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Income Tax Appellate Tribunal, “C ” BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI. G. PAVAN KUMAR
आदेश / O R D E R
PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The Revenue filed an appeal against the order of Commissioner of Income Tax (Appeals), Salem in dated 28.05.2015 for the assessment year 2007-2008 passed u/s.143(3) and 250 of the Income Tax Act, 1961.
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2. The Revenue has raised the grounds of appeal:-
1. ‘’The Commissioner of Income Tax (Appeals) ought to have considered that the Hon'ble ITAT, Panaji Bench in Shri Chandraprabhu Urben Co.Operative Credit Society Ltd. (2014)(45 taxmann 14) clearly brought out the definition of 'Banking business'.
2. The Commissioner of Income Tax (Appeals) ought to have considered that the Hon'ble ITAT 'B' Bench, Chennai in the case of M/s. SL(SPL) 151 Karkudalpatty PACCS Ltd. Vs ITO which has been relied upon by him has not become final as an appeal has been filed u/s 260A before the Hon'ble Madras High Court.
3. The Commissioner of Income Tax (Appeals) ought to have considered that in the Tamilnadu Co-operative Societies Act, 1983 the term "Member" is dealt in sections 4,5,6,8,13,14,15, 20,21,23,24,25,26,27,28,29,30,31,32, 33, 34,35,38,40,41,42, 44,46,51,66,69,72,81 and 85. In all these section the term "member" means ONLY SHARE HOLDER- MEMBER. Hence the intention of the legislature- is that associate member will not be treated as member.
4 The Commissioner of Income Tax (Appeals) ought to have considered that the Statutory Auditor for Co-operative Society, in his Report, discloses only Share Holder - Members as Members and did not include the Associate Member in the report’’..
The Brief facts of the case, the assessee is a Co-Operative Bank filed return of income on 29.10.2007 admitted Nil income after claim of deduction u/s.80P of the Act. The return of income was processed
ITA No.1874/Mds/2015 :- 3 -: u/s.143(1) of the Act and subsequently, the case was selected for scrutiny under CASS and notice u/s.143(2) of the Act was issued on 15.09.2009. In compliance to notice, the ld. Authorised Representative and Secretary of the society appeared from time to time filed details and produced books of accounts for examination. The ld. Assessing Officer on verification of books of accounts found the assessee society engaged in commercial banking activities and deriving interest income from other business activities refereed page no.2 of the order:-
01 Interest income from Crop loan 7,61,281/- 02 Interest income from MT Loan 4,03,631/- 03 Interest receipts from NFS MT loan 28,97,439/- 04 Consumer loan 1,43,062/- 05 Consumption loan ----- 06 Deposit loan 4,65,620/- 07 NSC/KVP Pledge loan 1,05,125/- 08 Jewel loan 79,91,402/- 09 Staff’s loan 24,678/- Total interest receipts 1,21,92,238/- Further in addition to the agricultural farm sector loans, the assessee is having other incomes which are not covered under farm sector. Upon perusal of the amendment to provisions to Sec.80P(4) of the Act and CBDT Circular No.14/2006, dated 28.12.2006. The benefits available to Co-operative banks are withdrawn from assessment year 2007-08 as Co- operative bank are functioning on par with commercial banks. The amended provisions shall not apply to any Co-operative bank other than
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Primary Agricultural Credit Society or Primary Co-operative Agricultural and Rural Development banks. And the profit and gains of any business of banking including credit facilities carried on by the Co-operative society with its members. The Assessing Officer presumed that activities of the society are not in accordance with the provisions of Sec.80P(4) of the Act and issued show cause notice to the assessee society. In compliance to notice, the assessee society has filed explanation on 27.10.2009 at page no.3 is as under:-
‘’the assessee society has given loan for various purposes during the previous year which are as under:-
Agricultural crop loan.
Agricultural jewel loan. 3. Loan against KVP. 4. Loans against deposits. 5. Members jewel loan
It is brought to notice that the banks activity and area of operation is confined to Attur Taluk, all of them are remote villages and people living in these villages are only agriculturist and they are economically very poor. The society is not engaged in regular commercial banking activities. They have lent loans against own deposits agricultural loan and members jewel loan. The major chunk of lending of the bank is only jewel loan which carries interest at 7% and at 11% in two categories. Both these loans were given purely for agricultural purposes. From the above it is clear that the deduction u/s.80P cannot be denied’’.
The Assessing Officer on perusal of the provisions and submissions found the farm sector agricultural crop loans and agricultural jewel loans
ITA No.1874/Mds/2015 :- 5 -: are less compared with other loans. The Assessing Officer made elaborate findings on the working system of society activities and dealt on definition and provisions applicable to Co-operative bank and primary agricultural society. The Co-operative society, primary object or principal business is to provide financial accommodation to members for agricultural purposes or for purposes connected with agricultural activities including marketing of crops. The ld. Assessing Officer assumed that the assessee cannot enjoy the benefit of deduction u/s.80P of the Act by naming as Primary agricultural co-operative Society and shall fulfil the conditions of provisions of Sec.80P(4) of the Act. The ld. Assessing Officer has found that society could not comply the conditions and claimed deduction u/s.80P of the Act and perused the activities of society on par with commercial bank and limited the deduction u/s.80P of the Act to the extent of income earned from farm sector out of banking business and income from credit facilities extended to its members by calculating proportionate profit and allowed proportionate deduction u/s.80P of the Act and assessed total income of �.36,02,190/-. and raised demand. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals).
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In the appellate proceedings, the ld. Authorised Representative of the assessee reiterated the submissions made before the Assessing Officer and demonstrated the applicability of provisions to the assessee society providing agricultural crop loans and jewelry loans to its members. The ld. Authorised Representative relied on the decision of Co-ordinate bench in assessee’s own case for the assessment year 2009- 10 in dated 23.05.2014. The ld. Commissioner of Income Tax (Appeals) has dealt on Co-ordinate Bench decision in detail at para no. 3 to 6 of the order and having satisfied with compliance of provisions of Sec. 80P of the Act relied Punjab and Haryana High Court decision in CIT vs. Punjab State Co-Operative Bank Ltd 300 ITR 24 and Co-ordinate bench decision in the case of M/s. SL(SPL) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd vs. ITO in ITA No.292/Mds/2014, dated 17.03.2014. The ld. Commissioner of Income Tax (Appeals) on the basis of the submissions of ld. Authorised Representative and the orders of the Tribunal found the assessee society is eligible for deduction u/sec.80P(2)(a)(i) of the Act and allowed the appeal. Aggrieved by the order of Commissioner of Income Tax (Appeals), the Revenue has assailed an appeal before the Tribunal.
Before us, the ld. Departmental Representative reiterated his submissions on the grounds of appeal and contested the judicial
ITA No.1874/Mds/2015 :- 7 -: decisions relied by the Commissioner of Income Tax (Appeals) were the department has filed an appeal in Jurisdictional Hon’ble High Court against ITAT order and raised other grounds which are not subject matter of dispute before Assessing Officer in assessment proceedings and prayed for set aside of the order of Commissioner of Income Tax (Appeals).
Contra, the ld. Authorised Representative relied on the order of Commissioner of Income Tax (Appeals) and judicial decisions and opposed to the grounds of the Revenue.
We heard the rival submissions and perused the material on record and judicial decisions. The ld. Departmental Representative contested the decisions relied by the Commissioner of Income Tax (Appeals) as they have not reached finality and appeal is pending in jurisdictional High Court, does not have merit by mere filing the proceedings before the Tribunal cannot be stopped and also urged on definition of the member based on the Audit report as member means share holder and does not include associate member which is not subject matter of dispute in assessment order. The assessee society is engaged in the business of providing credit facilities to its members and activities of Primary agriculture co-operative credit society are not at par with co-operative banks and rely on Co-ordinate
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Bench decision of Tribunal in ITO vs Veerakeralam Primary Agricultural Co-operative Credit Society in dated 11.02.2014 and assessee’s own case in ITA No.919/Mds/2013 dated 23.05.2014 where the Tribunal has observed at para 8 of the order ‘’The issue in appeal is similar to the one adjudicated by the co-ordinate bench in the case of M/s.SL(SPL) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd., Vs. ITO (supra). Accordingly, we hold that the assessee is eligible to claim benefit of deduction u/s.80P(2)(a)(i) & (iv) of the Act’’.
We respectfully following the Co-ordinate bench decision, Dismiss the grounds of the Revenue. 8. In the result, the appeal of the Revenue is dismissed.
Order pronounced on Wednesday the 09th day of March, 2016 at Chennai.