2014 (5) TMI 813 - AT - Income Tax

Entitlement for deduction u/s 80P(2)(a)(i) of the Act - Society cooperative bank or not Held that - Held that - Following M/s.SL(SPL) 151, Karkudalpatty Primary Agricultural Cooperative Credit Society Ltd. Vs. ITO 2014 (5) TMI 556 - ITAT CHENNAI - it is evident from the definition of member u/s 2(16) that the same includes an associate member u/s 2(6) - the nominal members also enjoy statutory recognition as per the Act - 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) - the objections 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 - the assessee is entitled to claim benefit of deduction u/s.80P of the Act Decided in favour of Assessee.

Summary

Issues:
Appeal against disallowance of deduction u/s.80P(2)(a)(i) for providing credit facilities to Class-B Members by a primary agriculture co-operative society.

Analysis:
The assessee, a primary agriculture co-operative society, filed three appeals against the order of the Commissioner of Income Tax (Appeals) disallowing deduction u/s.80P(2) for AYs 2007-08, 2008-09, and 2009-10. The Assessing Officer held the assessee ineligible for the deduction as it was engaged in activities similar to commercial banking. The CIT(Appeals) upheld this decision, stating that the society provided credit facilities to Class 'B' Members, not recognized as full Members, and had profit motives. The assessee contended that it provided credit facilities to its Members, including Class 'B' Members, who were recognized under the Tamil Nadu Co-operative Societies Act, 1983. The Tribunal considered precedents where the classification of Members as 'A' or 'B' was deemed irrelevant for claiming deduction u/s.80P. The Tribunal disagreed with the CIT(Appeals) and allowed the appeals, holding the assessee eligible for the deduction.

The CIT(Appeals) denied the deduction based on the classification of Members and the profit motive of the society. However, the Tribunal emphasized that the definition of 'Member' under the Societies Act includes Associate Members, covering Class 'B' Members. The Tribunal cited a previous case where nominal Members were considered within the definition of 'members' for deduction purposes. Additionally, the Tribunal referred to a High Court case supporting a liberal interpretation of deduction provisions. The Tribunal found in favor of the assessee, noting that the issue was similar to a previous case where the deduction was allowed. Consequently, the Tribunal held that the assessee was entitled to claim the benefit of deduction u/s.80P.

In conclusion, the Tribunal allowed the appeals, emphasizing that the assessee, as a primary agriculture co-operative society, was eligible for deduction u/s.80P despite providing credit facilities to Class 'B' Members. The Tribunal's decision was based on the inclusive definition of 'Member' under the Societies Act and precedents supporting a broad interpretation of deduction provisions.