TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 1500
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....iolated the provisions of the Karnataka Co-operative Societies Act. The ld. AO also held that the assessee has dealt with the nominal members and therefore, they are not entitled for deduction u/s 80P of the Act. Further, the ld. AO had disallowed the interest income earned from the co-operative banks and other banks since the same are against section 80P(2)(d) of the Act. Similarly, the ld. AO had disallowed the provision made for the interest expenses and held that the same is not eligible for deduction u/s 80P of the Act. The assessee filed an appeal before the NFAC and the NFAC had also confirmed the orders of the ld. AO by dismissing the appeal filed by the assessee. Therefore, the present appeal has been filed before this Tribunal challenging the above said order of the NFAC. 3. The ld. A.R. at the time of hearing submitted that there is no dispute with regard to the society being registered under the provisions of the Karnataka Co-operative Societies Act. The allegation that the nominal and associate members exceed the 15% of the regular members as per Section 18 of the Karnataka Co-op Societies Act is not correct since the provision says that the associate members should n....
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....eal, there are 3 issues and we dealt with each issue separately. 5.1. The first issue relates to the disallowance of deduction claimed u/s 80P(2)(i) of the Act by the AO on the basis that the assessee had violated the provisions of the Karnataka Co-operative Societies Act by having more number of nominal and associate members than prescribed under section 18 of the Karnataka Co-operative Societies Act. We have perused the provision and found that the Act prescribed that the nominal members should not exceed 15% of the total members and not as stated by the ld AO. The statement of membership filed by the assessee shows that the nominal members are within 15% of the total members prescribed under the statute and therefore there is no violation of any of the provisions of the Karnataka Act. Further we are of the view that the ld. AO has no jurisdiction to look into the fact whether there is any violation committed by the assessee under the provisions of the Karnataka Cooperative Societies Act. It is for the Registrar of Co-operative Societies to take any action on the assessee society, if there is any violation committed by them. Further the ld AO cannot disallow the claim of deducti....
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....est income received on investments made under compulsion under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules, is entitled to benefit of deduction under section 80P(2)(a)(i) of the Act. We find that this issue has been considered by the Bangalore Bench of the Tribunal in the case of M/s. Kachur Credit Co-operative Society Ltd., Vs. ITO (supra). The Bangalore Bench of the Tribunal had followed its earlier orders. The relevant finding of the Bangalore Bench of the Tribunal reads as follows: "8. I have heard the rival submissions and perused the material on record. The solitary issue for adjudication is whether a sum of Rs.5,07,822/- can be allowed as a deduction under sections 80P(2)(a)(i) of the Act. Admittedly, the amount of Rs.5,07,822/- has been received by the assessee from South Canara District Central Co-operative Bank Ltd. It is the claim of the assessee that the amounts are invested in compliance with the relevant Acts and Rules. On identical facts, the Bangalore Bench of the Tribunal in the case of Bharat Co-operative Credit Society Vs. ITO (supra) by following the Co-ordinate Bench's order in the case of Vasavamba Co-operative Society Ltd., Vs. PC....
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....ore, if the investments are out of compulsion under the Act and relevant Rules, necessarily it is part of assessee's business activity entailing the benefit of section 80P(2)(a)(i) of the Act." 6.3. The above order of the Co-ordinate bench of this Tribunal is on the very same facts and therefore, we set aside the order in respect of this portion and granted a similar relief by remitting the issue to the jurisdictional AO to examine whether the interest income received on investments with co-operative bank is out of compulsion under the provisions of the Karnataka Co-operative Societies Act and if so, the same may be considered under business income and the assessee is entitled for relief u/s 80P(2)(a)(i) of the Act after quantifying the correct income. In so for as the interest income received from other commercial banks the ld AO is directed to verify if there is any statutory compulsion, otherwise the same should be treated as income from other sources and the assessee is entitled for the cost of funds. 7. The third issue raised by the assessee is that whether the provision made for the interest expenses is eligible for deduction u/s 80P of the Act. We perused the provision and....