TaxTMI 
TaxTMI 
2019 (7) TMI 798
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.... claim of deduction under section 80P(2)(a)(i) of the Act by following, inter alia, the decision of the Hon'ble Apex Court in the case of Totgars Co-operative Sale Society Ltd., Vs. ITO (2010) 322 ITR 283 (SC). 2.2 On appeal, the CIT(A), Hubballi, vide the impugned order dated 28.11.2018 allowed the assessee partial relief. In this order, the CIT(A) held that (1) the assessee is entitled to deduction under section 80P(a)(i) of the Act in respect of interest income attributable to its business but (2) upheld the AO's rejection of the assessee's claim for deduction under section 80P(2)(a)(i) of the Act in respect of interest received from other investments and deposits which was to be assessed under the head 'Income from Other Sources'. 3. Aggrieved by the order of CIT(A), Hubballi, dated 28.11.2018 for Assessment Year 2012-13, the assessee has preferred this appeal before the Tribunal, wherein it has raised the following grounds:- 1. The learned Commissioner of Income Tax (Appeals), Hubballi has erred in passing order which is opposed to law and facts of the case. 2. The learned Commissioner of Income Tax (Appeals), Hubballi has erred in holding that income from regular member....
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....ed the matter to the file of the CIT(A) for fresh decision after affording both the assessee and Revenue adequate opportunity of being heard in the matter. 5.2 The learned DR for Revenue supported the orders of the CIT(A). 5.3.1 I have heard and considered the rival contentions and perused the material on record; including the judicial pronouncements cited. It is seen from the impugned order of the CIT(A) at para 7 thereof that the interest income earned from associate members is Rs. 32,46,651/- out of the total interest earned of Rs. 47,16,361/-. The CIT(A) held that as per the decision of the Hon'ble Apex Court in the case of Citizen Co-operative Society Ltd., Vs. ACIT (supra) deduction is allowable only in respect of income earned from regular members under section 80(P)(2)(a) of the Act and not income earned from others. The Hon'ble Apex Court in the case of Citizen Co-operative Society Ltd., (supra) at paras 25 to 28 thereof has held as under:- "25. So far so good. However, it is significant to point out that the main reason for disentitling the appellant from getting the deduction provided under Section 80P of the Act is not sub-section (4) thereof. What has been noticed ....
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....ple, ING Mutual Fund [as said by the MD vide his statement dated 20.12.2010]. [Though the bank formed the third party vis-a-vis the assessee entitled between contributor and recipient is lost in such case. The other ingredients of mutuality are also found to be missing as discussed in further paragraphs]. In the present case both the parties to the transaction are the contributors towards surplus, however, there are no participators in the surpluses. There is no common consent of whatsoever for participators as their identity is not established. Hence, the assessee fails to satisfy the test of mutuality at the time of making the payments the number in referred as members may not be the member of the society as such the ADP body by the society is not covered by concept of mutuality at all." 27. These are the findings of fact which have remained unshaken till the stage of the High Court. Once we keep the aforesaid aspects in mind, the conclusion is obvious, namely, the appellant cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members. We are afraid such a society cannot claim the benefit of Section 80P of the Act. 28....
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....rom nominal members, there is no observation about any other aspect of various Objection raised in the case of Citizen Co - Operative Society Limited vs. ACIT (Supra) and it is held by CIT (A) that deduction should be disallowed in respect of interest earned from nominal members by stating that this is the ratio of this judgment of Hon'ble Supreme Court rendered in the case of Citizen Co -Operative Society Limited vs. ACIT (Supra) but in my considered opinion as evident from relevant paras of this judgment reproduced above, this is not the ratio of this judgment. 7. In the light of above discussion, I Feel that in the interest of justice, the mater should go back to the file of CIT (A) for a fresh decision. Hence. I set aside the order of CIT (A) and restore this matter back to his tile for a fresh decision with the direction that sufficient opportunity should be provided by him to both sides and the assessee should provide complete detail with cogent evidence in respect of business carried out by the assessee with nominal members and general public, if any. The assessee should also demonstrate about the difference in facts of the present case and facts in the case of Citiz....
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.... AO holding as under at paras 4 and 5 thereof:- "4. The learned AR relied on the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Credit Cooperative Ltd. 230 taxman 309 (Kam), the DR relied on a subsequent decision of the Hon'ble Karnataka High Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd. 395 ITR 611 (Karn.). We have carefully gone through the said judgment. The facts of the case before the Hon'ble Karnataka High Court was that the Hon'ble Court was considering a case relating to Assessment Years 2007-2008 to 2011- 2012. In case decided by the Hon'ble Supreme Court in the case of the very same Assessee, the Assessment years involved was AY 1991-92 to 1999-2000. The nature of interest income for all the AYs was identical. The bone of contention of the Assessee in AY 2007-08 to 2011-12 was that the deduction under Section 80P(2) of the Act is claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under Section 80P(2)(a) of the Act which was the claim in AY 1991-92 to 1999-2000. The reason given by the Assessee was that in AY 2007-08 to 2011-12 investments and deposits after th....