TaxTMI 
TaxTMI 
2025 (6) TMI 487
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.... interconnected and pertains to allowances of deduction under section 80P of the Act. 3. The relevant facts are that the assessee is a cooperative society carrying out banking business and providing credit facilities to the members. The assessee society has 3826 members which are categorized into 3 different classes of members. The numbers of members of each class and their rights are detailed as under: Particular Class 'A' regular member Class 'B' associate member Calss 'C' nominal member Total number of members 609 14 3202 Right to Vote Yes No No Right in share profit Yes - No Right to obtain books of account Yes No No Right to participate in administration Yes No No Deposit and loan Yes = ....
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....ee has debited profit and loss account by sum of Rs. 5 lakh being RBDD provision. The AO found that the impugned provision created are not an expenditure nor an ascertained liability, hence the same is not allowable as deduction. Accordingly, the AO disallowed the same and added to the total income of the assessee. Hence the AO in view of the above, assessed the total income of the assessee at Rs. 74,77,720/- (Rs. 6977720 + Rs. 5,00,000). 8. The aggrieved assessee preferred an appeal before the learned CIT(A). 9. The learned CIT(A) after considering the facts in totality found that the assessee being a cooperative society registered under The Karnataka Cooperative Societies Act 1959 (KCSA) eligible for deduction under section 80P of the A....
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.... was governed under the MACS Act, 1995, where nominal membership is not permitted. However, under the KCS Act, nominal and associate memberships are explicitly allowed, as outlined in section 2(f) and section 18 of such Act. The learned CIT(A), after considering the Hon'ble Supreme Court judgment in Mavilayi Service Co-Operative Bank Ltd. vs. CIT, directed the AO to verify whether the nominal and associate members were within the prescribed limits, i.e., not exceeding 15% of total membership, and accordingly allowed the deduction. 13. The learned AR in this regard contended that the AO had no jurisdiction to examine compliance with the KCS Act, as this falls solely within the purview of the Registrar of Co-Operative Societies Act, and the ....
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.... the rival contentions of both the parties and perused the materials available on record. The main issue before us is whether the assessee, a cooperative society registered under the Karnataka Cooperative Societies Act (KCS Act), is eligible for deduction under section 80P(2)(a)(i) of the Act, despite having different classes of members, particularly associate and nominal members. In this regard, we note that section 18 of the KCS Act places a restriction only on associate members, limiting them not more than 15% of the total membership. The learned AR argued that the society has only 14 associate members, which is well within the permitted limit. However, we observe that the AO has not verified this fact, and for the sake of justice and fa....
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....so consider the learned AR's argument that the AO does not have the jurisdiction or authority to examine whether the assessee society complies with the provisions of KCS Act, as this responsibility lies solely with the Registrar of Cooperative Societies. While we acknowledge that the primary authority to monitor and regulate cooperative societies under the KCS Act is indeed of the Registrar, but we are also mindful that for the purpose of granting tax benefits under section 80P of the Act, the AO has the duty to verify whether the assessee meets the eligibility conditions prescribed under the Income Tax Act. This includes examining facts such as the composition of membership, the nature of activities, and whether the entity satisfies the sp....