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The Commissioner of Income Tax, Salem Versus The Salem Agricultural Producers Co-operative Marketing Society Ltd.

2016 (8) TMI 1125 - MADRAS HIGH COURT

Deduction u/s 80P (2) (a) (iii) - Assessee is a co-operative society engaged in marketing the agricultural produces grown by its members - ITAT allowed the claim - Held that:- The Income Tax Appellate Tribunal has clearly perceived that the assessee is not a co-operative bank and that the activities in the nature of accepting deposits, advancing loans etc., carried on by the assessee, but is confined to its members only and that too in a particular geographical area. Therefore, the respondent So .....

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the Act. - Decided against revenue - Tax Case Appeal Nos.3 and 4 of 2015 - Dated:- 9-8-2016 - MR. JUSTICE S.MANIKUMAR AND MR. JUSTICE D.KRISHNAKUMAR For the Appellant : Mr.J. Narayanasamy Senior Standing Counsel for I.T COMMON 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 'D' Bench dated 30.06.2014 in I.T.A.Nos.730 and 731/Mds/2014. 2. The facts of the case are a .....

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see, challenged in both the appeals, on the ground that the sum of ₹ 17,61,080/- and ₹ 62,78,650/- respectively, represents interest income and not an income derived by marketing the agricultural produce to its members. The Assessing Officer found that the interest income would be entitled for deduction only in respect of Societies, which are engaged in the business of banking or providing credit facilities to its members and so the assessee is not entitled for deduction in respect o .....

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bers viz., Class A and Class B members. Class A members are regular members who have voting rights and were involved in the running of the assessee's business and can become the members of Administrative committee, etc. Class B members are those, other than Class A member, who had availed loans from the assessee and is necessarily enrolled as Class B member. The Class B member is not recognized by the assessee for the purpose of records in statute. Further, the majority of jewel loan and oth .....

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t the assessee had not provided credit facilities to its members to assist agricultural activity and thus confirmed the Assessment orders challenged on two appeals, to the extent of interest income of ₹ 17,61,080/- and ₹ 62,78,650/-, respectively, earned on jewel loan extended to class B members. 4. Aggrieved by the orders of the Commissioner of Income Tax (Appeal), the assessee filed appeals in I.T.A. Nos.730 and 731/Mds/2014 before the Income Tax Appellate Tribunal. The Tribunal pe .....

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. It is submitted by the appellant/ Revenue that the Tribunal had failed to 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 assessee's violation to lend amount on par with commercial banks at higher interest. 5. Being not satisfied with the common order dated 30.06.2014 of the Income Tax Appellate Tribunal in I.T.A. Nos.730, 731 and 732/Mds/2014, the Revenue .....

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non-agricultural activity. 2. Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the Class B members of the assessee society can be treated as a member of the society for the purpose of Section 80P (2) (a) (i) when Class B members do not have the right to participate in the voting and meetings of the board of the society and were not recognised by the assessee itself for audit purposes. 3. Whether on the facts and in the circumstances of the case the .....

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ection 80P cannot be extended to any co-operative Bank other than a primary agricultural credit society. The assessee cannot be treated as a credit society, to the extent of the loan advanced to non-agricultural purposes and therefore the assessee is not entitled for the benefit under Section 80P (2) (a) (i) read with 80P (4). 7. Heard Mr.J. Narayanasamy, learned Senior Standing Counsel for the appellant and perused the material available on record. 8. On perusal of the order passed by the Tribu .....

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#39; Bench considered the issue raised by the assessee, based on the decisions of the Co-ordinate Bench of the Tribunal in the case of Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd. vs. ITO in ITA No.292 & 293/Mds/2014 by a common order dated 17.03.2014 and also the decision of 'C' Bench in the cases of M/s. 1915 Vellalapatty Primary Agricultural Co-operative Credit Society Ltd. in I.T.A. Nos. 385 & 386/Mds/2014, M/s.6648 Attur Mulluvadi Primary Agricultural .....

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at 'members' defined in sub-clause (i) of Section 80P(2) should only include voting members, would amount to a classification within classification, which is beyond the purview of taxing statute, unless provided specifically by the legislature. Therefore, the Tribunal gave a finding that the issues raised in those appeals, stand adjudicated in favour of the assessee and set aside the orders of the lower authorities on this point and directed the assessing authority to grant the benefit o .....

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Court. By judgment dated 05.07.2016, the appeals were dismissed, on the following reasoning: 13. Sub-section (4) of Section 80P of the Income Tax Act, 1961 is extracted below : (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation For the purposes of this sub-section - (a) co-operative bank and primary agricultural credit society shall .....

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nts 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 Author .....

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the Commissioner of Income Tax, reported in (2016) 68 taxmann.com.298 (Kerala), the High Court considered similar substantial questions of law (Issue No.A) raised by the assessee, regarding the entitlement for exemption under sub section (4) of Section 80P. By considering the fact that the assessee is a primary agricultural society, the Kerala High Court has answered the substantial question of law in favour of the assessee and held that the primary agricultural credit societies, registered as s .....

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