2019 (10) TMI 356 - AT - Income Tax

Tribunal directs reassessment in favor of appellant for fair hearing.

The Tribunal allowed the appeal for statistical purposes, directing the CIT(A) to re-evaluate the issue in light of the Tribunal's and higher courts' ... Disallowing the Deduction u/s 80P(2)(a)(i) - Interest Received on Loans given to Nominal Members - HELD THAT:- Assessee is eligible for deduction of u/s 80P(2)(d) of the Act in respect of the amount invested in PDCC i.e., Cooperative Banks and other Banks. Further of the view that in the present case, the ratio of decision of the High Court in the case of M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. [2019 (1) TMI 116 - MADRAS HIGH COURT] would be applicable. Therefore following the ratio of the decisions cited herein above and the decision of Hon’ble Bombay High Court hold that assessee is eligible for deduction u/s 80P of the Act. Thus, the grounds of allowed. Issues Involved:1. Disallowance of Deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 on Interest Received on Loans given to Nominal Members.Issue-wise Detailed Analysis:1. Disallowance of Deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 on Interest Received on Loans given to Nominal Members:The appellant, a Cooperative Society registered under the Maharashtra Co-operative Societies Act, 1960, filed a return declaring Nil income after claiming a deduction of Rs. 2,73,45,788/- u/s 80P of the Act. The Assessing Officer (AO) disallowed the deduction of Rs. 14,94,258/- u/s 80P(2)(a)(i) by treating the interest received on loans given to nominal members as 'Income from Other Sources.' The AO’s decision was based on the Supreme Court judgment in Citizen Co-operative Society Ltd. vs. ACIT, which resulted in the denial of section 80P benefits.During the first appellate proceedings, the CIT(A) upheld the AO’s decision, recognizing two kinds of members in cooperative societies and concluding that the appellant did not qualify as a cooperative bank under section 80P(2).The appellant argued before the Tribunal that the issue was similar to the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit vs. ITO, where the Tribunal ruled in favor of the assessee. The appellant requested that the issue be remanded back to the CIT(A) for reconsideration in light of the Tribunal's settled view.The Tribunal noted that the issue had been adjudicated in favor of the assessee in the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit, where it was established that cooperative credit societies are distinct from cooperative banks and are eligible for deductions u/s 80P(2)(a)(i). The Tribunal also referenced the Madras High Court decision in PCIT vs. M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd., which differentiated between members as per various state cooperative acts and supported the appellant's claim.The Tribunal found that the CIT(A) had relied on the Supreme Court's decision in Citizen Co-operative Society Ltd., which was not applicable due to differences in state cooperative laws. The Tribunal also referred to the Bombay High Court decision in Jalgaon District Central Cooperative Bank Ltd., which stated that the definition of 'member' under the Maharashtra Co-operative Societies Act includes nominal members.Consequently, the Tribunal accepted the appellant's alternate prayer to remand the issue back to the CIT(A) for fresh adjudication, directing the CIT(A) to pass a speaking order considering the Tribunal's settled view and granting a reasonable opportunity of being heard to the assessee.Conclusion:The Tribunal allowed the appeal for statistical purposes, directing the CIT(A) to re-evaluate the issue in light of the Tribunal’s and higher courts' decisions, ensuring a fair hearing for the assessee.