2014 (6) TMI 706 - AT - Income Tax

Tribunal Allows Deduction for Agriculture Co-operatives Regardless of Member Classification

S-6749 Umayalpuram Primary Agricultural Co-operative Credit Society Ltd. Versus Income Tax Officer

The Tribunal ruled in favor of the primary agriculture co-operative credit societies, allowing them to claim the deduction under section 80P(2)(a)(i) of ... Denial of deduction u/s 80P(2)(a)(i) of the Act – Loan for non-agricultural activities – Scope of term Member u/s 2(16) of Societies Act, 1983 – Held that:- The authorities cannot go beyond their jurisdiction and make classification within a classification of members to deny the benefit of deduction – Relying upon M/s. SL(SPL) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd. Versus The Income Tax Officer [2014 (5) TMI 556 - ITAT CHENNAI] - the ‘nominal’ members also enjoy statutory recognition as per the Act - once the ‘nominal’ members or non-voting members are themselves included in the definition of ‘members’, they satisfy the relevant condition imposed by the legislature u/s 80P(2)(a)(i) - the objections of the Revenue that the ‘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 tax statute - unless provided specifically by the legislature - 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 - the assessees are eligible to claim benefit of deduction u/s.80P(2)(a)(i) of the Act – Decided in favour of Assessee. Issues:Denial of deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961 to primary agriculture co-operative credit societies for providing credit facilities to non-Members.Analysis:The appeals were filed against the order of Commissioner of Income Tax(Appeals) denying deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961. The assessees, primary agriculture co-operative credit societies, claimed deduction for providing credit facilities to Members under the Societies Act. However, the Assessing Officer held that since the assessees extended loans for non-agricultural activities to non-Members, they were ineligible for the deduction. The CIT(Appeals) upheld this decision, leading to the assessees appealing before the Tribunal.The assessees argued that they only provided credit facilities to their Members, distinguishing between Class-A and Class-B Members. They relied on a Tribunal decision stating that the classification of Members as 'A' or 'B' was irrelevant for claiming deduction u/s. 80P. The Revenue, represented by Shri Guru Bhashyam, supported the denial of deduction.After considering the submissions and the relevant provisions, the Tribunal disagreed with the CIT(Appeals). It noted that the definition of 'Member' under the Societies Act included Associate Members, encompassing Class-B Members. The Tribunal emphasized that the authorities could not create further classifications within Members to deny the deduction. Citing a previous Tribunal decision, the Tribunal highlighted that even nominal or non-voting Members satisfied the conditions for deduction under section 80P(2)(a)(i). The Tribunal also referenced a case from the Punjab & Haryana High Court supporting the assessee's position.Given the similarity of the issue with the previous Tribunal decision, the Tribunal ruled in favor of the assessees, allowing them to claim the benefit of deduction u/s. 80P(2)(a)(i) of the Act. Consequently, the appeals of the assessees were allowed, and the order was pronounced in open court on June 9, 2014, in Chennai.