2019 (6) TMI 86 - AT - Income Tax

Tribunal Upholds Co-op Society's Tax Deduction Eligibility, Emphasizes Member Classification

Tata Memorial Central Employees Co-operative Credit Society Versus ITO Ward 20 (3) (4), Mumbai

The tribunal upheld the CIT(A)'s ruling in favor of the assessee, confirming it as a co-operative credit society entitled to deduction under section 80P ... Rectification u/s 254 - Deduction u/s 80P(2)(a)(i) allowability - as per AO that the assessee is a Co-operative Bank in the category of primary co-operative bank and is hit by provisions of Section 80P(4) - assessee claimed that it provides credit facilities to its members only and hence it is entitled for deduction u/s 80P(2)(a)(i) - CIT-A decided the issue in favour of the assessee - tribunal based on material which is available on record the assessee is not a Co-operative Bank but a Co-operative credit society and also noticed that there are two types of members which the assessee can make as per bye laws firstly active members and second nominal members. The active members can give deposit , take loans and also are entitled to vote at the meetings but there is another class of members namely nominal members who are retired employees of Tata Memorial Hospital who cannot give deposits to assessee, nor take loans from assessee as well these nominal members are not entitled to vote at the meetings - assessee is now seeking recall of the said well reasoned order dated 31.07.2018 passed by tribunal on the grounds that there was no dispute between the Revenue and the assessee as to the nominal members and also it is made out that facts in the case of Citizen Co-operative Society Limited [2017 (8) TMI 536 - SUPREME COURT] were different HELD THAT:- The scope available with tribunal u/s 254(2) is limited to correcting mistakes apparent from records and we do not find any mistake apparent from records in well reasoned order [2018 (8) TMI 129 - ITAT MUMBAI] passed by tribunal in view of recent decision of Hon’ble Supreme Court in the case of The Citizen Co-operative(supra), as in case of the assessee there is also an class of nominal members who are not entitled to give deposits, take loans or even they are not allowed to vote in meetings but they are only allowed to place their retirement benefits. Thus, we find there is no mistake apparent from records in the appellate order dated 31.07.2018 passed by tribunal which can be rectified within limited mandate of Section 254(2). At this stage we would also like to refer to recent decision in the case of The Mavilayi Service Co-operative Bank Limited v. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] . Thus, in our considered view this MA lacks merit and we are inclined to dismiss this MA. We order accordingly. Issues:1. Deduction under section 80P of the Income Tax Act for a co-operative credit society.2. Classification of members in a co-operative credit society.3. Applicability of recent Supreme Court judgment on nominal members in co-operative societies.4. Recall of appellate order based on the classification of members.Analysis:1. The assessee claimed deduction under section 80P of the Income Tax Act as a co-operative credit society providing credit facilities to its members. The Assessing Officer denied the deduction, considering the assessee as a Co-operative Bank falling under Section 80P(4) of the Act. The CIT(A) ruled in favor of the assessee, stating it was a co-operative credit society entitled to the deduction.2. The tribunal reviewed the bye laws of the assessee and differentiated between active members and nominal members. Active members had various rights, including deposits, loans, and voting, while nominal members, retired employees of Tata Memorial Hospital, had limited rights to only place their retirement benefits with the society. The tribunal referred to a recent Supreme Court judgment on nominal members' rights and decided to send the matter back to the Assessing Officer for verification of potential breaches of mutuality.3. The tribunal's decision was based on the need to verify the roles, rights, and responsibilities of nominal members in light of the Supreme Court judgment. The tribunal found that the authorities had not examined this aspect and ordered a limited verification to ensure compliance with mutuality principles. The assessee sought a recall of this order, arguing that there was no dispute regarding nominal members and that the facts of the Supreme Court judgment were different.4. The tribunal, considering the recent Supreme Court decision and the nature of nominal members in the assessee's society, declined to recall the order. The tribunal highlighted the limited scope of rectification under Section 254(2) of the Act and referenced a recent Kerala High Court judgment on a similar matter. Consequently, the Miscellaneous Application seeking a recall of the order was dismissed, affirming the original decision regarding the classification of members in the co-operative credit society.This comprehensive analysis covers the issues related to the deduction under section 80P, the classification of members, the impact of the Supreme Court judgment on nominal members, and the decision on recalling the appellate order based on the classification of members in the co-operative credit society.