2018 (8) TMI 273

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....parte qua the assessee-appellant after hearing ld.DR and considering material available on record. 3. Though the assessee has raised five grounds of appeal, effective ground in this appeal is against denial of exemption of Rs. 16,41,836/- under section 80P of the Income Tax Act mainly on the ground that credit facilities extended to 'nominal' members far exceeds 'regular' members, and therefore, principle of mutuality has been broken. 4. Brief facts of the case involved in the present appeal is that assessee co-op. credit society registered under Gujarat Cooperative Societies Act, 1961. It is engaged in providing credit facilities to its members. Return of income for the assessment year 2015-16 was filed on 30.10.2015 declaring total ....

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....g to earn maximum profit in the business which are against the object of the society, and therefore, by following judgment of Hon'ble Supreme Court in the case of Citizen Co-operative Society Ltd. Vs. ACIT dated 8.8.2017 disallowed the claim of the assessee under section 80P and the added the same to the total income of the assessee. 5. Aggrieved by the order of the ld.AO, the assessee went in appeal before the ld.CIT(A). Before the ld.First Appellate Authority the assessee filed written submissions, which are reproduced in the impugned order from page nos.2 to 6. In the written submissions, the assessee inter alia pleaded that assessee-society is primary agriculture credit society as per the Part V of the Banking Regulation Act. A certi....

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....om the Registrar of Societies. The Hon'ble Apex Court held that the main reason for disentitling the assessee from getting the deduction provided under section 80P is not sub-section (4) of the Act, but activities of the assessee were in violation of provisions of Multi State Co-operative Societies Act. It was submitted that as per the definition provided in section 2(13) of Gujarat Cooperative Societies Act, the expression 'Member' also includes nominal, associate or sympathizer member and they will have such privileges and rights of a member and be subject to such liabilities of a member, as may be specified in the bye-laws of the society. It was further pointed out that expression "member" has not defined in the Income Tax Act and it has....

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..... As per the AO, members of the assessee-society consisted of two types viz. regular member and nominal members. It is the case of the Revenue that assessee is doing more business with nominal members than the regular member in order to earn more profit, which is against the law, and therefore, there is a break-down of principle of mutuality resulting disentitlement of exemption under section 80P. The ld.AO relied upon the judgment of Hon'ble Supreme Court in the case of Citizens Cooperative Society Ltd. (supra) to support his view. While the case of the assessee is that being a primary agriculture credit society, it is entitled for exemption under sub-section (4) of section 80P. Judgment of Hon'ble Apex Court relied upon by the Revenue is ....