TaxTMI 
TaxTMI 
2019 (10) TMI 356
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.... CIT(A) and learned AO erred in law and on facts in not appreciating the facts that Nominal Members is one of the category of members of the Co-operative Society as defined in State Legislature governing the appellant. 3. The learned CIT(A) and learned AO erred in law and on facts in not appreciating the difference between category of members as defined in applicable State Legislature governing the appellant society that from the State Legislature which was applicable to The Citizen Co-operative Society Ltd. 4. The appellant craves leave to add/modify/delete/amend all/any of the grounds of appeal." 3. Briefly stated the relevant facts include that the assessee is a Cooperative Society registered under the Maharashtra Co-operative Societies Act, 1960. Assessee earned interest income apart from other miscellaneous income during the year. The assessee filed the return of income declaring Nil income after claiming of deduction of Rs. 2,73,45,788/- u/s 80P of the Act. The Assessing Officer took the case for limited scrutiny in view of the CASS guidelines and found that the assessee is not entitled to claim the deduction u/s 80P of the Act. Further, the Assessing Officer noticed tha....
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....record are as under :- Assessee is a Co-operative Society registered under Maharashtra Cooperative Credit Societies Act, 1960 and is stated to be engaged in providing credit facilities to its Members and accepts deposits from its members. Assessee filed its return of income for A.Y. 2015-16 on 29.09.2015 declaring total income at Rs.Nil after claiming deduction of Rs. 18,38,878/- u/s 80P of the Act. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt.29.12.2017 and the claim of deduction u/s 80P of the Act was denied to the assessee and the total income was thus determined at Rs. 18,38,878/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.01.06.2018 (in appeal No.PN/CIT(A)-6/ITO Wd.10(5)/10297/2017-18) dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds : "1. The Ld.CIT(A) - 6, Pune erred in law and on facts, in confirming the action of the learned AO in denying the deduction u/s 80P(2)(a)(i) of the ITA, 1961 amounting to Rs. 18,38,878/-. 2. The learned CIT(A)-6, Pune and the le....
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....ished by the assessee. AO noted that though assessee had provided credit facilities to the new non-members and nominal members but had failed to submit any evidence of approval from the Managing Committee for being taken the new non-members or nominal members and had submitted only registration numbers and hence, according to AO, assessee had violated the bye-laws of the Society. AO was of the view that since the assessee had neither enrolled the new non-members or nominal members nor any activities were carried out by them thereby violated the provisions of bye-laws of the Society by accepting the deposits from nominal members and new non-members. AO thereafter concluded that assessee was acted like a regular Bank by accepting deposits from any person and also giving loans and therefore the main motto of the assessee is to earn more profits. 7. AO also noticed that the assessee was required to invest surplus funds with the Co-operative Society and not with the Co-operative Banks and the interest earned on investments, surplus funds with Co-operative Banks was not eligible for claim of deduction. He therefore concluded that assessee satisfied the essential condition to qualify as....
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....rea of operation confined to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities". 6.1 Subsequent to the introduction of Sec.80P(4), controversy arose as to whether all the credit cooperative societies fall within the definition of cooperative bank mentioned in sec.80P(4). This issue was examined by the various Tribunals in the country and also by the constitutional courts. 6.1.1 In the case of CIT Vs. Jafar Momin Vikas Co-op. Credit Society Ltd. reported in [2014] 49 Taxmann.com 571 (Guj.), the High Court of Gujarat held in its order dtd.15/1/2014 that Sec.80P(4) will not apply to the assessee which is not a co-operative bank and in ruling so that it relied on the clarification issued by the CBDT in Circular No.133 of 2007 dtd.9/5/2007 in respect of the Delhi Co-operative Urban Thrift and Credit Society Ltd. 6.1.2 The ITAT Pune Bench B in the case of ITO Vs. Jankalyan Nagari Sah. Pat Sanstha Ltd. reported in [2012] 24 Taxmann.com 127 (Pune) for A.Y. 07-08 dtd.26/6/2012, has held that the co-operative credit society is distinct and separate from co-operative bank. It is also held that the co-operative ....
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....s not involved in co-operative activities. The borrowers and the depositors are quite distinct. As the facts of the appellant case are similar to that of the case decided by the Supreme Court, the decision of Supreme Court is also applicable to the appellant. Therefore, the action of the AO in disallowing the deduction u/s.80P(2)(a) is upheld. 7.1 As the society has been held to be not involved in co-operative activity, the deduction u/s.80P itself would not be applicable to the appellant. Therefore the claim of deduction u/s.80P(2)(d) would also not be available to the appellant." Aggrieved by the order of Ld.CIT(A), assessee is now in appeal. 8. Before me, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A). Before me Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A) and submitted that Ld.CIT(A) while upholding the order of AO had relied on the decision of Hon'ble Apex Court in the case of Citizen Cooperative Society Limited Vs. ACIT in Civil Appeal No.10245 of 2017 order dated 08.08.2017. He submitted that the facts in the case of Citizen Cooperative Society (supra) are different and are therefore not applicable to the present facts. He submitted ....
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....r of the assessee. He placed on record the copy of the aforesaid decision. He therefore submitted that following the decision of Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra), the issue be decided in assessee's favour. Similar arguments were raised by other Authorized Representatives also. Ld. D.R. on the other hand, supported the order of lower authorities. 9. I have heard the rival submissions and perused the material on record. The issue in the present case is with respect to denial of claim of deduction u/s 80P of the Act. I find that AO while denying the claim of assessee had held the assessee can be treated as a Co-operative Bank looking at the nature of activities of the assessee and since Co-operative Banks are not eligible for deduction u/s 80P on the amount invested in banks other than those mentioned u/s 80P(2)(d) of the Act, he denied the claim of deduction. I find that the Co-ordinate Bench of the Tribunal while deciding the identical issue in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra) has decided the issue in assessee's favour by noting as under : "8. It is pertinent to note here that the ....
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....ty is entitled for deduction u/s. 80 P(2)(a)(i) of the Act. We accordingly uphold the order of the Ld CIT(A)." 10. Before me, it is assessee's contention that the facts in the year under consideration are similar to the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra). The aforesaid contention of the assessee has not been controverted by Revenue. Revenue has also not placed any contrary binding decision in its support nor has placed any material to demonstrate that the order passed by the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra) in A.Y. 2007-08 has been set aside by higher Judicial Forum. 11. I further find that Ld.CIT(A) while upholding the order of AO, had relied on the decision of Hon'ble Apex Court in the case of Citizen Co-operative Society (supra). Before me, Ld.A.R. has pointed to the difference in the definition of member in case of Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995 and Maharashtra Co-operative Societies Act, 1960 and Tamilnadu Co-operative Societies Act, 1983. The difference in the definition pointed out by Ld.A.R. has not been controverted by Ld. D.R. I thus find force in the argument of Ld.A.R. ....
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....y and therefore, would be entitled to the benefit of Section 80P of the Act. 15. Further, for the assessment year 2014-15, the decision in the case of Citizen Cooperative Society Limited was relied upon by the Revenue before the Tribunal, which, in paragraph 6.1 of its order dated 28.2.2018 for the assessment year 2014-15, extracted the operative portion of that judgment. In that case, the Hon'ble Supreme Court found that the society carried on certain activities, which were contrary to the provisions of the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995 and that they accepted deposits from third parties, who were not members in the real sense and were using those deposits to advance gold loans. Therefore, the Hon'ble Supreme Court pointed out that such an activity of the said society was that of a finance business and could not be termed as a cooperative society and that the loans, which were disbursed, were without the approval from the Registrar of Mutually Aided Cooperative Societies, Ranga Reddy District. The Hon'ble Supreme Court found that the said society was not entitled to deduction under Section 80P of the Act. 16. It is noteworthy to point....