2022 (4) TMI 1414 - AT - Income Tax

Appeal partially granted under Section 80P(2) of Income Tax Act. Cooperative society qualifies for deduction.

AA-435 Velankattuvalasu Primary Agricultural Cooperative Credit Society Ltd. Versus The ACIT (OSD), Ward -2 (3), Range-2, Erode.

The Tribunal partly allowed the appeal, granting the deduction claim under Section 80P(2) of the Income Tax Act, 1961. The decision was based on the ... Disallowance of claim of deduction u/s.80P - income received from associate members i.e., interest received from Class B members - Assessee is a primary agricultural cooperative society registered under the Tamil Nadu Cooperative Societies Act - AO disallowing the claim of deduction by stating that the society is engaged in granting loans to general public without approval from Registrar of Societies and therefore cannot be treated as cooperative society meant only for providing credit facilities to its members and accordingly would not be entitled to claim the benefit u/s.80P - HELD THAT:- We noted that this issue is squarely covered exactly on identical facts by the Co-ordinate Bench decision in the case of Tamilnadu Co-operative State Agriculture and Rural Development Bank Limited [2014 (5) TMI 1220 - ITAT CHENNAI] wherein considering the decision of Hon’ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] and the decision in the case of S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. [2019 (1) TMI 116 - MADRAS HIGH COURT] the deduction is allowed u/s.80P(2) of the Act in respect of income earned from associated members -Decided in favour of assessee. Issues Involved:1. Faceless appeal proceedings conducted without affording personal hearing.2. Reopening of assessment.3. Disallowance of claim of deduction under Section 80P of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Faceless Appeal Proceedings Conducted Without Affording Personal Hearing:- The first common issue in both the appeals of the assessee is against the faceless appeal proceedings conducted without affording personal hearing. However, the counsel for the assessee stated that she is not interested in prosecuting these grounds. Consequently, these grounds were dismissed as not-pressed.2. Reopening of Assessment:- In the assessment year 2011-12, there was an additional issue regarding the reopening of assessment. Similar to the first issue, the counsel for the assessee decided not to pursue this ground, leading to its dismissal as not-pressed.3. Disallowance of Claim of Deduction under Section 80P:- The primary issue on merits in these appeals concerns the disallowance of the claim of deduction under Section 80P of the Income Tax Act in relation to income received from associate members, specifically interest received from Class B members.- The assessee, a primary agricultural cooperative society registered under the Tamil Nadu Cooperative Societies Act, 1983, filed its return of income for the assessment years 2011-12 and 2017-18, claiming deductions under Sections 80P(2)(a)(i) and 80P(2)(d) of the Act.- The Assessing Officer (AO) disallowed the claim, arguing that the society was engaged in granting loans to the general public without approval from the Registrar of Societies and thus could not be treated as a cooperative society meant only for providing credit facilities to its members.- The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the society had both members and non-members, earned more interest from non-members, and advanced loans at high rates, thereby violating the principle of mutuality.- The assessee argued that the society provides credit facilities to both Class A and Class B members, and there is no distinction between the members under the Tamil Nadu Cooperative Societies Act and the society's bye-laws.- The assessee cited the jurisdictional High Court's judgment in the case of CIT vs. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd., which supports the claim of deduction under Section 80P.- The Tribunal noted that the issue is covered by the Co-ordinate Bench decision in the case of Tamilnadu Co-operative State Agriculture and Rural Development Bank Limited, where the deduction was allowed under Section 80P(2) for income earned from associated members.- The Tribunal concluded that the assessee is a cooperative society and not engaged in banking activities. Therefore, it is entitled to the deduction under Section 80P(2)(a)(i) of the Act.- The Tribunal reversed the orders of the lower authorities and allowed the appeals of the assessee, granting the claim of deduction under Section 80P(2) of the Act.Conclusion:- The appeal filed by the assessee was partly allowed, with the Tribunal granting the claim of deduction under Section 80P(2) of the Income Tax Act, 1961. The order was pronounced on 29th April 2022 at Chennai.