The Income Tax Appellate Tribunal (ITAT), Chennai Bench has held that the cooperative society providing financial accommodation to members without Reserve Bank of India (RBI) license for banking business is eligible for exemption u/s 80P(2)(a)(I).
The assessee, Varathappam Palayam Primary Agricultural Co-op. Credit Society having “A” class Members as well as “B” class Members as its society’s Members. The Assessing Offier by relying on the decision in Citizen Co-Operative Society Limited v. ACIT deleted the exemption claim under section 80P(2)(a)(i) alleging that deposits received from “B” class Members, there is no mutuality and they are only “nominal members”. On appeal the CIT(A) confirmed the deletion. Aggrieved by the decision the assessee filed appeal before the ITAT.
The Tribunal by relying on the decision in Velankattuvalasu Primary Agricultural Cooperative Credit Society Ltd. v. ACIT obseved that the assessee being a Co-operative Society the primary object of which is to provide financial accommodation to its members, i.e. members as well as Associate members for agriculture purposes or for purpose connected with the agricultural activities. The provision of Section 80P(4) of the Act is to be read as a proviso, which specifically excludes cooperative banks which are co-operative societies engaged in the banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the Reserve Bank of India. Clearly, therefore, the assessee’s case is out of the provisions of Section 80P(4) of the Act.
The Coram of Mr. V. Durga Rao, Judicial Member and Mr. Girish Agrawal, Accountant Member has held that “we hold that irrespective of the fact that whether the assessee is having “A” class Members or “B” class Members, the assessee is entitled for claiming exemption under section 80P(2)(a)(i) of the Act. Thus, the ground raised by the assessee is allowed”.
Advocate Mr. S. Sridhar appeared on behalf of the appellant and Mr. V. Sreenivasan appeared on behalf f the respondent.
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