2014 (6) TMI 921 - AT - Income Tax

Tribunal rules in favor of appellant, grants tax benefits under Income Tax Act

The Salem Agricultural Producers Cooperative Marketing Society Ltd., Versus The Income Tax Officer, Ward III (1), Salem.

The Tribunal ruled in favor of the appellant, directing the assessing authority to grant benefits under section 80P(2)(a)(i) of the Income Tax Act, 1961. ... Denial of claim of benefits available under section 80P(2)(a)(i) - Held that:- This issue has been considered in Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd [2014 (5) TMI 556 - ITAT CHENNAI] found that definition of ‘members’ includes ‘associate members’, as well. The Tribunal found that such nominal members also enjoy statutory recognition as per the State Co-operative Societies Act. The Tribunal further observed that the objections of the Revenue that ‘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. - Decided in favour of assessee Claim of deduction under section 80P(2)(d) - assessee has submitted that the income by way of interest and dividend earned by the assessee society are from investments made in Salem District Central Cooperative Bank, which is also admittedly, a co-operative society - Held that:- In the present case, the assessee is an Agricultural Producers Co-operative Marketing Society Ltd., registered under Tamilnadu Co-operative Societies Act and established for the benefit of the agricultural producers and the interest or dividend earned by the assessee will be beneficial to the members alone. Therefore, keeping in view of the decision in the case of CIT v. Kangra Cooperative Bank Ltd. (2008 (8) TMI 193 - HIMACHAL PRADESH HIGH COURT ), we hold that the assessee is eligible for benefit under section 80P(2)(d) of the Act and also this being a beneficial section to the co-operative societies.- Decided in favour of assessee Issues involved:1. Denial of benefits under section 80P(2)(a)(i) of the Income Tax Act, 1961.2. Claim of deduction under section 80P(2)(d) of the Income Tax Act.Analysis of Issue 1 - Denial of benefits under section 80P(2)(a)(i) of the Income Tax Act, 1961:The appeals were against orders of the Commissioner of Income Tax denying benefits under section 80P(2)(a)(i). The appellant argued that the society's bye-laws allowed lending loans to members on agricultural produce and gold, qualifying for benefits under section 80P(2)(a)(i). The Tribunal referenced similar cases and the State Co-operative Societies Act, noting that 'members' included 'associate members'. It found the Revenue's interpretation limiting 'members' to voting members as beyond the statute's scope. Consequently, the Tribunal ruled in favor of the appellant, directing the assessing authority to grant benefits under section 80P(2)(a)(i).Analysis of Issue 2 - Claim of deduction under section 80P(2)(d) of the Income Tax Act:In the assessment year 2010-11, the appellant claimed deduction under section 80P(2)(d) for interest and dividend income from investments in a cooperative bank. The Assessing Officer and the CIT(Appeals) disallowed the claim, stating the investments were only with one bank. The appellant cited a Himachal Pradesh High Court case to support their claim. The Tribunal examined the case law and determined that the appellant, an Agricultural Producers Co-operative Marketing Society, qualified for the deduction under section 80P(2)(d) as the income benefited only members. Relying on the precedent, the Tribunal allowed the appeals, granting the appellant the benefit under section 80P(2)(d).In conclusion, the Tribunal ruled in favor of the appellant on both issues, directing the assessing authority to grant benefits under section 80P(2)(a)(i) and allowing the deduction under section 80P(2)(d). The judgment highlighted the importance of statutory interpretation and the applicability of legal precedents in tax matters concerning cooperative societies.