T.C.A.No.170 & 171 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 17.07.2020 CORAM HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.Nos.170 & 171 of 2020 M/s.S 1911 Udhur PACCS N Mangalam Post Salem 636 106. .. Appellant in both appeals Versus Principal Commissioner of Income Tax, Salem. .. Respondent in both appeals Common Prayer:- Tax Case Appeal filed under Section 260-A of Income Tax Act, 1961, against order of Income Tax Appellate Tribunal, Madras 'C' Bench, dated 27.03.2018 made in I.T.A.Nos.2331/Chny/2017 relating to Asst Year 2011-12 and 2014-15. For Appellant in both appeals: Mr.Balaji.N.V 1/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 For Respondent in both appeals:Mr.M.Swaminathan Senior Standing Counsel assisted by Ms.V.Pushpa COMMON JUDGMENT [Order of Court was made by T.S.SIVAGNANAM, J.] These appeals filed by assessee under Section 260 of Income Tax Act, 1961 ( 'the Act' for brevity), is directed against order dated 27.03.2018 in I.T.A.No.2331/Chny/2017, on file of Income Tax Appellate Tribunal Madras 'C' Bench for assessment year 2011-12. appeal is entertained on following substantial question of law: ''Whether under facts and circumstances of case Tribunal was right in holding that appellant is not entitled for deduction under Section 80P?'' 2. Heard N.V.Balaji, learned counsel appearing for appellant / assessee and Mr.M.Swaminathan, learned senior standing counsel appearing for Revenue assisted by Mr.V.Pushpa, learned Junior standing counsel appearing for Revenue. 3. Identical issue was decided by Division Bench of this Court 2/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 in case of 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. assessee in said case was also Cooperative Society carrying on business of Banking. question was whether assessee was entitled to deduction under Section 80P(2)(a)(i) of Act, as activity carried on by assessee being finance business, it cannot be termed as Cooperative Society. 4. Court after considering definition of 'Member' under Tamil Nadu Cooperative Societies Act, 1983 and also taking note of Section 80P(4) of Act, considered definitions of expressions 'Members' and 'associated members' under Cooperative Societies Act and held that 'associated member' is also member in terms of Section 2(16) of Cooperative Societies Act. Accordingly, said Tax Case Appeal was dismissed and Substantial Question of Law was answered against Revenue. 5. case on hand is also identical matter. only 3/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 difference being, assessee lost before Tribunal and therefore, assessee is before us by way of these appeals. For better appreciation, we refer to relevant paragraphs in case of Ammapet Primary Agricultural Cooperative Bank Ltd., (cited supra): 12.Admittedly, assessee society is registered under provisions of TNCS Act. It defines word 'members' under Section 2(16) to mean person joining in application for registration of society and person admitted to membership after registration in accordance with provisions of Act, Rules framed thereunder and By-laws and includes associate member. expression 'associate member' is defined under Section 2(6) of TNCS Act to mean member, who possesses only such privileges and rights of member and who is subject only to such liabilities of member as may be specified in this Act, Rules and By-law. 13.Thus, definition of word 'members' includes associate member and therefore, Assessing Officer fell into error in drawing distinction between Class members and B Class members. For purpose of being entitled to relief under Section 80P of Act, all that is required is that cooperative society should answer description of society engaged in carrying on business of 4/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 providing credit facilities to its member. Once description is answered, then automatically, benefit of Section 80P of Act would stand attracted subject to provisions contained in Sub-Section (2) of Section 80P of Act. 14. Further, it is to be pointed out that in terms of Sub-Section (4) of Section 80P of Act, which was inserted vide Finance Act, 2006 with effect from 01.4.2007 i.e from assessment year 2007-08, 'primary cooperative agricultural and rural development bank' means 'a society having its area of operation confined to taluk, principal object of which is to provide for long term credit for agricultural and rural development activities'. What was excluded was 'cooperative banks' and admittedly, assessee society is primary agricultural cooperative credit society and therefore, would be entitled to benefit of Section 80P of Act. 15. Further, for assessment year 2014-15, decision in case of Citizen Cooperative Society Limited was relied upon by Revenue before Tribunal, which, in paragraph 6.1 of its order dated 28.2.2018 for assessment year 2014-15, extracted operative portion of that judgment. In that case, Hon'ble Supreme Court found that society 5/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 carried on certain activities, which were contrary to provisions of Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995 and that they accepted deposits from third parties, who were not members in real sense and were using those deposits to advance gold loans. Therefore, Hon'ble Supreme Court pointed out that such activity of said society was that of finance business and could not be termed as cooperative society and that loans, which were disbursed, were without approval from Registrar of Mutually Aided Cooperative Societies, Ranga Reddy District. Hon'ble Supreme Court found that said society was not entitled to deduction under Section 80P of Act. 16. It is noteworthy to point out that Hon'ble Supreme Court in decision in case of Citizen Cooperative Society Limited also observed that in light of insertion of Sub-Section (4) to Section 80P of Act by Finance Act, 2006, such deduction should not be admissible to cooperative bank and that if it is primary agricultural credit society or primary cooperative agriculture and rural development bank, deduction would still be provided. 17. In preceding paragraphs, we have pointed out definitions of expressions 'members' and 'associate 6/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 member' under TNCS Act and held that 'associate member' is also 'member' in terms of Section 2(16) of TNCS Act. Furthermore, Assessing Officer himself found that associate members are also admitted as members of society. In such circumstances, Assessing Officer fell into error in not granting any relief to assessee society, which was rightly granted by CIT (A) as confirmed by Tribunal. In addition to that, Assessing Officer has not pointed out that loans have been disbursed to all and sundry in terms of provisions of TNCS Act and in terms of Clause (b) to Sub-Section (4) of Section 80P of Act, society has area of operation, operates within taluk and will provide long term credit for agricultural and rural development activities as well. CIT (A) rightly granted relief to assessee as confirmed by Tribunal. We do not find any good ground to entertain these appeals. 18. Accordingly, above tax case appeals are dismissed. substantial questions of law framed are answered against Revenue. 6. We are convinced that aforesaid judgment will squarely applicable to assessee's case. 7/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 7. For all above reasons, these Tax Case Appeals are allowed and Substantial Questions of Law is answered in favour of assessee. (T.S.S.,J) (V.B.S.,J) 17.07 .2020 sk Index: Yes / No Internet: Yes / No Speaking Order/Non-Speaking Order To Principal Commissioner of Income Tax, Salem. T.S.SIVAGNANAM, J. AND V.BHAVANI SUBBAROYAN, J. 8/9 http://www.judis.nic.in T.C.A.No.170 & 171 of 2020 sk T.C.A.Nos.170 & 171 of 2020 17.07.2020 9/9 http://www.judis.nic.in S 1911 Udhur PACCS v. Principal Commissioner of Income-tax, Salem