2015 (9) TMI 1540 - AT - Income Tax

Entitlement to claim benefit of deduction under section 80P - assessee is providing credit facilities to Class B Members or associate Members who are not recognized as Members of the society - Held that - We find that the issue of whether the assessee is entitled for deduction under section 80P(2) was considered in assessee s own case for the assessment years 2007-08 to 2009-10 and held that assessee is entitled to claim benefit under section 80P(2) CIT(Appeals) has denied deduction to the assessee only for the reason, that credit facilities have been 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. As in case M/s. SL(SPL) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd. Versus The Income Tax Officer 2014 (5) TMI 556 - ITAT CHENNAI wherein held as 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). 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 category is concerned. We follow the same and accept contentions of the assessee - Decided in favour of assessee

Summary

Issues:
- Interpretation of provisions under section 80P(2) of the Income Tax Act for deduction eligibility.
- Classification of members in cooperative societies and their impact on deduction claims.
- Application of Tamil Nadu Co-operative Societies Act, 1983 in determining membership status.

Issue 1: Interpretation of provisions under section 80P(2) of the Income Tax Act for deduction eligibility:
The appeal involved a dispute regarding the eligibility of the assessee to claim a deduction under section 80P(2) of the Income Tax Act. The Assessing Officer contended that the assessee, a primary agriculture cooperative society, engaged in activities similar to commercial banking and therefore was not entitled to the deduction. However, the co-ordinate bench of the Tribunal, based on previous decisions, held that the assessee qualified for the deduction under section 80P(2) as it provided credit facilities to its members. The Tribunal emphasized that the profit motive should not be denied based on the business activities of the assessee.

Issue 2: Classification of members in cooperative societies and their impact on deduction claims:
The key contention revolved around the classification of members within the cooperative society. The Commissioner of Income Tax (Appeals) had rejected the deduction claim under section 80P(2)(a)(i) on the grounds that credit facilities were extended to Class-B Members, who were not recognized as regular members of the society. However, the Tribunal disagreed with this reasoning, citing the definition of 'Member' under the Societies Act, which included Associate Members. The Tribunal highlighted that the classification of members into 'A' and 'B' categories was irrelevant for the purpose of claiming the deduction under section 80P(2)(a)(i).

Issue 3: Application of Tamil Nadu Co-operative Societies Act, 1983 in determining membership status:
The interpretation of the term 'Member' as defined in Section 2(16) of the Tamil Nadu Co-operative Societies Act, 1983 played a crucial role in resolving the dispute. The Tribunal clarified that the definition of 'Member' encompassed Associate Members, which supported the assessee's position in claiming the deduction under section 80P of the Income Tax Act. The Tribunal relied on previous decisions and statutory provisions to emphasize that the inclusion of Associate Members within the definition of 'Member' validated the assessee's eligibility for the deduction.

In conclusion, the judgment addressed the issues of deduction eligibility under section 80P(2), the significance of member classification within cooperative societies, and the application of relevant provisions from the Tamil Nadu Co-operative Societies Act, 1983. The Tribunal's decision favored the assessee, upholding their right to claim the deduction under section 80P based on the interpretation of legal definitions and precedents.