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TMI Blog2017 (4) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... Case Appeal No. 259 of 2016 - - - Dated:- 10-8-2016 - S. Manikumar And D. Krishnakumar, JJ. For the Appellant : J. Narayanasamy, Senior Standing Counsel for Income-tax For the Respondent : B. Vasudevan JUDGMENT D. Krishnakumar, J. 1. This appeal has been filed by the Revenue against the order of the Income-tax Appellate Tribunal Madras C Bench dated September 23, 2015 in I. T. A. No. 825/Mds/2015. 2. The facts of the case are as follows : a. The assessee is a co-operative society engaged in banking and trading activities. It admitted nil return of income, after claiming deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961. The Assessing Officer, disallowed the claim of the assessee on the ground that the asses see had lent monies to the members, who were undertaking non-agricultural/non-farm activities and had received the interest on par with commercial banks. The Assessing Officer found that since interest is received, non-farm sector loans do not qualify for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 and that the assessee's activity is purely in the nature of commercial banking activities. Further, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee will be entitled for deduction under section 80P(2)(a)(iv) even though the issue did not arise for consideration. The Tribunal did not consider the issue as to whether the interest on the loan lent for non-agricultural activity could be entitled for deduction, as per section 80P(2)(a)(i) read with section 80P(4) and the assessee's violation to lend amount on par with commercial banks at higher interest. The Tribunal following its own order had allowed the appeal. 3. Being not satisfied with the order of the Income-tax Appellate Tribunal, in I. T. A. No. 825/Mds/2015, the Revenue has filed the instant appeal, on raising the following substantial questions of law : (i) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 with respect to the interest received from Class B members who were involved in non-agricultural activity ? (ii) Whether on the facts and in the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these appeals is that the Commissioner of Income-tax (Appeals) has erred in confirming the order of the assessing authority in denying the claim of benefits available under section 80P(2)(a)(i) of the Income-tax Act, 1961. The case of the assessee is that the bye-laws of the society allow the assessee to lend/advance loans to its members on agricultural produce loan and on the pledge of gold jewels and silver articles, earned interest income only as per the objects and submitted before the lower authorities that the claim of the assessee has to be considered under section 80P(2)(a)(i) of the Act. 3. This issue has been considered by the Income-tax Appellate Tribunal, Chennai 'B' Bench in the cases of SL(SPL) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd. and S 1382 Mullukuruchi Primary Agricultural Co-operative Credit Society Ltd. in I. T. A. Nos. 292 and 293/Mds/2014 vide common order dated March 17, 2014 and also the decision of 'C' Bench in the cases of M/s. 1915 Vellalapatty Primary Agricultural Co-operative Credit Society Ltd. in I. T. A. Nos. 385 and 386/Mds/2014, M/s. 6648 Attur Mulluvadi Primary Agricultural Co-operative Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.' It is seen that the primary object of the society is to provide financial accommodation to its members to meet all the agricultural requirements and to provide credit facilities to the members, as per the bye-laws and as laid down in section 5(cciv) of the Banking Regulation Act, 1949. Further, from the CPT Circular dated March 12, 2008, it is evident that a credit co-operative society is not a co-operative bank, as defined in Part V of the Banking Regulation Act, 1949. The object of a 'co-operative bank' is to accept deposits from the public, for lending or investment of money. On perusal of the findings of the appellate authority as well as the Appellate Tribunal, it is categorically made clear that the assessee society will not come under the object of the principal business of a co-operative bank, which is a banking business. The benefit of section 80P is excluded for deductions by co-operative banks, whereas the primary agricultural credit societies are entitled for the said deduction . . . In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that we are dealing with the deduction provision to be interpreted liberally. In our considered opinion, the objections of the Revenue that the 'members' defined in sub-clause (i) of section 80P(2)(a) 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. Moreover, we find that the case law of the hon'ble Punjab and Haryana High Court (supra) also supports the assessee's case wherein it has been held 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. 10. The appellate authority, namely, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal has clearly perceived that the assessee is not a co-operative bank and that the activities of the bank are in the nature of accepting deposits, advancing loans, etc., carried on by the assessee, but are confined to its members only and that too in a particular geographical area. Therefore, the respondent society is eligible for deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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