P, CLASS IFICATION OF MEMBERS IN A AND B IS IRRELEVANT. THE LD.AR ALSO PLACED ON RECORD A COPY OF THE ORDER OF THE TRIBUNA L IN ITA NO.197/MDS/2013 IN THE CASE OF ITO VS. M/S.VEERAKERALAM PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY DECIDED ON 11-02-2014 , WHEREIN THE TRIBUNAL HAD HELD THAT THE ACTIVITIES OF PRIMAR Y AGRICULTURAL CO-OPERATIVE CREDIT SOCIETIES ARE NOT AT PAR WITH CO-OPERATIVE BANKS. 4. ON THE OTHER HAND, SHRI ANIRUDH RAI, APPEARING O N BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE IMPUGNED ORDER AND PRAYED FOR THE DISMISSAL OF THE APPEAL OF THE ASSESSEE. 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 DECI SIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL RELIED UPON B Y THE LD.AR OF THE ASSESSEE. IN APPEAL, THE ASSESSEE HAS IMPUGNED THE FINDINGS OF THE CIT(APPEALS) FOR REJEC TING THE CLAIM OF DEDUCTION U/S.80P(2)(A)(I) TO THE ASSE SSEE. THE CIT(APPEALS) IN HIS ORDER HAS HELD THAT THE ASSESSEE-SOCIETY IS NOT A CO-OPERATIVE BANK, THEREF ORE, THE PROVISIONS OF SECTION 80(P)(4) ARE NOT ATTRACTE D. HOWEVER, THE CIT(APPEALS) HAS DENIED THE DEDUCTION ON THE GROUND THAT THE ASSESSEE HAS EXTENDED CREDIT FACILITIES TO CLASS-B MEMBERS, WHO ARE NOT REGULAR MEMBERS OF THE SOCIETY AND THUS THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S.80P(2)(A)(I) & (IV). 7 ITA NOS.664 TO 674 /MDS/2014 6. SECTION 2(16) OF THE SOCIETIES ACT, 1983 DEFINE S MEMBER AS UNDER: MEMBER MEANS A PERSON JOINING IN THE APPLICATION F OR THE REGISTRATION OF SOCIETY AND A PERSON ADMITTED T O MEMBERSHIP AFTER REGISTRATION IN ACCORDANCE WITH TH E PROVISIONS OF THIS ACT, THE RULES AND BYLAWS AND IN CLUDES AN ASSOCIATE MEMBER. A PERUSAL OF DEFINITION OF THE TERM MEMBER CLEARL Y SHOWS THAT MEMBER INCLUDES ASSOCIATE MEMBER. THE REFERENCE OF CLASS B MEMBERS BY CIT(APPEALS) IS W ITH RESPECT TO ASSOCIATE MEMBERS. THE CIT(APPEALS) HAS DENIED DEDUCTION TO THE ASSESSEE ONLY FOR THE REASO N, THAT CREDIT FACILITIES HAVE BEEN EXTENDED TO A PART ICULAR CLASS OF MEMBERS, WHO ARE NOT NORMAL MEMBERS OF THE SOCIETY. WE DO NOT AGREE WITH THE CIT(APPEALS) ON THE ISSUE. THE AUTHORITIES UNDER THE ACT CANNOT GO BEY OND THEIR JURISDICTION AND MAKE CLASSIFICATION WITHIN A CLASSIFICATION OF MEMBERS TO DENY THE BENEFIT OF DEDUCTION. THE CO-ORDINATE BENCH OF TRIBUNAL IN TH E CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTU RAL CO-OPERATIVE CREDIT SOCIETY LTD., VS. ITO (SUPRA) H AS DEALT WITH THIS ISSUE. THE FINDINGS OF THE TRIBUNA L ARE AS UNDER: 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, THE CIT(A) HAS 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 CLASS NOMINAL MEMBERS WHOSE LIABILITY IS LIMITED, AT TH E BEST; TO THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS MEMBERS WHO HAVE 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 SOCIETIES ACT, 1983, GOVERNING THE ASSESSEE-SOCIETY, IT IS EVIDENT FROM THE DEFINITION OF MEMBER U/S 2(16) THAT THE SAME INCLUDES AN ASSOCIATE MEMBER U/S 2(6) APPENDED THEREIN. IN OTHER WORDS, THE NOMINAL MEMBERS ALSO ENJOY STATUTORY RECOGNITION AS PER THE ACT. THE NET RESULT IS THAT ONCE THE NOMINAL MEMBERS OR NON-VOTING MEMBERS ARE THEMSELVES INCLUDED IN THE DEFINITION OF MEMBERS, THEY SATISFY THE RELEVANT CONDITION IMPOSED BY THE LEGISLATURE U/S 80P(2)(A)(I). WE MAKE IT CLEAR THAT WE ARE DEALING 8 ITA NOS.664 TO 674 /MDS/2014 WITH A DEDUCTION PROVISION TO BE INTERPRETED LIBERALLY. IN OUR CONSIDERED OPINION, THE OBJECTION S OF THE REVENUE THAT THE MEMBERS DEFINED IN SUB- CLAUSE(I) OF SECTION 80P(2) SHOULD ONLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A CLASSIFICATION WITHIN CLASSIFICATION WHICH IS BEYOND THE PURVIEW OF TAX STATUTE; UNLESS PROVIDED SPECIFICALLY BY THE LEGISLATURE. MOREOVER, WE FIND THAT THE CASE LAW OF HON'BLE PUNJAB & HARYANA HIGH COURT (SUPRA) ALSO SUPPORTS THE ASSESSEES CASE WHEREIN IT HAS BEEN HELD UNDER THE VERY PROVISION THAT FOR THE PURPOSE OF IMPUGNED DEDUCTION, IT IS IRRELEVANT SO FAR AS CLASSIFICATION OF THE MEMBERS IN A OR B CATEGOR Y IS CONCERNED. WE FOLLOW THE SAME AND ACCEPT CONTENTIONS OF THE ASSESSEE. 7. SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE CO-OPERATIVE BANK LTD., REPORTED AS 300 ITR 24, WHEREIN THE HONBLE HIGH COURT HAD DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE. THE LD.DR HAS NOT BEEN ABL E TO CONTROVERT THE CONTENTIONS OF THE AR. 8. THE ISSUE IN APPEAL IS SIMILAR TO THE ONE ADJ UDICATED 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 ASSESSEE IS ELIGIBLE TO CLAIM BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) & (IV) OF THE ACT. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. 6. AS THE ISSUE IS IDENTICAL, RESPECTFULLY FOLLOWIN G THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, WE HOLD THAT ASSESSEES ARE ENTITLED FOR DEDUCTION UNDER SE CTION 80P(2)(A)(I) OF THE ACT. 9 ITA NOS.664 TO 674 /MDS/2014 7. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 20 TH DAY OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) . ( !' # ) ACCOUNTANT MEMBER / % JUDICIAL MEMBER/ !' % ! /CHENNAI, ( /DATED, 20 TH JUNE, 2014 SOMU #'+, ., /COPY TO: 1. ASSESSEE 2. ASSESSING OFFICER 3. / () /CIT(A) 4. / /CIT 5. , #''3 /DR 6. 6 /GF .