Madras High Court
M/S.S 1911 An Pudur Paccs vs The Principal Commissioner Of on 1 February, 2021
TCA.No.91 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 01.2.2021
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MS.JUSTICE R.N.MANJULA
Tax Case Appeal No.91 of 2021
M/s.S 1911 AN Pudur PACCS ...Appellant
Vs
The Principal Commissioner of
Income Tax, Salem ...Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against
the order dated 05.10.2018 passed by the Income Tax Appellate
Tribunal, 'C' Bench, Chennai made in M.P.No.122/Chny/2018 in ITA.No.
2331/Chny/2017 for the assessment year 2014-15.
For Appellant: Mr.N.V.Balaji
For Respondent: Mrs.V.Pushpa, JSC
Judgment was delivered by T.S.SIVAGNANAM,J
This appeal has been filed by the assessee under Section 260A of
the Income Tax Act, 1961 ('the Act' for brevity) challenging the order
dated 05.10.2018 made in M.P.No.122/Chny/2018 in ITA.No.2331/
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TCA.No.91 of 2021
Chny/2017 on the file of the Income Tax Appellate Tribunal, Chennai,
'C' Bench ('the Tribunal' for brevity) for the assessment year 2014-15.
2. The assessee has filed this appeal by raising the following
substantial questions of law:
“i. Whether, under the facts and
circumstances of the case, the Tribunal was
right in holding that the appellant is not
entitled for deduction under Section 80P ?
ii. Whether, under the facts and
circumstances of the case and based on
material before the Tribunal, the finding of the
Tribunal that there is no mistake apparent
from record in the order of the Tribunal in
ITA.No.2331/Mds/2017 and C.O.No.180/Chny/
2017 not perverse?
iii. Is the finding of the Tribunal that the
appellant is a cooperative bank and therefore
not entitled for deduction under Section 80P
not perverse?
iv. Whether, under facts and
circumstances of the case and in law, the
Tribunal was right in holding that provisions of
Section 80P(4) is applicable to the assessee?
And
v. Whether, under the facts and
circumstances and in law, the Tribunal was
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TCA.No.91 of 2021
right in holding that principles of mutuality is
not present in the appellant's case and
therefore, the appellant is not eligible for
deduction under Section 80P(2)(a)(i)?”
3. We have heard Mr.N.V.Balaji, learned counsel appearing for
the appellant/assessee and Mrs.V.Pushpa, learned Junior Standing
Counsel accepting notice for the respondent/Revenue.
4. As against the common order passed by the Tribunal in both
the main appeal as well as in the cross objection, the assessee filed
TCA.Nos.170 and 171 of 2020 and by a common judgment dated
17.7.2020, to which, one of us (TSSJ) was a party, the said
appeals were allowed in favour of the appellant – assessee following
the decision of this Court, to which, one of us (TSSJ) was a party, in
the case of PCIT Vs. S1308 Ammapet Primary Agricultural
Cooperative Bank Ltd., Ammapet [T.C.A. Nos.882 & 891 of 2018
dated 06.12.2018]. The relevant portions of the said common
judgment dated 17.7.2020 read as follows :
“3. Identical issue was decided by the
Division Bench of this Court in the case of the
Principal Commissioner of Income Tax, Salem
Vs., S1308 Ammapet Primary Agricultural
Cooperative Bank Ltd., Ammapet, in T.C.A.No.
882 & 891 of 2018 dated 06.12.2018. The
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TCA.No.91 of 2021
assessee in the said case was also a
Cooperative Society carrying on business of
Banking. The question was whether the
assessee was entitled to deduction under
Section 80P(2)(a)(i) of the Act, as the activity
carried on by the assessee being a finance
business, it cannot be termed as a Cooperative
Society.
4. The Court after considering the
definition of 'Member' under the Tamil Nadu
Cooperative Societies Act, 1983 and also
taking note of Section 80P(4) of the Act,
considered the definitions of the expressions
'Members' and an 'associated members' under
the Cooperative Societies Act and held that an
'associated member' is also a member in terms
of Section 2(16) of the Cooperative Societies
Act. Accordingly, the said Tax Case Appeal was
dismissed and the Substantial Question of Law
was answered against the Revenue.
5. The case on hand is also an identical
matter. The only difference being, the
assessee lost before the Tribunal and
therefore, the assessee is before us by way of
these appeals. For better appreciation, we
refer to the relevant paragraphs in the case of
Ammapet Primary Agricultural Cooperative
Bank Ltd., (cited supra):
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TCA.No.91 of 2021
'12.Admittedly, the assessee – society is
registered under the provisions of the TNCS
Act. It defines the word 'members' under
Section 2(16) to mean a person joining in the
application for the registration of society and a
person admitted to the membership after
registration in accordance with the provisions
of the Act, the Rules framed thereunder and
the By-laws and includes an associate
member. The expression 'associate member' is
defined under Section 2(6) of the TNCS Act to
mean a member, who possesses only such
privileges and rights of a member and who is
subject only to such liabilities of a member as
may be specified in this Act, the Rules and the
By-law.
13.Thus, the definition of the word
'members' includes an associate member and
therefore, the Assessing Officer fell into an
error in drawing a distinction between A Class
members and B Class members. For the
purpose of being entitled to a relief under
Section 80P of the Act, all that is required is
that the cooperative society should answer the
description of a society engaged in carrying on
the business of providing credit facilities to its
member. Once the description is answered,
then automatically, the benefit of Section 80P
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TCA.No.91 of 2021
of the Act would stand attracted subject to the
provisions contained in Sub-Section (2) of
Section 80P of the Act.
14. Further, it is to be pointed out that in
terms of Sub-Section (4) of Section 80P of the
Act, which was inserted vide the Finance Act,
2006 with effect from 01.4.2007 i.e from the
assessment year 2007-08, the 'primary
cooperative agricultural and rural development
bank' means 'a society having its area of
operation confined to a taluk, the principal
object of which is to provide for long term
credit for agricultural and rural development
activities'. What was excluded was the
'cooperative banks' and admittedly, the
assessee society is a primary agricultural
cooperative credit society and therefore, would
be entitled to the benefit of Section 80P of the
Act.
15. Further, for the assessment year
2014-15, the decision in the case of Citizen
Cooperative Society Limited was relied upon by
the Revenue before the Tribunal, which, in
paragraph 6.1 of its order dated 28.2.2018 for
the assessment year 2014-15, extracted the
operative portion of that judgment. In that
case, the Hon'ble Supreme Court found that
the society carried on certain activities, which
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TCA.No.91 of 2021
were contrary to the provisions of the Andhra
Pradesh Mutually Aided Cooperative Societies
Act, 1995 and that they accepted deposits
from third parties, who were not members in
the real sense and were using those deposits
to advance gold loans. Therefore, the Hon'ble
Supreme Court pointed out that such an
activity of the said society was that of a
finance business and could not be termed as a
cooperative society and that the loans, which
were disbursed, were without the approval
from the Registrar of Mutually Aided
Cooperative Societies, Ranga Reddy District.
The Hon'ble Supreme Court found that the said
society was not entitled to deduction under
Section 80P of the Act.
16. It is noteworthy to point out that the
Hon'ble Supreme Court in the decision in the
case of Citizen Cooperative Society Limited
also observed that in the light of insertion of
Sub-Section (4) to Section 80P of the Act by
the Finance Act, 2006, such deduction should
not be admissible to a cooperative bank and
that if it is a primary agricultural credit society
or a primary cooperative agriculture and rural
development bank, the deduction would still be
provided.
17. In the preceding paragraphs, we
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TCA.No.91 of 2021
have pointed out the definitions of the
expressions 'members' and 'associate member'
under the TNCS Act and held that an 'associate
member' is also a 'member' in terms of Section
2(16) of the TNCS Act. Furthermore, the
Assessing Officer himself found that the
associate members are also admitted as
members of the society. In such
circumstances, the Assessing Officer fell into
an error in not granting any relief to the
assessee society, which was rightly granted by
the CIT (A) as confirmed by the Tribunal. In
addition to that, the Assessing Officer has not
pointed out that loans have been disbursed to
all and sundry in terms of the provisions of the
TNCS Act and in terms of Clause (b) to Sub-
Section (4) of Section 80P of the Act, the
society has an area of operation, operates
within the taluk and will provide long term
credit for agricultural and rural development
activities as well. The CIT (A) rightly granted
the relief to the assessee as confirmed by the
Tribunal. We do not find any good ground to
entertain these appeals.
18. Accordingly, the above tax case
appeals are dismissed. The substantial
questions of law framed are answered against
the Revenue.'
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TCA.No.91 of 2021
6. We are convinced that the aforesaid
judgment will squarely applicable to the
assessee's case.
7. For all the above reasons, these Tax
Case Appeals are allowed and the Substantial
Questions of Law is answered in favour of the
assessee.”
5. As the said tax case appeals namely TCA.Nos.170 and 171 of
2020 filed against the common order passed by the Tribunal in both
the main appeal as well as the cross objection were decided in favour
of the assessee, nothing survives for consideration in this appeal.
6. Accordingly, the above tax case appeal is closed. No costs.
01.2.2021
To
1.The Income Tax Appellate Tribunal, 'C' Bench, Chennai.
2.The Principal Commissioner of Income Tax, Salem.
RS
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TCA.No.91 of 2021
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
RS
TCA.No.91 of 2021
01.2.2021
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