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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A.MOHAN ALANKAMONY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
These appeals by the assessee are directed against the orders passed by the learned Commissioner of Income Tax (Appeals)-2, Coimbatore, both passed U/s.250(6) r.w.s. 143(3) of the Act dated 30.05.2017 & 31.07.2017 in & ITA No.199/16-17 for the assessment years 2013-14 & 2014-15 respectively. the appeals however the crux of the issue is that the Ld.CIT(A) has erred in upholding the order of the Ld.AO who had denied deduction U/s.80P(2)(a)(i) of the Act.
The brief facts of the case are that the assessee is a co- operative housing society registered as Housing Society under TamilNadu Co-operative Societies Act, filed its return of income for the assessment years 2013-14 & 2014-15 electronically on 14.05.2014 & 22.07.2015 respectively declaring ‘Nil’ income for both the assessment years. The returns were selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 31.08.2015 and 06.08.2016 for the assessment years 2013-14 & 2014-15 respectively. Finally assessment orders were passed U/s.143(3) of the Act on 22.03.2016 and 30.11.2016, wherein the Ld.AO made addition of Rs.1,54,67,507/- & 1,58,78,088/- for the assessment years 2013-14 & 2014-15 respectively towards disallowance of deduction claimed U/s.80P(2)(a)(i) of the Act.
The main activity of the assessee Society is providing means to acquire residential house to its members at an affordable cost. In order to fulfill its objectives, the society collects funds from the respective members as per Section 45(2) of the TamilNadu Cooperative Societies Act. Since Section 80P(2)(a)(i) of the Act provides for deduction with respect to the cooperative societies carrying on banking business or providing credit facilities to its members which is not the case of the assessee because its main object is to provide housing sites etc., to its members, the Ld.AO opined that the assessee co-operative society is not entitled to claim the benefit of deduction. The Ld.AO further placing reliance in the decision of the Hon’ble Apex Court in the case Madras Auto Rickshaw Drivers’ Co-operative Society Vs. CIT reported in 249 ITR 330, wherein it was held that the activity of rendering service in the nature of hire purchase cannot be treated as rendering credit facilities to the members of the society, denied the benefit of deduction U/s.80P(2)(a)(i) of the Act to the assessee for both the assessment years. On appeal, the Ld.CIT(A) concurred with the view of Ld.AO and following his earlier decision for the assessment year 2012-13 in the assessee’s own case on the identical issue upheld the order of the Ld.AO.
At the outset, the Ld.AR produced the decision of the Chennai Bench of the Tribunal in the assessee’s own case in ITA identical issue, wherein vide order dated 23.06.2017, the Tribunal had held the issue in favour of the assessee and further it remitted the matter back to the file of Ld.AO for verifying whether the assessee had actually offered credit facility to its members for the purpose of construction of houses, etc., and received interest thereon. The Ld.AR further produced the order giving effect to the order of the Tribunal dated 31.01.2018, wherein the Ld.AO after verifying the books of accounts of the assessee arrived at the conclusion that the society provides loans only to its members for the purpose of purchase of house, construction and for carrying out repairs on the houses. With the above finding the Ld.AO had granted deduction U/s.80P(2)(a)(i) of the Act to the assessee. It was therefore pleaded that since the issue was decided in favour of the assessee by the Tribunal as well as by the Ld.AO while giving effect to the order of the Tribunal, in the assessee’s own case for the assessment year 2012-13, for the relevant assessment years also the same decision may be followed because the facts are identical. The Ld.DR could not controvert to the submission of the Ld.AR. the materials available on record. On examining the facts of the case, we find merit in the submissions of the Ld.AR. As stated by the Ld.AR the Tribunal had held the issue in favour of the assessee for the assessment year 2012-13 and remitted the matter back to the file of Ld.AO for verifying whether the assessee had actually offered credit facilities to its members. The gist of the relevant decision of the Tribunal in dated 23.06.2017 for the assessment year 2012-13 is extracted herein below for reference:
“6. We have heard both sides, perused the materials available on record and gone through the orders of authorities below. Admittedly, the assessee's society is a cooperative society registered under the Tamilnadu Co- operative Societies Act as a housing society and not a credit society., Therefore, the Assessing Officer has denied claiming deduction under section 80P(2)(a)(i) of the Act. As per bye-laws of the society, the ld. CIT(A) has reproduced the objects of the society in the appellate order, in which, as per clause (6), one of the objects of the society was to advance loans to the members for construction of new dwelling houses or· for additions arid repairs, maintenance to their existing houses and discharge of prior debts. It is immaterial to see that title of the assessee society rather than the business activities of the society. In the case of CIT v. Madras Autorickshaw Drivers' Co-operative Society Ltd. in T.C.A. No. 1234 & 1246 of 1977 (Mad), which was affirmed by the Hon'ble Supreme Court, there was no object of the society to offer credit facilities and the only object of the society was "to promote the economic interests of the members of the society by purchasing autorickshaw vehicles and selling them on hire purchase terms to the members and similarly, in the case of ITO v. Modern Engineers Construction Co-op. Society 16 taxmann.com 158 the assessee was only a labour contract society, employing graduates and taking up engineering works from the PWD. Therefore, in both the cases, the claim of deduction under section 80P(2)(a)(i) of the Act was denied. However, in the present case one of the main objects of the assessee, as per clause (6) of the bye- law, was offering credit facility for construction of new dwelling houses as well as additions, repairs and maintenance to their existing houses. Therefore, the above case law have no application to the facts of the present
6 & 2495/Chny/2017 case. Further, As per the above clause (6) in the objects of the society and by referring to the profit and loss account for the year ended 31.03.2012 of the society, the ld. Counsel for the assessee has submitted that the society is offering credit facility for construction of new dwelling houses as well as additions, repairs and maintenance to their existing houses, thereby the society earns interest income over the credits. We have also perused the profit and loss accounts statement. However, the assessee has not filed any detailed break-up of the interest receipt. In view of the above, we direct the Assessing Officer to verify the accounts of the assessee as to whether the assessee has actually offered credit facility to its members for the purpose of 'Construction of houses, etc. and received interest thereon and thereafter, decide the issue afresh in accordance with law by giving sufficient. opportunities of being heard to the assessee. The assessee is also directed to furnish complete details before the Assessing Officer for verification. Thus, the ground raised by the assessee is allowed for statistical purposes.”
The finding of the Ld.AO in his order giving effect to the order of the Tribunal dated 31.01.2018 is also extracted herein below for reference:-
“4. Accordingly, in response to the notice issued to the assessee, its Authorised Representative CA.S. Ramachandran, appeared and provided the details called for, including the break-up of interest receipts. The books of accounts were scrutinized., the loan documents were perused along with the Membership register and it was found that the Society provides loans only to its Members for the purpose of purchase of house, construction and carrying out repairs on the houses.”
Since the issue is put to rest by the Tribunal in its earlier Order cited supra, following the same, we hereby hold that the assessee is entitled for the benefit of Section 80P(2)(a)(i) of the Act if it had offered credit facility to its members for construction of new dwelling houses as well as additions, repairs and maintenance to their existing houses for both the relevant assessment years in 7 & 2495/Chny/2017 appeal before us. By holding so, we hereby direct the Ld.AO to verify the accounts of the assessee for both the relevant assessment years in appeal before us, as to whether the assessee has actually offered credit facility to its members for the purpose of construction of houses etc., and receive interest thereon and thereafter decide the issue afresh in accordance with law by giving sufficient opportunities of being heard to the assessee. We also direct the assessee and its counsel to duly co-operate before the Ld.AO in order to expedite his proceedings.
In the result both the appeals of the assessee are allowed for statistical purposes as indicated herein above.
Order pronounced on the 31st May, 2018 at Chennai.