TaxTMI 
TaxTMI 
2018 (3) TMI 1793
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....assessment year 2014-15. 2. All the above assessees' are Primary Agricultural Co-operative Credit Society registered under Tamilnadu Co-operative Societies Act, 1983. All of them claimed deduction u/s. 80P(2)(a)(i). In all these cases, while the making the assessments for the respective assessment years, the AO analysed the provisions of the State Co-operative Act, examined the books of accounts and found that the society had advanced loans to non-voting/nonprofit sharing members and earned profit from them. However, the profit was shared only with the voting members/shareholding members, hence, principles of mutuality did not exist among all the classes of members and accordingly held that each of the assessee is not eligible for deduction u/s. 80P(2)(a)(i) and completed the respective assessments. Aggrieved, each of the assessee filed appeals before the CIT(A) . The CIT (A) allowed each of the appeal. Aggrieved, the Revenue filed the above appeals against all the above cases .M/s. S. 1911, A.N. Pudur PACCS Ltd. alone filed a CO. Since the issues involved are common for all of them , all these appeals are heard together and disposed together for convenience sake . 3. The DR ....
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.... Here the 'member' means 'share-holding members' (also called A-class member) only. On perusal of the details of interest income, it is seen that a major portion of the interest receipts are on account of jewel loan granted to 'associate members' (also called B-Class members). Anyone can become an associate member of the society on payment of a nominal token fee. The 'associate members' are not entitled to receive any dividend or having any voting rights and also do not have any right to participate in general administration and to attend any meeting etc. Only A-class members are allowed the above privileges. B-class members are admitted for the limited purpose of availing loans only. Subsequently, on discharging of their loan liability, they simply relinquish their membership and do not have any further role to play in the society. On the other hand, share-holding members are enjoying all these rights in addition to other rights and liabilities' in the society as specified in the bye-law. 'Associate members' cannot be regarded* as members of the Society. (d) The Co-operative Societies function under the State Co-operative Societ....
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....r members having voting rights and the associate members who are members without voting rights respectively and the most important fact to be understood was the society does not accept any deposits from general public other than its members and the associate members. It is not doing any banking business, nor it has any license from RBI. Since, the "Associate Member" shall be construed as a "Member" as per section 2(16) of the TN Co-operative Societies Act, all the depositors and the borrowers of the respondent society are having a capacity and characters of either Members or Associate members, except in terms of the voting rights, and hence the assessee is entitled for deduction u/s. 80P(2)(a)(i). Further, the ARs tried to distinguish the ratio of the Supreme Court relied on by the DR. 4. We heard the rival submissions. The AO analysed the provisions of the State Co-operative Act and found that the 'associate members' are not entitled to receive any dividend or having any voting rights, they do not have any right to participate in general administration and to attend any meeting etc. Only A-class members are allowed the above privileges. B-class members are admitted for ....
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....tive bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80P. 25) So far so good. However, it is significant to point out that the main reason for disentitling the appellant from getting the deduction provided under Section 80P of the Act is not sub-section (4) thereof. What has been noticed by the Assessing Officer, after discussing in detail the activities of the appellant, is that the activities of the appellant are in violations of the provisions of the MACSA under which it is formed. It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people. The first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of 'nominal members'. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in real sense. Most of the business of the appellant was with this second category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to ear....