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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P.GEORGE
आदेश / O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER:
In this appeal filed by the Department, it is aggrieved that the Ld.CIT(A) allowed the claim made by the assessee u/s.80P(2)(a)(i) of the Income Tax Act, 1961 (in short “the Act”).
Ld. Counsel for the Revenue submitted that assessee had nominal or associate members, in addition to its shareholding members. According to ld.D.R, the Hon’ble Apex Court in the case of Citizen’s Co-operative Society Vs. ACIT ( (2017)
397 ITR 1 had clearly held that deduction u/s.80P(2)(a)(i) of the Act could not be allowed to a Society, which was earning interest from Nominal and Associate Members. As per the ld.D.R, assessee had members without voting rights and these were very similar to the Associate Member. Therefore, according to him, by virtue of the decision of Apex Court mentioned supra, deduction u/s.80P(2)(a)(i) of the Act could not be given to the assessees. Submission of the ld.D.R was that Ld.CIT(A) had relied on certain decisions of the Tribunal in the case of Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd., Vs.ITO (ITA No.292/Mds./2014 dated 17.03.2014) and that of I.T.O Vs. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd.,Salem (ITA No.825/Mds./2017, dated 23.09.2015) for giving relief to the assessee. As per the ld.D.R, in view of the judgment of Hon’ble Apex Court in the case of The Citizen’s Co-operative Society (supra), these rulings were no more good law.
Per contra, ld. Authorised Representative strongly supporting the order of the ld. Commissioner of Income Tax (Appeals) submitted that this was the second round of proceedings before the ld. Assessing Officer for all these assessee’s. According to him, this Tribunal through an earlier order dated 10.08.2016 in had remitted the issue regarding claim of deduction u/s.80P(2)(a)(i) of the Act back to the file of the ld. Assessing Officer for verifying the following –
(i) Whether loans were granted to non-members. (ii) Whether any current accounts were opened for traders. (iii) Whether the society was a member of clearing house. (iv) Whether the society issued guarantee on behalf of customers. (v) Whether the society dealt in foreign exchange transaction. (vi) Whether there were any inspection reports of RBI.
As per the ld. Authorised Representative, when the matter was reconsidered by the ld. Assessing Officer, assessee had pointed out that it had not earned any interest from loans granted to nonmembers. Despite this, as per the ld. Authorised Representative, ld. Assessing Officer had denied the claim of deduction. According to the ld. Authorised Representative, assessee had no business with any non-members.
Further, as per the ld. Authorised Representative, there was no option for the assessee to have an associate member under the enactment under which it was registered as a Cooperative Society. Therefore, as per the ld. Authorised Representative, finding of the ld. Assessing Officer that assessee had associate members were incorrect. Ld. Authorised Representative also placed reliance on a decision of Co-ordinate Bench in the case of ITO vs. M/s. S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd, (ITA No.2338/Mds/2017, dated 28.02.2018).
Thus, according to him, ld. Commissioner of Income Tax (Appeals) was justified in holding that assessee was eligible for deduction claimed by it u/s. 80P(2) (a) (i) of the Act.
We have heard the rival submissions, perused the material on record and gone through the orders of authorities below. The question whether deduction u/s.80P(2)(a)(i) of the Act could be given to a Society, which was having business with both Regular Members as well as Associate Members had come up before the Hon’ble Apex Court in the case of The Citizen Co-Operative Society Ltd vs. ACIT, (2017) 397 ITR 0001. The Hon’ble Apex Court had clearly held that such deduction would not be available to a Society where it had business with Nominal Members, who were not share holder member in the real sense. Now the argument taken by the ld.A.R before us is that judgment of Hon’ble Apex Court in the case of The Citizen’s Co-operative Society (supra) was in relation to MACSA whereas the assessees here were registered under a different enactment which did not allow any Associate Membership in a society. Be that as it may, the judgment of Hon’ble Apex Court in the case of The Citizen’s Co-operative Society(supra) was not available with the lower authorities, when they considered the question whether the assessees were eligible for claiming exemption u/s.80P(2)(a)(i) of the Act. Records made available before us is not adequate enough to decide whether the provisions under MACSA and provisions of the law under which assessee’s were registered, in relation to various categories of Members were pari-materia or entirely different. No doubt, ld. Authorised Representative stated before us that assessees had no different classes of members. However, the findings of the ld. Assessing Officer at para 5.1 of his order reveal a different scenario. Said para is reproduced hereunder:-
‘’5.1. As regards to the answer provided to the question of loans granted, to non members Sec.80P(2)(a)(i) provides for deduction to a society engaged in carrying on the business of providing credit facilities to its 'members'. Here the 'member' means 'share-holding members' (also called A-class member) only. On perusal of the details of interest income, it is seen that a major portion of the interest receipts are on account of jewel loan granted to 'associate members' (also called B-Class members). Anyone can become an associate member of the society on payment of a nominal token fee. The 'associate members' are not entitled to receive any dividend or having any voting rights and also do not have any right to participate in general administration and to attend any meeting etc. Only A-class members are allowed the above privileges. 8-class members are admitted for the limited purpose of availing loans only. Subsequently, on discharging of their loan liability, they simply relinquish their membership and do not have any further role to play in the society. Whereas, on the other hand, share- holding members are enjoying all these rights in addition to other rights and liabilities in the society as specified in the bye-law. 'Associate members' cannot be regarded as members of the Society’’.
There is a clear finding by the ld. Assessing Officer that assessee had granted loan to Associate members.
Coming to the decision of Co-ordinate Bench in the case of M/s. S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd (supra) relied on by the ld Authorised Representative, in the said case there was no question regarding category of membership and it was probably due to this reason that the Tribunal held in favour of the assessee. Considering all these things, we are of the opinion that the question whether assessee was eligible for claiming deduction u/s.80P(2)(a) (i) of the Act requires a revisit by the ld. Assessing Officer, in the light of the judgment of Apex Court in the case of The Citizen Co-Operative Society Ltd (supra). Needless to say that assessee shall be given an opportunity to demonstrate that it had only one class of members to which loans were given, who were all regular members with vote. We therefore set aside the orders of the lower authorities and remit the issue back to the file of the ld. Assessing Officer for consideration afresh in accordance with law.
In the result, the appeal of the Revenue is allowed for statistical purpose.