2021 (9) TMI 343

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....T circle 9, CA no. 10245 of 2017, were can't made applicable in our case, because. a. In the case of Appellant Society, the Hon'ble supreme Court observed situation in the Civil Appeal of The Citizen Co-operative Society Limited Hyderabad V/s ACIT circle 9, CA no. 10245 of 2017 were completely absent. We being a co-operative society registered under Karnataka Cooperative Societies Act and society meant only for its members and providing credit facilities to its members. We have nowhere violated the pro isions of Co-operative Societies Act & By-laws. Section 80(p) (4) is also not applicable to us as we are not a "Co-operative Bank "within the meaning assigned in Part V of the Banking Regulation Act. b. We have not violated the provisions of KCS Act. As per our By-laws approved by the Registrar of Co-op Societies. c. We humbly rely on the decision laid down by the Honorable Apex Court in the MAVILAYI SERVICE COOPERATIVE BANK LTD. AND OTHERS V. COMMISSIONER OF INCOME TAX AND ANOTHER. [2021j/4314TR/1 3 The Learned FAA/AO has relied on the ratio laid down in Order dated 16.06.2017 of Dharwad bench of Hon'ble High Court of Karnataka in the ....

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....eedings, 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. 2.3 The Ld.AO was of the view that principle of mutuality were 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 society....

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....ssociate/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. Accordingly grounds 2 stands allowed for statistical purposes. 5. Ground 3 is in respect of interest from investment in Cooperative banks, nationalised banks. 5.1 This issue has been decided by coordinate bench of this Tribunal in case of Potters Cottage Industrial Co-Operative Society Ltd., for assessment years 2015-16 in ITA No 1257 & 1258/Bang/2019 by order dated 30-08-2019. This Tribunal observed and decided as under: "We note that the Ld....

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....nterest 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 the assessee- Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in section 80P(2)(a)(i) ....