2014 (6) TMI 219 - AT - Income Tax

Claim of deduction u/s 80P(2) of the Act Credit facilities extended to non-members Held that - The authorities under the Act cannot go beyond their jurisdiction and make classification within a classification of Members to deny the benefit of deduction Relying upon M/s.SL(SPL) 151, Karkudalpatty Primary Agricultural Cooperative Credit Society Ltd., Vs. ITO 2014 (5) TMI 556 - ITAT CHENNAI - 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) also in CIT Vs. Punjab State Cooperative Bank Ltd. 2008 (3) TMI 45 - HIGH COURT PUNJAB AND HARYANA the assessee is eligible for deduction - Revenue has not been able to controvert the contentions of the assessee thus, the assessee is eligible to claim benefit of deduction u/s.80P(2)(a)(i) & (iv) of the Act Decided in favour of Assessee.

Issues:
1. Eligibility of a primary agriculture credit co-operative society for deduction u/s.80P(2) of the Income Tax Act, 1961.
2. Interpretation of the term "Member" under the Tamil Nadu Co-operative Societies Act, 1983.
3. Classification of Members as 'Class-A' and 'Class-B' for deduction purposes.
4. Applicability of deduction u/s.80P(2)(a)(i) & (iv) to co-operative societies providing credit facilities.

Detailed Analysis:
1. The primary issue in this case revolves around the eligibility of a primary agriculture credit co-operative society for deduction under section 80P(2) of the Income Tax Act, 1961. The Assessing Officer contended that the society, despite being registered under the Societies Act, was engaged in activities similar to commercial banking and thus ineligible for the deduction. The CIT(Appeals) concurred, emphasizing that the society provided credit facilities to non-members, leading to a profit motive that disqualified them from claiming the deduction.

2. The interpretation of the term "Member" under the Tamil Nadu Co-operative Societies Act, 1983 played a crucial role in determining the eligibility for the deduction. The definition of "Member" as per Section 2(16) of the Act includes Associate Members, which was pivotal in the argument presented by the assessee. The Tribunal highlighted that the authorities cannot make classifications within classifications of Members to deny the deduction, emphasizing that even nominal or non-voting members fall within the statutory recognition as per the Act.

3. The classification of Members as 'Class-A' and 'Class-B' was a significant point of contention in the case. The CIT(Appeals) denied the deduction based on the extension of credit facilities to Class-B Members, who were not considered regular Members of the society. However, the Tribunal, relying on previous decisions, emphasized that such classifications within the Members for deduction purposes were beyond the purview of the tax statute unless specifically provided by the legislature.

4. The final issue addressed the applicability of deduction under section 80P(2)(a)(i) & (iv) to co-operative societies providing credit facilities. The Tribunal, after considering the arguments and precedents, held that the assessee was indeed eligible to claim the benefit of the deduction, overturning the decision of the CIT(Appeals. The Tribunal's decision was supported by previous judgments and interpretations of the relevant provisions, ultimately allowing the appeal of the assessee.

In conclusion, the judgment clarifies the eligibility criteria for primary agriculture credit co-operative societies to claim deductions under specific sections of the Income Tax Act, emphasizing the interpretation of key terms and the limitations on making classifications within classifications for deduction purposes.

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