2014 (6) TMI 596 - AT - Income Tax

Claim of deduction u/s 80P(2) of the Act - Activities akin to commercial banking - Scope of term Member u/s 2(16) of Societies Act, 1983 Held that - The authorities 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 Co-operative Credit Society Ltd. Versus The Income Tax Officer 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) - 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 - 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 - the assessees are eligible to claim benefit of deduction u/s.80P(2)(a)(i) of the Act Decided in favour of Assessee.

Summary

Issues:
Interpretation of Section 80P(2)(a)(i) of the Income Tax Act for a primary agriculture credit co-operative society providing credit facilities to its members.

Analysis:
The Appellate Tribunal ITAT Chennai dealt with two appeals concerning the Assessment Years 2007-08 and 2009-10 filed by a primary agriculture credit co-operative society under the Tamil Nadu Co-operative Societies Act, 1983. The society claimed deduction under Section 80P(2) of the Income Tax Act, but the Assessing Officer disallowed it, considering the society akin to commercial banking. The Commissioner of Income Tax (Appeals) upheld this decision, stating that the society's provision of credit facilities to non-members, specifically Class 'B' Members, made it ineligible for the deduction. The society argued that the classification of members as 'A' and 'B' was irrelevant for claiming the deduction, citing precedents from the Tribunal and the High Court.

The Tribunal analyzed the definition of 'Member' under the Societies Act, which includes Associate Members. It disagreed with the CIT(Appeals) and held that denying the deduction based on providing credit facilities to a specific class of members was unjustified. Referring to previous decisions, the Tribunal emphasized that the legislative intent was to interpret the deduction provision liberally. It highlighted that including 'nominal' members within the definition of 'members' satisfied the conditions for deduction under Section 80P(2)(a)(i). The Tribunal also noted a similar ruling by the Punjab & Haryana High Court supporting the assessee's case. As the issue was akin to a previous judgment, the Tribunal ruled in favor of the assessee, allowing the deduction under Section 80P(2)(a)(i) and (iv).

In conclusion, the Tribunal held that the primary agriculture credit co-operative society was eligible for the deduction under Section 80P(2)(a)(i) and (iv) of the Income Tax Act. The appeals of the assessee were allowed, emphasizing the importance of interpreting tax statutes liberally to benefit cooperative societies providing credit facilities to their members.