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TMI Blog2018 (6) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Proviso to S 80P(2)(a)(vi) are not violated by the assessee society and so it is eligible for the deduction - Decided in favour of assessee - I.T.A. No. 2539/CHNY/2017 - - - Dated:- 18-6-2018 - Shri N.R.S. Ganesan, Judicial Member And Shri Abraham P. George, Accountant Member Appellant by : Shri. Sanath Kumar Raha, JCIT. Respondent by : Shri. R. Vijayaraghavan, Adv. ORDER Per Abraham P. George, Accountant Member In this appeal filed by the Revenue, which is directed against an order dated 29.06.2017 of the ld. Commissioner of Income Tax (Appeals)-Puducherry, it is aggrieved that disallowance made by the ld. Assessing Officer on a claim made by the assessee u/s.80P(2) (a) (vi) of the Income Tax Act, 1961 (in short the Act ) was deleted. 2. Ld. Counsel for the assessee submitted that similar issue had come up before this Tribunal in Revenue s appeal for assessment year 2012-2013 in ITA No.979/Mds/2016. As per the ld. Authorised Representative, this Tribunal vide its decision dated 18.08.2017 had held that assessee was eligible to claim deduction u/s.80P(2) (a) (vi) of the Act. 3. The ld. Departmental Representative fairly agreed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the voting rights in elections have not been conferred on the NLC or its nominated persons as per Rule 22 of bye-laws of the assessee s society, hence, the provisions of section 80P(2)(a)(vi) are not violated by the assessee society and it is eligible for deduction. Aggrieved, the revenue filed this appeal, inter alia, with the following grounds: 2. The Commissioner of Income Tax (Appeals) erred in deleting the addition made on the ground that NLC is a member as per bye-laws of the society. If NLC has voting rights, assessee is not eligible for deduction u/s. 80P. If NLC has no voting rights, then it is eligible for the deduction u/s. 80P. 3. The Commissioner of Income Tax (Appeals) had failed to note that the core issue is the non restriction of the voting right of NLC to one vote against the four votes allowed during the Meeting of the Board of General Body. 4. The company failed to appreciate the fact that out of 11 members, during the decision making process, only five members are elected members, which constitutes less than 50% of the total votes. The others are nominated members who constitute more than 50%. 5. The Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held with reference to the proviso to Section 80P of the Act that Our reading of the proviso only shows that in respect of classes of members mentioned therein, the society should restrict the voting rights. The proviso does not mean that the society cannot have any other classes of members. In other words, classes of members enumerated in the proviso extracted above are only a few types of members that would have been admitted in the society and it does not mean no person not falling within the three classes enumerated in the proviso, could become member of the society . Following this decision of jurisdictional High Court, I hold that there is no bar for NLC being member of the assesseeSociety and this is not sufficient to hold the society ineligible for deduction u/s. 80P. 7.12 The issue of voting rights of members was considered by the Hon'ble Kerala High Court in the case of CIT v. Palghat Food Corporation of India Labour Contract Cooperative Society Ltd [2003J 266 ITR 315 wherein the Court has held that it is necessary to ascertain status of members, 1.e. whether they could be treated as active members or were mere nominal members in society with reference to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur, is against the provisions of the Co-operative Societies Act, and the Rules framed thereunder, and that Rule 5 of the said Rules clearly provides that the bye-laws of the society shall not be contrary to the provisions of the Act. It is also the assessee's case that section 20 of the Act interdicts the conferment of any voting right to persons other than members (If the Society. Hence, we have to refer to the provisions of the Co-operative Societies Act and the Rules framed thereunder. Section 20 of the Act reads thus: Votes of members.-Every member of a society shall have one vote in the affairs of the society: Provided that (a) nominal or associate member shall not have the right to vote; (b) where the Movement is 11 member of the society, each person nominated by the Government on the committee of the society shall have one vote except when the right to vote is to be exercised for election of office bearers of the society; The expression 'nominal or associate member' is defined in section 2(m) as follows: (m)'nominal or associate member' means a member who possess only such privileges and rights of a member who is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm to the provisions of the TNSCA, 1983. Chapter IV of (INCSA, 1983 deals with the Management of registered societies and conduct of general meetings comes under this chapter and expressly dealt in Section 32 of the Act. Thus; daily management of the Society, i.e. day-to-day affairs of the Society which.is managed by the Board elected under bye-laws of the society is distinct from the general body of the Society where the rights of nominated members to vote has been clearly restricted and therefore, the operation of proviso to sub-section (2) of Section 80P does not have any application in this case. As observed by the Kerala High Court, any deviation to the TNSCA, 1983 in the bye-laws would not have any effect and it would only render de-registration of the Society under the Act. The AO has not shown that the registration of the Society has been revoked under law for violation of the provisions of TNSCA, 1983. Following the 97th Amendment to the constitution of India, consequent Amendments in TNSCA 1983 and TNSCR 1988, the Bye-laws of the assessee Society may also require amendments in tandem with thorough overhaul of its clauses. 7.14 Combined reading of the latest Tamil Na ..... 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