Attur Pudupet Primary Agricultural Co-operative Credit Society Ltd., Salem V. ITO, Salem

ITA 675/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6317 (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: K THANGARAJU

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 ./I.T.A.NO. 675/MDS/2014 ( / ASSESSMENT YEAR: 2007-08) ATTUR PUDUPET PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY LTD. NO.12, KARUTHAN STREET, PUDUPET, ATTUR, SALEM DIST. VS INCOME TAX OFFICER, WARD-II(3), SALEM-636 007. PAN: AAAAS5661A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.K.THANGARAJU, FCA /RESPONDENT 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 CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM DATED 31.12.2013 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT DENIED DEDUCTION UNDER SECTION 80P OF THE ACT ON THE GROUND THAT ASSESSE DID NOT FULFILL THE CONDITION O F BEING PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETY EXTENDING CREDIT 2 ITA NO. 675/MDS/20 14 FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER FU RTHER HELD THAT ASSESSE IS NOT BANK ELIGIBLE FOR DEDUCTION U NDER SECTION 80P(2) OF THE ACT. HOWEVER, THE ASSESSING OFFICER R ESTRICTED THE DEDUCTION UNDER SECTION 80P TO THE INCOME EARN ED FROM FARM SECTOR OUT OF BANKING BUSINESS AND TO THE INCO ME FROM THE CREDIT FACILITIES EXTENDED TO ITS MEMBERS. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD T HAT ASSESSE IS NOT A BANK AND IS A PRIMARY AGRICULTU RAL CREDIT SOCIETY AND SHOULD BE CONSIDERED WHETHER IT IS C ORRECT IN MAKING THE CLAIM FOR DEDUCTION UNDER SECTION 80P(2) (A)(I) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ASSESSEE IS A PRIMARY AGRICULTU RAL CREDIT SOCIETY AND ITS CLAIM IS ALLOWABLE UNDER SECTION 80 P(2)(A)(I) OF THE ACT. HOWEVER, COMMISSIONER OF INCOME TAX (APPEA LS) HELD THAT ASSESSE IS NOT ENGAGED IN THE BUSINESS O F PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY BUT EXTENDIN G LOANS TO CLASS B MEMBERS WHO ARE ALL NOMINAL MEMBERS AND N OT RECOGNIZING THEM AS MEMBERS FOR AUDIT. HENCE, ASSE SSEE DOES NOT QUALIFY FOR DEDUCTION UNDER SECTION 80P(2) (A)(I) OF THE ACT. 3 ITA NO. 675/MDS/20 14 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 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 4 ITA NO. 675/MDS/20 14 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- 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 5 ITA NO. 675/MDS/20 14 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). 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 6 ITA NO. 675/MDS/20 14 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, T HE 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 RESUL T IS THAT ONCE THE NOMINAL MEMBERS OR NON-VOTING MEMBERS ARE THEMSELVES INCLUDED IN THE DEFINITION O F MEMBERS, THEY SATISFY THE RELEVANT CONDITION IMPOSED BY THE LEGISLATURE U/S 80P(2)(A)(I). WE MAK E IT CLEAR THAT WE ARE DEALING WITH A DEDUCTION PROVI SION TO BE INTERPRETED LIBERALLY. IN OUR CONSIDERED OPIN ION, THE OBJECTIONS OF THE REVENUE THAT THE MEMBERS DEFINED IN SUB-CLAUSE(I) OF SECTION 80P(2) SHOULD O NLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A CLASSIFICATION WITHIN CLASSIFICATION WHICH IS BEYON D THE PURVIEW OF TAX STATUTE; UNLESS PROVIDED SPECIFICALL Y BY THE LEGISLATURE. MOREOVER, WE FIND THAT THE CASE LA W 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 7 ITA NO. 675/MDS/20 14 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 ASSESSE IS ENTITLED FOR DEDUCTION UNDER SECT ION 80P(2)(A)(I) OF THE ACT. 7. IN THE RESULT, APPEAL OF THE ASSESSE IS ALLOWE D. 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 8 ITA NO. 675/MDS/20 14 /0 10 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. 0 6 /DR 6. /GF .