TaxTMI 
TaxTMI 
2025 (6) TMI 1535
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....Co-op Societies Act 1960. 3. On the facts and in circumstances of the case and in law the Ld. CIT(A) has erred in not considering the decision of Hon'ble ITAT Pune in case of Sai Prerana Gramin Biggar Shati Sahakari Pat Sanstha V/s ITO W-10(5) Pune in ITA No. 143/PMA/2018 for AY 2015-16. 4. The assessee craves leave to add, alter, amend, delete, any ground that may occur at the time of hearing of the appeal." 3. Briefly stated, the facts of the case are that the assessee is Cooperative Society. It filed its return of income on 20.02.2018 declaring total income at Rs. Nil after claiming deduction u/s 80P of the Income Tax Act, 1961 (the "Act") of Rs. 25,62,137/-. The return was processed u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny under CASS. Accordingly, notice(s) u/s 143(2) and 142(1) were of the Act were issued and served upon the assessee calling for certain details. During the assessment proceedings, the Ld. Assessing Officer ("AO") observed that assessee has given loans to nominal members / B class members and earned interest thereon of Rs. 22,34,529/- and asked the assessee as to why the deduction under sect....
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.... Co-operative Societies Act, 1960. According to the appellant, members should include "nominal members, associate members, and sympathizer members." 7.5 The contentions of the appellant have been carefully considered. The appellant's argument that, according to the Maharashtra Co-operative Societies Act, 1960, members should include "nominal members is noted. However, it is important to clarify that while a co-operative society may have various categories of members as per the relevant state laws, it must also comply with the requirements under the Income Tax Act, particularly under Section 80P, to claim deductions. Section 80P(2)(a)(i) allows a deduction for the income derived by a co-operative society from carrying on the business of providing credit facilities to its members. However, the fundamental principle of mutuality underpins the eligibility for such deductions. A member who is not involved in the economic and administrative affairs of the society and is merely a nominal member would not fulfill the concept of mutuality. Such a member is, in effect, considered part of the general public, and therefore, the income generated from them would not qualify for dedu....
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....ws cited by the Ld. AO/Ld. Addl./JCIT(A) are not applicable to the facts of the present case. The Ld. AR submitted that the impugned issue is now covered in favour of the assessee by catena of decisions of the coordinate bench of the Pune Tribunal and cited the decision of Pune ITAT in the case of Nivruttisheth Gramin Bigarsheti Sahakari Patsanstha Ltd. Vs. ITO in ITA No. 1502/PUN/2018, dated 15.03.2022 in support thereto. 7. The Ld. DR, on the other hand, relied on the order of the Ld. AO/ Ld. Addl./JCIT(A) but could not cite any decision in favour of the Revenue against the above submission of the Ld. DR. 8. We have heard the Ld. Representatives of the parties and perused the record as well as case laws cited by the Ld. DR. The facts of the case are not in dispute. The assessee is a co-operative society duly registered under the Maharashtra Cooperative Societies Act, 1960 and thus governed by the provisions of the said Act. We observe that the Ld. AO has denied the assessee's claim of deduction under section 80P(2)(a)(i) on the ground that the assessee is not eligible to the said deduction in respect of interest earned from nominal members/ class B members as the nominal me....
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....nder the Kerala Act. This Court in UP Cooperative Cane Unions' Federation Lid CIT (1997) 11 SCC 287 referred to section 80P of the IT Act and then held "8. The expression "members" is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in Section 80- P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is therefore, necessary to construe the expression "members" in Section 80-P(2)(a)(1) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: "2. (n) Member' means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to 'members' anywhere in this Act in connection with the possession or exercise of a....
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....rough the above definition of "Member", it becomes overt that the term "Member" also includes a Nominal Member. Once it is accepted that the assessee, governed by the Maharashtra Act, made advances to certain Nominal Members from whom interest income was earned, there can be no doubt whatsoever that the deduction u/s 80P(2)(a)(i) has to be allowed. The Department has heavily relied on the judgment of Hon'ble Supreme Court in the case of Citizen Cooperative Society Ltd. vs. ACIT (supra). That was a case in which Andhra Pradesh Mutually Aided Co-operative Society Act, 1995 was under consideration, which did not admit `Nominal Member" within the ambit of the term "Member". Recently, the Hon'ble Supreme Court in Mavilayi Service Co-Operative Bank Ltd. vs. CIT (2021) 123 taxmann.com 161 (SC) considered its earlier judgment in Citizen Co-operative Society Ltd. vs. ACIT (supra) vide para 46 of its order. Taking note of the fact case in which Andhra Pradesh Mutually Aided Co-operative Society Act, 1995 was under consideration, which did not admit `Nominal Member" within the ambit of the term "Member". Recently, the Hon'ble Supreme Court in Mavilayi Service Co-Operative Bank Ltd....
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....in an application for the registration of a Cooperative society which is subsequently registered, or a person duly admitted to membership of a society after registration and includes a nominal, associate or sympathizer member". On going through the above definition of "Member", it becomes overt that the term "Member" also includes a Nominal Member. Once it is accepted that the assessee, governed by the Maharashtra Act, made advances to certain Nominal Members from whom interest income was earned, there can be no doubt whatsoever that the deduction u/s 80P(2)(a)(i) has to be allowed. The Department has heavily relied on the judgment of Hon'ble Supreme Court in the case of Citizen Cooperative Society Ltd. vs. ACIT (supra). That was a case in which Andhra Pradesh Mutually Aided Co-operative Society Act, 1995 was under consideration, which did not admit `Nominal Member" within the ambit of the term "Member". Recently, the Hon'ble Supreme Court in Mavilayi Service Co-Operative Bank Ltd. vs. CIT (2021) 123 taxmann.com 161 (SC) considered its earlier judgment in Citizen Co-operative Society Ltd. vs. ACIT (supra) vide para 46 of its order. Taking note of the fact case in which Andh....