TMI Blog2016 (8) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... members for availing loan only and was also charging a higher rate of interest at the rate of 14%, is not a ground to deny the exemption granted under Section 80P (2)(a) (i) of the Act. - Decided against the Revenue. - Tax Case Appeal Nos. 484 to 487 and 490 of 2016 - - - Dated:- 2-8-2016 - S. Manikumar And D. Krishnakumar, JJ. For the Appellant : Mr. J. Narayanasamy Senior Standing Counsel for I.T JUDGMENT ( Judgement of the Court was made by D. Krishnakumar, J ) These Appeals have been filed by the Revenue against the orders of the Income Tax Appellate Tribunal Madras 'C' Bench dated 17.04.2015 in I.T.A.Nos.27 to 30/ Mds/2015 and 'A' Bench dated 30.10.2015 in I.T.A. No. 1845/Mds/ 2014. 2. The facts of the case are as follows :- The Assessees are co-operative societies engaged in banking and trading activities. It admitted 'Nil' return of income after claiming deduction u/s 80P (2) (a) (i) of the IT Act, 1961. The Assessing Officer disallowed the claims of the assessee on the ground that the assessees had lent monies to the members who were undertaking non-agricultural/ non-farm activities and had received the interest on par with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the State Cooperative Societies Act, 1983. Therefore, the Class B members cannot be treated as non-member and consequently held that the assessee is entitled for deduction under Section 80P (2)(a)(i). The Tribunal held that the assessees will be entitled for deduction under Section 80P (2) (a) (iv) eventhough the issue did not arise for consideration. The Tribunal did not consider the issue as to whether the interest on the loan lent for non-agricultural activity could be entitled for deduction as per Section 80P (2) (a) (i) read with 80P (4) and the assessees' violation to lend amount on par with commercial banks at higher interest. The Tribunal had followed its own order and had allowed the appeal. 5. Aggrieved by the order of the Income Tax Appellate Tribunal, the appellants have filing these appeals, on raising the following substantial questions of law:- 1. Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction under Section 80P (2) (a) (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other decision of the Tribunal in the case of the Salem Agricultural Producers Co-operative Marketing Society Ltd. vs. ITO in ITA Nos.730 to 732/Mds/2014 dated 30.06.2014, it has been held as follows :- 2. The common issue raised in all these appeals is that the Commissioner of Income Tax (Appeals) has erred in confirming the order of the Assessing authority in denying the claim of benefits available under section 80P (2)(a)(i) of the Income Tax Act, 1961. The case of the assessee is that the bye-laws of the society allow the assessee to lend/advance loans to its members on agricultural produce loan and on the pledge of gold jewels and silver articles, earned interest income only as per the objects and submitted before the lower authorities that the claim of the assessee has to be considered under Section 80P(2)(a)(i) of the Act. 3. This issue has been considered by Income Tax Appellate Tribunal, Chennai 'B' Bench in the cases of SL(SLP) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd and S 1382 Mullukuruchi Primary Agricultural Co-operative Credit Society Ltd in I.T.A. Nos. 292 293/Mds/2014 vide common order dated 17.03.2014 and also the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural and rural development bank means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities. It is seen that the primary object of the society is to provide financial accommodation to its members to meet all the agricultural requirements and to provide credit facilities to the members, as per the bye-laws and as laid down in Section 5 (cciv) of the Banking Regulation Act, 1949. Further, from the CPT Circular dated 12.03.2008, it is evident that a credit co-operative society is not a co-operative bank, as defined in Part V of the Banking Regulation Act, 1949. The object of a 'Co-operative bank' is to accept deposits from the public, for lending or investment of money. On perusal of the findings of the Appellate Authority as well as the Appellate Tribunal, it is categorically made clear that the assessee society will not come under the object of the principal business of a co-operative bank, which is a banking business. The benefit of Section 80P is excluded for deductions by co-operative banks, whereas the primary agricultural credit societies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P (2) (a) (i). We make it clear that we are dealing with the deduction provision to be interpreted liberally. In our considered opinion, the objections of the revenue that the 'members' defined in sub clause (i) of Section 80P should only include voting members would amount to a classification within classification which is beyond the purview of tax statute; unless provided specifically by the legislature. Moreover, we find that the case law of Hon'ble Punjab and Haryana High Court (Supra) also supports the assessee's case wherein it has been held under the very provision that for the purpose of impugned deduction, it is irrelevant so far as classification of the members in 'A' or 'B' category is concerned. Following the decision of the Punjab and Haryana High Court, the appellate authority as well as the Income Tax Appellate Tribunal, has passed the order impugned. 10. The appellate authority, namely, the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal has clearly held that the assessees are not co-operative bank and that their activities in the nature of accepting deposits, advancing loans etc., carried on by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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