ITO, Salem V. S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd., Salem

ITA 825/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96152 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: M BALU

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO .825/MDS/2015 ( / ASSESSMENT YEAR: 2010-11) THE INCOME TAX OFFICER, WARD-I(1), SALEM. VS M/S. S-1308, AMMAPET PRIMARY AGRICULTURAL CO- OPERATIVE BANK LTD. AMMAPET, SALEM-636 003. PAN:AAALS0228A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. M.BALU, C.A. /DATE OF HEARING : 27 TH AUGUST, 2015 /DATE OF PRONOUNCEMENT : 23 RD SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS) SALEM DATE D 29.01.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL:- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT THE TRIBUNAL IN THE CASE OF SRI CHANDRAPRABHU URBAN CO-OP. CREDIT SOCIETY LTD. (201 4) (45 TAXMAN 14) CLEARLY BROUGHT OUT THE DEFINITION O F BANKING BUSINESS. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT THE TRIBUNAL IN THE CASE OF M/S. SL (SPL) 151, KARKUDALPATTY PACCS LTD. VS. ITO WHIC H 2 ITA NO.825/MDS/2015 HAS BEEN FILED U/S.260A BEFORE THE HONBLE MADRAS H IGH COURT. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT IN TAMILNADU CO-OP. SOCIETI ES ACT, 1983 THE TERM MEMBER IS DEALT IN SECTIONS 4,5,6,8,13,14,15,20,21,23 TO 35 38,40TO 42, 44, 46, 51, 66, 69, 72, 81 AND 85.. IN ALL THESE SECTIONS THE T ERM MEMBER MEANS ONLY SHAREHOLDER MEMBER. HENCE THE INTENTION OF LEGISLATURE IS THAT ASSOCIATE MEMBER W ILL NOT BE TREATED AS MEMBER. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT STATUTORY AUDITOR FOR CO-OP . SOCIETY IN HIS REPORT DISCLOSES ONLY SHARE HOLDER M EMBERS AS MEMBERS AND DID NOT INCLUDE THE ASSOCIATED MEMBE R IN THE REPORT. 5. FOR THE ABOVE REASONS IT IS PRAYED THAT ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE CANCELLED AND THAT OF ASSESSING OFFICER BE RESTORED . 3. COUNSEL FOR THE ASSESSEE SUBMITS THE ISSUE IN AP PEAL HAS BEEN DECIDED BY THE CO-ORDINATE BENCH IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 TO 2009-10 IN ITA NO.904 TO 906/MDS/2013 BY ORDER DATED 6.5.2014 , C OPY OF WHICH IS PLACED ON RECORD. 4. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE CO-ORD INATE BENCH UPON CONSIDERING VARIOUS DECISIONS ON THE ISS UE HELD THAT ASSESSEE IS ENTITLED TO CLAIM BENEFIT OF DEDUC TION UNDER SECTION 80P OF THE ACT. HE SUBMITS THAT THE SAME MA Y BE FOLLOWED. 3 ITA NO.825/MDS/2015 5. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF ASSESSING OFFICER. 6. ON GOING THROUGH THE ORDER OF THE CO-ORDINATE BE NCH OF THE TRIBUNAL IN ITA NOS. 904 TO 906/MDS/2013 DATED 06.05.2014, WE FIND THAT THE ISSUE OF WHETHER THE A SSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80P(2) WAS CON SIDERED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007-0 8 TO 2009-10 AND HELD THAT ASSESSEE IS ENTITLED TO CLAIM BENEFIT UNDER SECTION 80P(2) OBSERVING AS UNDER:- 2. THE ASSESSEE IS A PRIMARY AGRICULTURE CO- OPERATIVE SOCIETY REGISTERED UNDER THE TAMIL NADU CO-OPERATIVE SOCIETIES ACT, 1983 (HEREIN AFTER REFERRED TO AS THE SOCIETIES ACT). THE SOCIETY FO R THE AYS UNDER CONSIDERATION IN ITS RETURN OF INCOME CLAIMED DEDUCTION U/S.80P(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT PROCEEDINGS HELD THAT ALTHOUGH THE ASSESSEE IS REGISTERED AS PRIMARY AGRICULTURE SOCIETY BUT THE ASSESSEE IS ENGAGED IN THE ACTIVITIES AKIN TO COMMERCIAL BANKING AND HAS EARNED INCOME AT PAR WITH OTHER COMMERCIAL BANKS. THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S.80P OF THE ACT. AGGRIEVED AGAINST THE ASSESSMENT ORDER FOR THE RESPECTIVE AYS, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(APPEALS). THE CIT(APPEALS) VIDE IMPUGNED ORDERS HELD THAT THE EXEMPTION U/S.80P IS AVAILABLE TO CO-OPERATIVE SOCIETIES ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. BUT THE ASSESSEE IS PROVIDING CREDIT FACILITIES TO CLASS B 4 ITA NO.825/MDS/2015 MEMBERS OR ASSOCIATE MEMBERS WHO ARE NOT RECOGNIZED AS MEMBERS OF THE SOCIETY. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE CIT(APPEALS) FURTH ER OBSERVED THAT THE PROFIT MOTIVE CANNOT BE DENIED CONSIDERING THE BUSINESS ACTIVITIES OF THE ASSESSEE . THE CIT(APPEALS) DISMISSED THE APPEALS OF THE ASSESSEE FOR ALL THE THREE AYS. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF THE CIT(APPEALS). 3. SHRI M.BALU, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT, THE CIT(APPEALS) HAS DIS-ALLOWED DEDUCTION U/S.80P(2)(A)(I) ON THE GROUND THAT THE ASSESSEE HAS EXTENDED CREDIT FACILITIES TO ASSOCIAT E MEMBERS I.E., CLASS-B MEMBERS AND THE INCOME EARNED FROM THEM IS NOT ELIGIBLE FOR DEDUCTION. THE LD.AR CONTENDED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. THE ASSESSEE HAS TWO TYPES OF MEMBERS CLASS-A AND CLASS-B. THE CLASS-A MEMBERS OR NORMAL MEMBERS THEY ENJOY CERTAIN PRIVILEGES SUCH AS VOTIN G 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 COOPERATIVE 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 COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.292/MDS/2014 IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LTD., VS. ITO DECIDED ON 17-03-2014. IN THE SAID CASE, THE TRIBUNAL HAS HELD THAT FOR AVAILING DEDUCTION U/S.80P, CLASSIFICATION OF MEMBERS IN A AND B IS IRRELEVANT. THE LD.AR ALS O 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 PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETIES ARE NOT AT PAR WITH CO-OPERATIVE BANKS. 5 ITA NO.825/MDS/2015 4. ON THE OTHER HAND, SHRI ANIRUDH RAI, APPEARING O N BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE IMPUGNED ORDERS AND PRAYED FOR THE DISMISSAL OF THE APPEALS 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 DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL RELIED UPON BY THE LD.AR OF THE ASSESSEE. IN ALL TH E THREE APPEALS, THE ASSESSEE HAS IMPUGNED THE FINDINGS OF THE CIT(APPEALS) FOR REJECTING THE CLAI M OF DEDUCTION U/S.80P(2)(A)(I) TO THE ASSESSEE. THE CIT(APPEALS) IN HIS ORDER HAS ADMITTED THE FACT THA T THE ASSESSEE-SOCIETY IS NOT A COOPERATIVE BANK, THEREFORE, THE PROVISIONS OF SECTION 80(P)(4) ARE N OT ATTRACTED. 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. 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 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 THE WORD DEFINITION CLEARLY SHOWS TH AT THE TERM MEMBER INCLUDES ASSOCIATE MEMBER. THE REFERENCE OF CLASS B MEMBERS BY CIT(APPEALS) IS WITH RESPECT TO ASSOCIATE MEMBERS. THE CIT(APPEALS) HAS DENIED DEDUCTION TO THE ASSESSEE ONLY FOR THE REASON, THAT CREDIT FACILITIES HAVE BE EN EXTENDED TO A PARTICULAR CLASS OF MEMBERS, WHO ARE NOT NORMAL MEMBERS OF THE SOCIETY. WE DO NOT AGREE WITH THE CIT(APPEALS) ON THE ISSUE. THE COORDINATE 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 UND ER: 7. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, T HE 6 ITA NO.825/MDS/2015 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 THE BEST; TO THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS MEMBE RS 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 O F THE STATE CO-OPERATIVE SOCIETIES ACT, 1983, GOVERNING T HE 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 OT HER 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 LEGIS LATURE U/S 80P(2)(A)(I). WE MAKE IT CLEAR THAT WE ARE DEAL ING WITH A DEDUCTION PROVISION TO BE INTERPRETED LIBERA LLY. IN OUR CONSIDERED OPINION, THE OBJECTIONS OF THE REVEN UE THAT THE MEMBERS DEFINED IN SUB-CLAUSE(I) OF SECT ION 80P(2) SHOULD ONLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A CLASSIFICATION WITHIN CLASSIFICATION WH ICH 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 (SU PRA) ALSO SUPPORTS THE ASSESSEES CASE WHEREIN IT HAS BE EN 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 CONTENTION S OF THE ASSESSEE. 7. SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE COOPERATIVE BANK LTD., REPORTED AS 300 ITR 24, WHEREIN THE HONBLE HIGH COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD.DR HAS NOT BEEN ABLE TO CONTROVERT THE CONTENTIONS OF THE AR. 8. THE ISSUE IN APPEAL IS SIMILAR TO THE ONE ADJUDICATED BY THE CO-ORDINATE BENCH IN THE CASE OF M/S.SL(SPL) 151, KARKUDALPATTY PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY LTD., VS. ITO (SUPRA). ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM BENEFIT OF DEDUCTION U/S.80P OF THE ACT. 7 ITA NO.825/MDS/2015 7. SINCE THE FACTS AND CIRCUMSTANCES ARE BEING IDEN TICAL FOR THIS ASSESSMENT YEAR ALSO, RESPECTFULLY FOLLOWI NG THE SAID ORDER OF THIS TRIBUNAL, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 23 RD SEPTEMBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .