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TMI Blog2022 (7) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... t to tax, which was confirmed by the ld. CIT(A). Similar issue on identical facts was subject matter in appeal before the Tribunal in the case of The Salem Agricultural Producers Co-operative Marketing Society Ltd.[ 2016 (9) TMI 699 - MADRAS HIGH COURT] - we hold that the assessee is eligible for claiming deduction under section 80P(2)(d) of the Act. Thus, the ground raised by the assessee is allowed. - I.T.A. No. 282/Chny/2021 - - - Dated:- 29-6-2022 - Shri V. Durga Rao , Judicial Member And Shri Girish Agrawal , Accountant Member Appellant by : Shri S. Sridhar , Advocate , Erode Respondent by : Shri AR V Sreenivasan , Addl. CIT ORDER PER V. DURGA RAO , JUDICIAL MEMBER : This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi dated 02.08.2021 relevant to the assessment year 2016-17. 2. The first ground raised by the assessee relates to deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 [ Act in short]. 2.1 Brief facts of the case are that the assessee is a co-operative credit society having A class Members as well as B c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned on such investment for example, ING Mutual Fund . In the present case both the parties to the transaction are the contributors towards surplus, however, there are not participators to the surpluses. There is no common consent of whatsoever for participators as their identity is not established. Hence, the assessee fails to satisfy the test of mutuality at the time of making the payments the number in referred as members may not be the member of the society as such the AOP body by the society is not covered by concept of mutuality at all'... 7.5 The appellant pleaded that the Supreme Court judgement of Citizen Co-Operative Society is not applicable to it because appellant is doing business only with its members which include associate members (B Class Members), which is approved by the Registrar of Co-Operatives Society. The depositors and borrowers are all members of the society and as such there is no violation of any section of the Tamil Nadu Co-Operatives Registration Act and its Rules. The Society is not transacting with any outsider. As against this, Citizen Co-Operative Society transacted with outsiders, i.e., with nonmembers. The assessee relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the judgement of the Hon ble Supreme Court in the case of Citizen Co- Operative Society Limited v. ACIT (supra) and also by following the judgement of the Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. CIT [2021] 123 taxmann.com 161, the Tribunal has held that the assess is entitled for claiming deduction under section 80P(2)(a)(i) of the Act and prayed for following the same in the instant case. 4. On the other hand, the ld. DR supported the orders of authorities below. 5. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Similar issue on identical facts was subject matter in appeal before the Tribunal in the case of AA-435 Velankattuvalasu Primary Agricultural Cooperative Credit Society Ltd. v. ACIT (supra), wherein, the Coordinate Benches of the Tribunal has observed and held as under: 8. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that this issue is squarely covered exactly on identical facts by the Co-ordinate Bench decision in the case of Tamilnadu Co-operative State Agriculture and Rural Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIES OR FROM GOVERNMENT WITHOUT FLOATATION OF DEBENTURE ON SUCH CONDITIOONS AS MAY BE LAID DOWN BY THE GOVERNMENT. 1) Enbloc amendments from 1 to 35 and 43 to 54 registered by the DR of CS(c) vide his letter No.Rc.4673/71-k, dated 21.05.1971 (2) Enbloc amendments from 36 to 42 registered by theDR of CS(c) vide his letter No.Rc.4673/71-k, dated 19.04.1971. (b) to receive deposits; (c) to grant loans to Primary Land Development Banks and other institutions referred to in by law 2(c) for the purpose specified in Rule 13 of the Tamil Nadu Co-operative Land Development Banks (Miscellaneous provisions) Rules 1970 and on such terms consistent with their bylaws as the Board shall decide; [No.Rc.1636/77K, dated 26.02.1977) (d) to function as the agent of any Co-operative Bank, subject to such conditions as the Registrar may, by general or special order, specify; (e) to acquire such immovable properties and construct such buildings as it may consider necessary for the proper conduct of its business; (f) to appoint what staff it considers necessary to conduct the affairs of the bank; (g) to inspect the primary land development banks and the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted the facts that the Hon ble Supreme Court has discussed the following crucial aspects: I. The Society was originally formed under the mutually aided co-operative Societies Act, 1995 [MACSA] and subsequently had got registered under the Multi-State Cooperative Societies Act 2002 and their activities were in violations of the provisions of the Multi-State Co-operative Societies Act 2002 under which it had been functioning; II. The persons from whom deposits were received were not traceable; III. Additions were proposed u/s.68 of the Income Tax Act, 1961; IV. They had approached the Reserve Bank of India [RBI] vide letter dated 19.10.1997 requesting for conversion of the Co-operative Society into an Urban Bank; V. They had lent money to general public without obtaining permission from the concerned Registrar of the Cooperative Societies; VI. They had claimed to be a Co-operative Society for the claim of deduction u/s.80P of the Act and Banking Company / Co-operative Bank for the purpose of Section 269SS and 269T. 23. Now, we have gone through the facts of the Assessee and that, what is the difference as in the case-law of the Hon ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bye-laws. II. Section 2(16) of the Act defines a Member as a person joining in the application for the registration of a Society and a person admitted to membership after registration in accordance with the provisions of this Act, the Rules and Bye-laws and includes an Associate Member. We also noted that the Section 22 of the Tamil Nadu Co-operative Societies Act, 1983 and Rule 32 of the Tamil Nadu Co-operative Societies Rules describe the procedure for admission of Associate Member and the relevant Rule reads as under: I. Section 22 Admission of Associate Members: - (1) Notwithstanding anything contained in Section 21, every registered society of such class as may be prescribed may admit any person possessing such qualifications as may be prescribed, as an associate member. (2) Except as otherwise provided in the Rules, an Associate Member shall not be entitled to participate in the general meeting of the registered Society, or in the elections to the Board of such Society or to become an Officer of the registered Society or to any share in any form whatsoever in the assets or profits of the registered Society. II. Rule 32 : - Admission of As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inally the deposits are only from the members or Associate members but not from non-members. 27. Before us, the learned Counsel for the Assessee has categorically made statement at the bar and produced evidences that the Assessee has records of the names and addresses of the members and all the members are identifiable and available. Further, it was contended that the Assessee has always submitted all relevant documents as and when sought for and it is not the case of the Assessing Officer that the Assessee has not submitted the relevant documents or any particular depositor is not an Associate member. Further, we also noted that the applicability of the provisions of Section 80P(4) of the Act was first raised by the Revenue for the Assessment Year 2009 2010, as the Assessee had adopted the same deduction and had filed his return of income accordingly. The Tribunal has categorically held that, in Assessment Year 2009 2010 in Assessee s own case, in I.T.A. No.1318/Mad/2013, dated 01.05.2014 that the Assessee is a Co-operative Society and is not engaged in the business of Banking and hence the provisions of Section 80P(4) of the Act does not apply to the Assessee s case. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered as a Primary Agricultural Credit Society [PACS]. In this connection, we have advised RCS vide letter dated UBD (T) No.401/10.00/16A/2013-14 dated October 18, 2013 that in terms of Section 3 of the Banking Regulation Act, 1949 [AACS], PACS are not entitled for obtaining a banking license. Hence, your society does not come under the purview of the Reserve Bank of India, RCS will issue the necessary guidelines in this regard. After considering these, the Hon ble Supreme Court has summed up the issue in paragraph nos.45 and 46 as under: 45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Limited (supra), must be given effect to Section 80P of the Income Tax Act, being a benevolent provision enacted by the Parliament to encourage and promote the credit of the cooperative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the Assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the world agriculture into Section 80P(2)(a)(i) when it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs who by reason of the provisions of this Act do not possess such right or power have no such liability or duty; Considering the definition of member under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i). 29. Another aspect highlighted by the learned Counsel for the Assessee is that the Revenue while framing the assessment u/s.143(3) of the Act for the Assessment Year 2017 2018, vide order dated 25.12.2019 has accepted the above stated position that the Assessee is a Co-operative Society and is not engaged in any banking business and therefore eligible for claim of deduction u/s.80P(2) of the Act and further the Revenue has followed the decision of the Hon ble Supreme Court in the case of Mavilayi Cooperative Society Limited (supra). It means that the Revenue has accepted the position in the Assessment Year 2017 2018 while framing the scrutiny assessment and now the Revenue cannot go back from its stand because there is no change in the facts. 30. In view of the above facts discussed and the case-laws of the Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the lower authorities and allow these three appeals of the Assessee. Accordingly, we find the issue is squarely covered and hence, in this case also we allow the claim of deduction u/s.80P(2) of the Act. 5.1 Respectfully following the above decision of the Coordinate Benches of the Tribunal, we hold that irrespective of the fact that whether the assessee is having A class Members or B class Members, the assessee is entitled for claiming exemption under section 80P(2)(a)(i) of the Act. Thus, the ground raised by the assessee is allowed. 6. So far as interest income received by the assessee of ₹.2,82,017/- from Erode District Central Co-operative Bank is concerned, the Assessing Officer has held that the interest income falls in the category of Other Income and brought to tax. On appeal, the ld. CIT(A) confirmed the same. 6.1 Before us, the ld. Counsel for the assessee has submitted that the issue is covered in favour of the assessee by the decision of the Tribunal in the case of The Salem Agricultural Producers Co-operative Marketing Society Ltd. v. ITO in I.T.A. Nos. 730, 731 732/Mds/2014 dated 30.06.2014 for the assessment years 2007-08, 2009-10 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural producers and the interest or dividend earned by the assessee will be beneficial to the members alone. Therefore, keeping in view of the decision in the case of CIT v. Kangra Co-operative Bank Ltd. (supra), we hold that the assessee is eligible for benefit under section 80P(2)(d) of the Act and also this being a beneficial section to the co-operative societies. 6.4 On further appeal, while dismissing the appeal of the Department, the Hon ble Jurisdictional High Court has confirmed the order of the Tribunal and the relevant portion of the order of the Hon ble High Court is extracted as under: 9. Though Mr.J. Narayanasamy, learned Senior Standing Counsel for Income Tax Department submitted that the Tribunal was not right in holding that the interest earned from the Salem Agricultural Producers Co-operative Marketing Society Ltd., for reduction under Section 80 P (2(a) (i) of the Income Tax Act, we are not inclined to accept the said contentions. For the reason that a District Central Co-operative Bank, is also a Society, in which event, the income by way of interest and dividend earned by the assessee/respondent Society from the investments made in Salem District ..... X X X X Extracts X X X X X X X X Extracts X X X X
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