2023 (1) TMI 526 - AT - Income Tax

Deduction u/s.80P(2)(a)(1) - assessee is a primary agricultural cooperative credit society registered under the TamilNadu Cooperative Societies Act - Whether associate members are not entitled to claim of deduction - HELD THAT - We noted that this issue is squarely covered by the decision of Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., 2021 (1) TMI 488 - SUPREME COURT wherein this Tribunal is consistently following the issue of regular members as well as associated members because the Tamil Nadu Co-operative Societies Act permits so. This issue has been considered by this Tribunal in the case of ITO vs. The Tiruchengode Agricultural Producers Cooperative Marketing Society Ltd. 2022 (7) TMI 679 - ITAT CHENNAI wherein we have considered the decision of Hon ble Madras High Court decision in the case of S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd. 2019 (1) TMI 116 - MADRAS HIGH COURT we are of the view that the provision of Section 80P(4) of the Act is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in the banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the Reserve Bank of India. Clearly, therefore, the Assessee s case is out of the provisions of Section 80P(4) of the Act. In relation to the Associate members, we are of the view that the provisions of Section 22 read with Rule 32 of the Tamil Nadu Co-operative Societies Act, 1983 and Tamil Nadu Co-operative Societies Rules clearly determine the procedure to admit Associate members and accordingly in the present case, the Assessee s Co-operative Society has admitted the same. In view of the above finding, we hold that the Assessee is entitled for the claim of deduction u/s.80P(2)(a)(i) of the Act. Thus, we reverse the orders of the lower authorities and allow these three appeals of the Assessee. Ground of Revenue are dismissed.

Summary

Issues:

1. Disallowance of deduction u/s.80P(2)(a)(1) of the Income Tax Act.

Detailed Analysis:

Issue 1: Disallowance of deduction u/s.80P(2)(a)(1) of the Income Tax Act:

The appeal arises from the Commissioner of Income Tax (Appeals) confirming the disallowance of the deduction u/s.80P(2)(a)(1) by the Assessing Officer (AO). The assessee, a primary agricultural cooperative credit society, claimed the deduction, but the AO disallowed it, considering associated members as nominal members. The AO relied on a Supreme Court decision regarding cooperative society functions. The CIT(A) upheld the AO's decision, citing another Supreme Court case. The Tribunal noted that the issue is covered by a Supreme Court decision regarding cooperative bank members. The Tribunal referred to previous cases where the issue was discussed, emphasizing the legality of including associated members. The Tribunal concluded that the assessee is entitled to the deduction under Section 80P(2)(a)(1) as a cooperative society providing financial accommodation to members, including associate members, for agricultural purposes. The Tribunal dismissed the Revenue's appeal and directed the AO to allow the deduction, ultimately allowing the assessee's appeal.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the deduction under Section 80P(2)(a)(1) of the Income Tax Act. The decision was based on the legal status of the cooperative society and its activities, including providing financial assistance to members for agricultural purposes, irrespective of their classification as regular or associate members. The Tribunal's decision was supported by relevant legal precedents and interpretations of the Income Tax Act, ensuring the assessee's entitlement to the claimed deduction.