ITO, Cuddalore V. NLC Indcoserve, Cuddalore

ITA 979/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6296 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TRIUPURA SUNDASRI
• Keywords: Reassessment proceedings

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 979/MDS/2016 / ASSESSMENT YEAR : 2012-13 INCOME TAX OFFICER, WARD 2, CUDDALORE. VS. NLC INDCOSERVE, OPP. TO THERMAL POWER STATION I, NEYVELI 607 807. [PAN: AAAAN 0095M] ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : MS. TRIUPURA SUNDASRI, JCIT )*%& / RESPONDENT BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE & /DATE OF HEARING : 22.05.2017 & /DATE OF PRONOUNCEMENT : 18.08.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- PUDUCHERRY IN ITA NO. 106/CIT(A)- PDY/2014-15 DATED 18.02.2016. :-2-: I.T.A. N0. 979/MDS/2016 2. M/S. NLC INDCOSERVE, OR NLC INDUSTRIAL CO-OPERAT IVE SOCIETY, THE ASSESSEE, IS REGISTERED AS A CO-OPERATIVE SOCIETY U NDER TAMIL NADU CO- OPERATIVE ACT, 1983. IN THE ASSESSMENT MADE FOR TH E ASSESSMENT YEAR 2012- 13, THE ASSESSEE CLAIMED DEDUCTION U/S. 80P(2)(A)(V I) AT RS. 67,98,303/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO ESTABLIS H ITS CLAIM. AFTER CONSIDERING ITS REPLY, THE OBJECT OF THE SOCIETY, I TS MEMBERSHIP QUALIFICATION AND REMOVAL, CONDUCT OF GENERAL MEETINGS, RULES IN CONNECTION WITH GENERAL BODY, CONSTITUTION OF THE BOARD, BYE-LAW ETC., THE AO HELD , INTER ALIA, THAT THE ASSESSEES BOARD CONSISTS OF 11 MEMBERS VIZ., WOMEN MEMBERS 3, SCHEDULE CASTE/SCHEDULE TRIBES 2, NOMINEE OF NLC 4, MD (SENI OR OFFICER) 1, OTHER MEMBER 1, AND THE NLC MAY AT ANY TIME WITHDRAW ANY NOMINEE SO NOMINATED TO FILL UP THE VACANCY OR VACANCIES FOR FRESH NOMIN EES. THUS, THE SOCIETY IS UNDER THE CONTROL OF NLC LIMITED AND THE ACTUAL LAB OUR MEMBER HAD NO INDEPENDENT RIGHT CARRY OUT THE ACTIVITIES OF THE S OCIETY. THE SOCIETY HAS PROVIDED VOTING RIGHTS TO INDIVIDUAL/PERSONS WHO AR E NOMINATED BY THE NLC, WHICH IS AGAINST THE PROVISIONS OF SECTION 80P(2)(A )(VI). SINCE, THE PROVISIONS IN THE RULES AND THE BYE-LAW OF THE SOCIETY IS NOT IN ACCORDANCE WITH THE REQUIREMENT OF 80P(2)(A)(VI), THE AO DENIED THE BEN EFIT FOR DEDUCTION CLAIMED BY THE ASSESSEE AND ADDED IT TO THE TAXABLE INCOME. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). :-3-: I.T.A. N0. 979/MDS/2016 3. THE CIT(A) FOLLOWING THE DECISIONS OF THE HONBL E HIGH COURT OF MADRAS IN THE CASE OF CIT VS SALEM DISTRICT PRINTERS SERVI CE INDUSTRIAL CO-OPERATIVE SOCIETY LTD [2007] 290 ITR 371 AND THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS PALGHAT FOOD CORPORATION OF INDIA, L ABOUR CONTRACT CO- OPERATIVE SOCIETY LTD [2003] 266 ITR 315 HELD THAT THE VOTING RIGHTS IN ELECTIONS HAVE NOT BEEN CONFERRED ON THE NLC OR ITS NOMINATED PERSONS AS PER RULE 22 OF BYE-LAWS OF THE ASSESSEES SOCIETY, HEN CE, THE PROVISIONS OF SECTION 80P(2)(A)(VI) ARE NOT VIOLATED BY THE ASSESSEE SOCI ETY AND IT IS ELIGIBLE FOR DEDUCTION. AGGRIEVED, THE REVENUE FILED THIS APPEA L, INTER ALIA, WITH THE FOLLOWING GROUNDS: 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N DELETING THE ADDITION MADE ON THE GROUND THAT NLC IS A MEMBER AS PER BYE-LAWS OF THE SOCIETY. IF NLC HAS VOTING RIGHTS, ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P. IF NLC HAS NO VOTING RIGHTS, T HEN IT IS ELIGIBLE FOR THE DEDUCTION U/S. 80P 3. THE COMMISSIONER OF INCOME TAX (APPEALS) HAD FAI LED TO NOTE THAT THE CORE ISSUE IS THE NON RESTRICTION OF THE V OTING RIGHT OF NLC TO ONE VOTE AGAINST THE FOUR VOTES ALLOWED DURING THE MEETING OF THE BOARD OF GENERAL BODY. 4. THE COMPANY FAILED TO APPRECIATE THE FACT THAT O UT OF 11 MEMBERS, DURING THE DECISION MAKING PROCESS, ONLY F IVE MEMBERS ARE ELECTED MEMBERS, WHICH CONSTITUTES LESS THAN 50% OF THE TOTAL VOTES. THE OTHERS ARE NOMINATED MEMBERS WHO CONSTITUTE MOR E THAN 50%. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTE THAT THE AFFAIRS OF THE ASSESSEE SOCIETY ARE CONTROLLED BY T HE NLC. 6. SUBSEQUENT TO COMPLETION OF THE ASSESSMENT FOR T HIS ASSESSMENT YEAR 2012-13, REVENUE AUDIT PARTY HAD RAISED OBJECT ION FOR NOT :-4-: I.T.A. N0. 979/MDS/2016 CONSIDERING THE ABOVE ISSUE FOR THE EARLIER ASSESSM ENT YEAR 2010-11 WAS REOPENED AND THE REASSESSMENT PROCEEDINGS ARE PENDI NG. 4. THE DR TOOK US THROUGH THE ASSESSMENT ORDER AND ARGUED THAT : A. UNDER THE BYE-LAW RULE NO. 6, NLC COULD BE ENROL LED AS A MEMBER OF SOCIETY B. UNDER RULE 22 OF BYE-LAW EVERY MEMBER HAS A RIGH T TO VOTE (INCLUDING THE NOMINATED MEMBERS OF NLC ALSO IN THE GENERAL MEETING) C. UNDER RULE NOS. 19, 24 & 32 OF BYE-LAW NLC NOMIN ATED MEMBERS WERE GIVEN MAJOR ROLES IN THE BOARD. D. SEC 80P PROVIDES AS A PRECONDITION THAT THE BYE- LAWS RESTRICT THE RIGHT TO VOTE TO I. THE INDIVIDUALS CONTRIBUTING THEIR LABOUR II. COOPERATIVE CREDIT FINANCING FUNDING OPERATIO NS AND III. STATE GOVERNMENT E. SINCE THE BYELAWS PERMIT THE VOTING BY NLC, THE REQUISITE CONDITIONS FOR CLAIMING THE DEDUCTION ARE NOT FULFI LLED. F. THE AO ALSO MADE AN OBSERVATION RELATING TO AMEN DMENT OF BYE- LAW RELATING TO BUSINESS WHERE THE WORDS THROUGH S UBCONTRACT WAS STRUCK THROUGH AND OBSERVED THAT THE SAME WAS VIOLA TIVE OF THE REQUIREMENTS OF SEC 80P. IN VIEW OF THE ABOVE, THE AO HAS CORRECTLY REJECTED THE CLAIM OF THE DEDUCTION . SHE PLEADED ON THE BASIS OF THE GROUNDS OF APPEAL THAT THE APPEAL MAY BE ALLOWED. :-5-: I.T.A. N0. 979/MDS/2016 5. PER CONTRA, THE AR SUBMITTED THAT THE CIT(A) HAS ELABORATELY EXAMINED THE MEMBERSHIP OF THE SOCIETY, VOTING RITE , THE MAJOR ROLES OF THE NOMINATED MEMBERS IN THE BOARD, AMENDMENT IN BY E LAWS, THE ACTUAL OPERATION OF THE SOCIETY ETC , APPLIED THE RATIOS OF THE HONBLE HIGH COURTS OF MADRAS & KERALA IN THE CASES OF CIT VS SALEM DISTRICT PRINTERS SERVICE INDUSTRIAL CO-OPERATIVE SOCIETY LT D [2007] 290 ITR 371 (MAD)AND CIT VS PALGHAT FOOD CORPORATION OF INDIA, LABOUR CONTRACT CO- OPERATIVE SOCIETY LTD [2003] 266 ITR 315 (KER) AND ALLOWED THE APPEAL. HENCE, HE PLEADED THAT THE REVENUES APPEAL MAY BE DISMISSED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE RELEVAN T PORTION OF THE ORDER OF THE CIT(A) IS EXTRACTED AS UNDER : 7.11 THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT V. SALEM DISTRICT PRINTERS SERVICE INDUSTRIAL CO-OPERATIVE SOCIETY LTD [2007J 290 ITR 371 HAS HELD WITH REFERENCE TO THE PROVISO TO S ECTION 80P OF THE ACT THAT 'OUR READING OF THE PROVISO ONLY SHOWS THAT IN RESPECT OF CLASSES OF MEMBERS MENTIONED THEREIN, THE SOCIETY SHOULD RESTR ICT THE VOTING RIGHTS. THE PROVISO DOES NOT MEAN THAT THE SOCIETY CANNOT H AVE ANY OTHER CLASSES OF MEMBERS. IN OTHER WORDS, CLASSES OF MEMB ERS ENUMERATED IN THE PROVISO EXTRACTED ABOVE ARE ONLY A FEW TYPES OF MEMBERS THAT WOULD HAVE BEEN ADMITTED IN THE SOCIETY AND IT DOES NOT M EAN NO PERSON NOT FALLING WITHIN THE THREE CLASSES ENUMERATED IN THE PROVISO, COULD BECOME MEMBER OF THE SOCIETY'. FOLLOWING THIS DECISION OF JURISDICTIONAL HIGH COURT, I HOLD THAT THERE IS NO BAR FOR NLC BEING ME MBER OF THE ASSESSEESOCIETY AND THIS IS NOT SUFFICIENT TO HOLD THE SOCIETY INELIGIBLE FOR DEDUCTION U/S. 80P. :-6-: I.T.A. N0. 979/MDS/2016 7.12 THE ISSUE OF VOTING RIGHTS OF MEMBERS WAS CON SIDERED BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT V. PAL GHAT FOOD CORPORATION OF INDIA LABOUR CONTRACT CO-OPERATIVE SOCIETY LTD [ 2003J 266 ITR 315 WHEREIN THE COURT HAS HELD THAT IT IS NECESSARY TO ASCERTAIN STATUS OF MEMBERS, 1.E. WHETHER THEY COULD BE TREATED AS ACTI VE MEMBERS OR WERE MERE NOMINAL MEMBERS IN SOCIETY WITH REFERENCE TO S ECTION 20 OF THE KERALA CO-OPERATIVE SOCIETIES ACT AND REMITTED BAC K THE N MATTER TO TRIBUNAL FOR ADJUDICATION AS THE TRIBUNAL HAD FAILE D TO CONSIDER STATUS OF 'SYMPATHISERS' IN ACCORDANCE WITH PROVISIONS OF THE KERALA CO-OPERATIVE SOCIETIES ACT. THE OPERATIVE PORTION OF THE ORDER I S REPRODUCED BELOW: 5, THE FOLLOWING FACTS ARE NOT IN DISPUTE. THE ASS ESSEE IS A CO-OPERATIVE SOCIETY, THE MEMBERS OF WHICH ARE ENGA GED IN LABOUR WORK, ON CONTRACT WITH THE FOOD CORPORATION O] INDIA, PALAKKAD. THE ENTIRE INCOME, BELONGING TO THE SOCIE TY ARE FROM THE SAID CONTRACT WORK. THE EXEMPTION SOUGHT F OR BY THE ASSESSEE WAS DENIED SOLELY ON THE GROUND THAT T HE BYE- LAWS OF THE SOCIETY ARE CONTRARY TO THE PROVISO TO SECTION 80P(2)(A). THEREFORE, IT IS NECESSARY TO REFER TO T HE PROVISIONS OF SECTION 8OP. UNDER SECTION 80P, IN TH E CASE OF A CO-OPERATIVE SOCIETY, IF THE GROSS TOTAL INCOME I NCLUDES ANY INCOME REFERREDTO IN SUB-SECTION (2), THERE SHALL B E DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PRO VISIONS OF THIS SECTION, THE SUM SPECIFIED IN SUB-SECTION ( 2) IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. UNDER C LAUSE (VI) OF SUB-SECTION (2), THE INCOME, WHICH RELATES TO THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS, I S LIABLE TO BE DEDUCTED. THERE IS NO DISPUTE THAT THE INCOME OF THE CO- OPERATIVE SOCIETY RELATES TO THE COLLECTIVE DISPOSA L OF THE LABOUR OF ITS MEMBERS. HOWEVER, THE PROVISO TO SUB- SECTION (2)(A) SAYS THAT IN CASE OF A CO-OPERATIVE SOCIETY FALLING UNDER SUB-CLAUSE (VI) OR SUB-CLAUSE (VII), THE RULE S AND BYE- LAWS OF THE SOCIETY SHOULD RESTRICT THE VOTING RIGH T TO THE :-7-: I.T.A. N0. 979/MDS/2016 FOLLOWING CLASSES OF ITS MEMBERS, VIZ. (1) THE INDI VIDUALS WHO CONTRIBUTE THEIR LABOUR OR, AS THE CASE MAY BE, CAR RY ON THE FISHING OR ALLIED ACTIVITIES; (2) THE CO-OPERATIVE CREDIT SOCIETIES WHICH PROVIDE FINANCIAL ASSISTANCE TO THE SOCIETY; AND (3) THE STATE GOVERNMENT. AS WE HAVE ALREADY NO TED, UNDER THE BYE-LAWS OF THE SOCIETY VOTING POWER IS G IVEN TO ITS MEMBERS, WHO ARE SYMPATHISERS, WHO HAVE NO RIGHT TO WORK, ALSO' (CLAUSE 5 OF THE BYE-LAWS DEALT WITH BY THE A SSESSING OFFICER IN PARAGRAPHS 2 AND 3 OF THE ASSESSMENT ORD ER). THUS, GOING BY THE PROVISO MENTIONED ABOVE, THE INH IBITION CONTAINED IN THE SAID PROVISO WILL APPLY. HOWEVER, THE CASE OF THE ASSESSEE IS THAT THE CLAUSE 5 OF THE BYE LAWS, GIVING, VOTING RIGHT TO THE MEMBERS WHO ARE SYMPATHISERS WI THOUT ANY RIGHT TO LABOUR, IS AGAINST THE PROVISIONS OF T HE CO- OPERATIVE SOCIETIES ACT, AND THE RULES FRAMED THERE UNDER, AND THAT RULE 5 OF THE SAID RULES CLEARLY PROVIDES THAT THE BYE-LAWS OF THE SOCIETY SHALL NOT BE CONTRARY TO TH E PROVISIONS OF THE ACT. IT IS ALSO THE ASSESSEE'S CA SE THAT SECTION 20 OF THE ACT INTERDICTS THE CONFERMENT OF ANY VOTING RIGHT TO PERSONS OTHER THAN MEMBERS (IF THE SOCIETY . HENCE, WE HAVE TO REFER TO THE PROVISIONS OF THE CO-OPERAT IVE SOCIETIES ACT AND THE RULES FRAMED THEREUNDER. SECT ION 20 OF THE ACT READS THUS: 'VOTES OF MEMBERS.-EVERY MEMBER OF A SOCIETY SHALL HAVE ONE VOTE IN THE AFFAIRS OF THE SOCIETY: PROVIDED THAT (A) NOMINAL OR ASSOCIATE MEMBER SHALL NOT HAVE THE RIGHT TO VOTE; (B) WHERE THE MOVEMENT IS 11 MEMBER OF THE SOCIETY, EACH PERSON NOMINATED BY THE GOVERNMENT ON THE COMMITTEE OF THE SOCIETY SHALL HAVE ONE VOTE :-8-: I.T.A. N0. 979/MDS/2016 EXCEPT WHEN THE RIGHT TO VOTE IS TO BE EXERCISED FO R ELECTION OF OFFICE BEARERS OF THE SOCIETY; THE EXPRESSION 'NOMINAL OR ASSOCIATE MEMBER' IS DEFINED IN SECTION 2(M) AS FOLLOWS: '(M)'NOMINAL OR ASSOCIATE MEMBER' MEANS A MEMBER WHO POSSESS ONLY SUCH PRIVILEGES AND RIGHTS OF A MEMBER WHO IS SUBJECT ONLY TO SUCH LIABILITIES OF A MEMBER AS MAY BE SPECIFIED IN THE BYE- LAWS;' 6. THUS, GOING BY THE PROVISIONS OF SECTION 20, VOT ING RIGHT IS CONFERRED ONLY TO AN ACTIVE MEMBER OF A SO CIETY. IT IS ALSO SPECIFIED THAT A NOMINAL OR ASSOCIATE MEMBER S HALL NOT HAVE THE RIGHT TO VOTE. THUS, THE QUESTION THAT ARI SE FOR CONSIDERATION IS AS TO WHETHER SYMPATHISERS, WHO HA VE NO RIGHT TO LABOUR CAN BE TREATED AS ACTIVE MEMBERS OF A SOCIETY, OR ONLY NOMINAL OR ASSOCIATE MEMBER FALLIN G UNDER CLAUSE (A) OF THE PROVISO TO SECTION 20 READ WITH S ECTION 2(M). RULE 5 OF THE CO-OPERATIVE SOCIETIES RULES CL EARLY PROVIDES THAT THE BYE-LAWS OF A CO-OPERATIVE SOCIET Y SHALL (LOT BE CONTRARY TO THE PROVISIONS OF THE ACT. IF THE VO TING POWER CONFERRED TO MEMBERS, WHO ARE SYMPATHISERS, WITHOUT THE RIGHT TO LABOUR UNDER CLAUSE (5) OF THE BYE-LAWS IS CONTRARY TO THE PROVISIONS OF SECTION 20 OF THE CO-OPERATIVE SOCIETIES ACT, CERTAINLY, BY VIRTUE OF THE PROVISIONS OF RULE 5, THE SAID RIGHT CONFERRED HAS TO BE HELD TO BE ULTRA VIRES, A ND CONSEQUENTLY, HAS TO BE OF NO EFFECT. ' 7.13 THE ANALOGY OF THE DECISION OF HON'BLE KERALA HIGH COURT IS VERY MUCH APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF T HE CASE UNDER CONSIDERATION. FOR THIS PURPOSE, THE PROVISIONS OF THE TAMIL NADU CO- OPERATIVE SOCIETIES ACT 1983 (TNCSA 1983, IN SHORT) ARE EXAMINED. UNDER CHAPTER III OF THE SAID ACT, QUALIFICATIONS FOR MEMBERSHIP AND THEIR RIGHTS AND LIABILITIES' ARE GIVEN. UNDER THIS CHAPTER, SECTION 21 DEALS WITH 'QUALIFICATIONS FOR MEMBERSHIP OF SOCIETY'. CL AUSE (IV) INCLUDE 'ANY :-9-: I.T.A. N0. 979/MDS/2016 BODY OF PERSONS WHETHER INCORPORATED OR NOT AND WHE THER OR NOT ESTABLISHED BY OR UNDER ANY LAW, IF SUCH BODY IS AP PROVED BY THE GOVERNMENT IN THIS BEHALF BY GENERAL OR SPECIAL ORD ER, SHALL BE ELIGIBLE FOR ADMISSION AS A MEMBER OF A REGISTERED SOCIETY. AS T HE BYE-LAWS OF THE SOCIETY HAS BEEN APPROVED BY THE REGISTRAR OF COOPE RATIVE SOCIETIES ON BEHALF OF THE STATE GOVERNMENT, MEMBERSHIP OF NLC I N THE SOCIETY CAN BE CONSIDERED AS CONFIRMING TO THE PROVISIONS OF TH E TNCSA, 1983. SECTION 26 UNDER THE SAME CHAPTER DEALS WITH VOTES OF MEMBERS' OF THE SOCIETY. SUB-SECTION (4) OF SECTION 26 CLEARLY PROH IBITS RIGHTS OF NOMINEE OF GOVERNMENT, NOMINATED MEMBER S, ETC TO VOTE AT E LECTIONS. THE BYE- LAWS OF THE SOCIETY WHICH HAS BEEN ELABORATELY DISC USSED IN. THE 'PRECEDING PARAGRAPHS CLEARLY SHOWN THAT THEY CONFI RM TO THE PROVISIONS OF THE TNSCA, 1983. CHAPTER IV OF (INCSA, 1983 DEAL S WITH THE MANAGEMENT OF REGISTERED SOCIETIES AND CONDUCT OF G ENERAL MEETINGS COMES UNDER THIS CHAPTER AND EXPRESSLY DEALT IN SEC TION 32 OF THE ACT. THUS; DAILY MANAGEMENT OF THE SOCIETY, I.E. DAY-TO- DAY AFFAIRS OF THE SOCIETY WHICH.IS MANAGED BY THE BOARD ELECTED UNDER BYE-LAWS OF THE SOCIETY IS DISTINCT FROM THE GENERAL BODY OF THE SO CIETY WHERE THE RIGHTS OF NOMINATED MEMBERS TO VOTE HAS BEEN CLEARLY RESTR ICTED AND THEREFORE, THE OPERATION OF PROVISO TO SUB-SECTION (2) OF SECT ION 80P DOES NOT HAVE ANY APPLICATION IN THIS CASE. AS OBSERVED BY THE KE RALA HIGH COURT, ANY DEVIATION TO THE TNSCA, 1983 IN THE BYE-LAWS WOULD NOT HAVE ANY EFFECT AND IT WOULD ONLY RENDER DE-REGISTRATION OF THE SOC IETY UNDER THE ACT. THE AO HAS NOT SHOWN THAT THE REGISTRATION OF THE S OCIETY HAS BEEN REVOKED UNDER LAW FOR VIOLATION OF THE PROVISIONS O F TNSCA, 1983. FOLLOWING THE 97TH AMENDMENT TO THE CONSTITUTION OF INDIA, CONSEQUENT AMENDMENTS IN TNSCA 1983 AND TNSCR 1988, THE BYE-LA WS OF THE ASSESSEE SOCIETY MAY ALSO REQUIRE AMENDMENTS IN TAN DEM WITH THOROUGH OVERHAUL OF ITS CLAUSES. 7.14 COMBINED READING OF THE LATEST TAMIL NADU COO PERATIVE SOCIETIES ACT 1983 AND THE TAMIL NADU COOPERATIVE SOCIETIES R ULES 1988 WITH THE RELEVANT PROVISIONS OF THE BYE LAWS OF THE ASSESSEE SOCIETY AND THE :-10-: I.T.A. N0. 979/MDS/2016 APPRECIATION OF ACTUAL FUNCTIONING OF THE ASSESSEE SOCIETY WITH PURPOSIVE AND HARMONIOUS INTERPRETATION IN THE BACK-DROP OF T HE PROVISO TO S 80P(2)(A)(VI) OF THE INCOME TAX ACT 1961 SHOW THE F OLLOWING: A. NLC HAS BEEN CO-OPTED AS A MEMBER ONLY FOR OPERATIONAL EASE AND CONVENIENCE TO ASSIST THE BOAR D OF THE ASSESSEE SOCIETY IN ADMINISTRATION. WITHOUT THE ASS ISTANCE OF NLC, SMOOTH RUNNING OF THE ASSESSEE SOCIETY WILL BE PRACTICALLY DIFFICULT. B. THE ULTIMATE AUTHORITY OF THE ADMINISTRATION IS VESTED WITH THE GENERAL BODY OF THE MEMBERS. C. NLC OR ITS NOMINATED MEMBERS, IF ANY, DO NOT HAV E VOTING RIGHTS IN ELECTIONS OF THE ASSESSEE SOCIETY AS PER RULE 22 OF ITS BYELAWS. D. BOARD IS RESPONSIBLE FOR MANAGEMENT OF AFFAIRS O F THE ASSESSEE SOCIETY AND NOT NLC BOARD CAN HAVE 11 MEMB ERS, OF WHICH 4 CAN BE NOMINATED FROM NLC BY GOVERNMENT. RULE 22 OF THE BYELAWS OF THE ASSESSEE SOCIETY STIPULATE S THAT T HE NOMINATED MEMBERS OF THE BOARD HAVE NO VOTING RIGHT S IN ELECTIONS. 7.15 THEREFORE, FOLLOWING THE ABOVE DECISIONS OF T HE HON'BLE HIGH COURTS OF MADRAS AND KERALA (SUPRA) AND AS THE VOTING RIGHTS IN ELECTIONS HAVE NOT BEEN CONFERRED ON THE NLC OR ITS NOMINATED MEMBERS AS PER RULE 22 OF BYELAWS OF ASSESSEE SOCIETY, I A M OF THE VIEW THAT THE PROVISIONS OF THE PROVISO TO S 80P(2)(A)(VI) ARE NO T VIOLATED BY THE ASSESSEE SOCIETY AND SO IT IS ELIGIBLE FOR THE DEDU CTION. 7. FROM THE ABOVE, IT IS CLEAR THAT THE BOARD OF TH E ASSESSEE SOCIETY IS RESPONSIBLE FOR THE AFFAIRS OF THE ASSESSEE SOCIETY AND NOT THE NLC BOARD .THE ULTIMATE AUTHORITY OF ITS ADMINISTRATION IS VESTED WITH THE GENERAL BODY OF THE MEMBERS. NLC OR ITS NOMINATED MEMBERS, IF ANY, DO N OT HAVE VOTING RIGHTS IN :-11-: I.T.A. N0. 979/MDS/2016 ELECTIONS OF THE ASSESSEE SOCIETY AS PER RULE 22 OF ITS BYELAWS. NLC HAS BEEN CO-OPTED AS A MEMBER ONLY FOR OPERATIONAL EASE AND CONVENIENCE TO ASSIST THE BOARD OF THE ASSESSEE SOCIETY IN ADMINISTRATION, WI THOUT WHICH THE SMOOTH RUNNING OF THE ASSESSEE SOCIETY WILL BE PRACTICALLY DIFFICULT .FURTHER, THE REGISTRATION OF THE SOCIETY HAS NOT BEEN REVOKED UN DER LAW FOR VIOLATION OF THE PROVISIONS OF TNSCA, 1983. ON SUCH FACTS AND CIRCUM STANCES, THE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY INTERFERENCE AND HENCE THE REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED ORDER PRONOUNCED ON FRIDAY, THE 18 TH DAY OF AUGUST, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 18 TH AUGUST, 2017 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF