ITAT Bangalore Remands Case for Fresh Review of Section 80P Deduction Eligibility; Assessee to Provide New Evidence.

The ITAT Bangalore addressed the assessee's appeal concerning the denial of deduction under section 80P of the Income Tax Act. The ITAT set aside the previous decisions and remanded the case for fresh consideration by the Ld.AO. The ITAT instructed the assessee to provide evidence, including an RBI certificate, to substantiate its claim. The Ld.AO was directed to reassess the eligibility for deduction under section 80P, allowing the assessee to present further evidence. The appeal was allowed for statistical purposes, pending a thorough reexamination.

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Issues:
1. Denial of deduction under section 80P of the Income Tax Act.

Analysis:
The appeal was filed by the assessee against the order passed by the Ld.CIT (A), Bangalore for the assessment years 2015-16, specifically challenging the denial of deduction under section 80P of the Act. The assessee, a cooperative society providing credit facilities to its members and distributing ration cards, claimed a deduction of &8377; 84,67,703 under section 80P but was denied by the Ld.AO based on the violation of principles of mutuality. The Ld.AO disallowed the deduction citing relevant court decisions and observations. The assessee then appealed before the Ld.CIT(A) who upheld the Ld.AO's decision, leading to the current appeal before the ITAT Bangalore.

The Ld.AR representing the assessee argued that the society did not violate any provisions of the Karnataka co-operative societies act and included nominal and associate members. It was highlighted that only jewel loans were given to nominal members, mainly farmers with agricultural land, which constituted a small portion of the total advances. The Ld.AR contended that the facts of the present case were more aligned with a different court case and requested a reexamination of the issue.

The ITAT Bangalore, after considering the submissions from both parties and examining the records, decided to address the grievance of the assessee regarding the test of mutuality. The ITAT set aside the issue of deduction under section 80P(2)(a)(i) for fresh consideration by the Ld.AO. The ITAT directed the assessee to provide a certificate from the RBI confirming the absence of a banking license and to clarify that the business conducted was not similar to that of a co-operative bank. The ITAT emphasized the need to scrutinize the society's documents, membership categories, bylaws, and nature of business to determine the eligibility for deduction under section 80P. The Ld.AO was instructed to allow the assessee an opportunity to present evidence and substantiate its case before making a decision on the deduction issue.

Ultimately, the ITAT allowed the grounds raised by the assessee for statistical purposes, and the appeal was deemed allowed on those grounds. The judgment was pronounced on 1st September 2020.

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