TaxTMI 
TaxTMI 
2021 (9) TMI 342
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on the only ground that the appellant deals with nominal and associate members. 4. That the learned Commissioner of Income-Tax (Appeals) ought to have appreciated that the appellant is registered as Co-operative Society under Karnataka State Co-operative Societies Act, 1959 and the said Act allows the appellant to admit nominal and associate members. Each of the above grounds is without prejudice to one another, the appellant seeks the leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or otherwise modify each or any of the grounds of appeal either before or at the time of hearing this appeal." 2. Following Additional grounds has been raised by assessee vide application dated 31/12/2020: "The appellant herein seeks the leave of the Hon'ble Tribunal to file the following additional grounds: 1. Without prejudice to the claim that the appellant is entitled to deduction u/s 80P(2)(a) of Income Tax Act 1961 (Act) the learned lower authorities ought to have allowed the deduction u/s 80P(2)(a) of the Act to the extent that such income is attributable to the dealing with regular members and nominal members. 2.....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., that the assessee society was earning income not only from the members but majority of the income from the nominal/ Associate members. Taking into cognizance the ratio of decision of Hon'ble Supreme Court, in the case of Citizen Co-op Society Ltd, Hyderabad v. ACIT, C-9(1), Hyderabad in Civil Appeal No.10245 of 2017 dated 8.08.2017 the Ld.AO denied deduction claimed u/s.80P by holding that the asessee provided credit facilities to three categories of members viz., i) Regular member ii) Associate members and iii) Nominal members. Hence, Ld.AO disallowed the deduction claimed u/s.80P(2)(a)(i) of the Act. 3.3 The Ld.AO was of the view that principle of mutuality was violated by assessee and therefore denied the deduction in view of the decision of Hon'ble Supreme Court in case of Citizen cooperative society Ltd. in Civil appeal No. 10245/2017 dated 08.08.2017, on following grounds: i) interest/dividend income was held to be income from other sources and excluded from the deduction under section 80P(2)(a)(i). For the deduction under section 80P(2)(d) was also denied relying on the decision of Hon'ble Karnataka High Court in case of M/s Totgars Co-operative so sale society....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore do not require any adjudication. 6. Grounds 2-4 & Additional Ground No.1: In respect of associate/nominal members, Hon'ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. v. CIT (2021) 123 taxmann.com 161 (SC) has held that the expression "Members" is not defined in the Income-tax Act. Hence, it is necessary to construe the expression "Members" in section 80P(2)(a)(i) of the Act in the light of definition of that expression as contained in the concerned co-operative societies Act. In view of this, the facts are to be examined in the light of principles laid down by the Hon'ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. (supra). Accordingly, we remit this issue of deduction u/s.80P(2)(a)(i) of the Act to the file of Ld.AO to examine the same de novo in the light of the above judgment. Needless to say that proper opportunity of being heard is to be granted to assessee in accordance with law Accordingly grounds 2-4 and Additional Ground No.1 stands allowed for statistical purposes. 7. Additional Ground 2 is in respect of interest from investment in Co-operative banks, nationalised banks. 7.1 This issue has been decided by coordinate be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act. Hon'ble Karnataka Court distinguished the facts in the decision of the Hon'ble Supreme Court in the case of Totgars (supra) by observing that Hon'ble Supreme Court was dealing with a case where the assessee-cooperative society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by....