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TMI Blog2018 (6) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in favour of the assessee by the decision of this Tribunal in assessee's own case for assessment year 2012-2013. However, according to him, ld. Assessing Officer was justified in disallowing the claim made u/s.80P(2) (a) (vi) of the Act. 4. We have considered the rival contentions and perused the orders of the authorities below. Facts for the impugned assessment year is pari materia to what was considered by this Tribunal in assessee's own case for assessment year 2012-2013. Paras 2 to 7 of the order dated 18.08.2017 of this Tribunal is reproduced hereunder:- ''2. M/s. NLC Indcoserve, or NLC Industrial Co-operative society, the assessee, is registered as a co-operative society under Tamil Nadu Co-operative Act, 1983. In the assessment made for the assessment year 2012-13, the assessee claimed deduction u/s. 80P(2)(a)(vi) at Rs. 67,98,303/-. The Assessing Officer required the assessee to establish its claim. After considering its reply, the object of the society, its membership qualification and removal, conduct of general meetings, rules in connection with general body, constitution of the board, bye-law etc., the AO held , inter alia, that the assessee's board consists of 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee society are controlled by the NLC. 6. Subsequent to completion of the assessment for this assessment year 2012-13, Revenue Audit Party had raised objection for not considering the above issue for the earlier assessment year 2010-11 was reopened and the reassessment proceedings are pending." 4. The DR took us through the assessment order and argued that : a. Under the Bye-law Rule No. 6, NLC could be enrolled as a member of society. b. Under Rule 22 of Bye-law every member has a right to vote (including the nominated members of NLC also in the General Meeting). c. Under Rule Nos. 19, 24 & 32 of Bye-law NLC nominated members were given major roles in the board. d. Sec 80P provides as a precondition that the byelaws restrict the right to vote to i. The individuals contributing their labour ii. Cooperative Credit financing funding operations and iii. State Government e. Since the byelaws permit the voting by NLC, the requisite conditions for claiming the deduction are not fulfilled. f. The AO also made an observation relating to amendment of bye-law relating to Business where the words 'through subcontract' was struck through and observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal for adjudication as the Tribunal had failed to consider status of "sympathisers" in accordance with provisions of the Kerala Co-operative Societies Act. The operative portion of the order is reproduced below: "5, The following facts are not in dispute. The assessee is a co-operative society, the members of which are engaged in labour work, on contract with the Food Corporation o] India, Palakkad. The entire income, belonging to the Society are from the said contract work. The exemption sought for by the assessee was denied solely on the ground that the bye-laws of the Society are contrary to the proviso to section 80P(2)(a). Therefore, it is necessary to refer to the provisions of section 8OP. Under section 80P, in the case of a Co-operative Society, if the gross total income includes any income referredto in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sum specified in sub-section (2) in computing the total income of the assessee. Under clause (vi) of sub-section (2), the income, which relates to the collective disposal of the labour of its members, is liable to be deducted. There is no dispute that the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 20, voting right is conferred only to an active member of a society. It is also specified that a nominal or associate member shall not have the right to vote. Thus, the question that arise for consideration is as to whether sympathisers, who have no right to labour can be treated as active members of a society, or only nominal or associate member falling under clause (a) of the proviso to section 20 read with section 2(m). Rule 5 of the Co-operative Societies Rules clearly provides that the bye-laws of a co-operative society shall (lot be contrary to the provisions of the Act. If the voting power conferred to members, who are sympathisers, without the right to labour under clause (5) of the bye-laws is contrary to the provisions of section 20 of the Cooperative Societies Act, certainly, by virtue of the provisions of Rule 5, the said right conferred has to be held to be ultra vires, and consequently, has to be of no effect. " 7.13 The analogy of the decision of Hon'ble Kerala High Court is very much applicable to the facts and circumstances of the case under consideration. For this purpose, the provisions of the Tamil Nadu Co-operative Societies Act 1983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bye Laws of the assessee society and the appreciation of actual functioning of the assessee society with purposive and harmonious interpretation in the backdrop of the proviso to S 80P(2)(a)(vi) of the Income tax Act 1961 show the following: a. NLC has been co-opted as a member only for operational ease and convenience to assist the Board of the assessee society in administration. Without the assistance of NLC, smooth running of the assessee society will be practically difficult. b. The ultimate authority of the administration is vested with the General Body of the members. c. NLC or its nominated members, if any, do not have voting rights in elections of the assessee society as per Rule 22 of its Byelaws. d. Board is responsible for management of affairs of the assessee society and not NLC Board can have 11 members, of which 4 can be nominated from NLC by Government. Rule 22 of the Byelaws of the assessee society stipulates that t he nominated members of the Board have no voting rights in elections. 7.15 Therefore, following the above decisions of the Hon'ble High Courts of Madras and Kerala (supra) and as the voting rights in elections have not been conferred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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