TaxTMI 
TaxTMI 
2024 (10) TMI 1748
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....he appellant had dealings with members as well as nonmembers under the facts and in the circumstances of the appellant's case. 2.1 The learned CIT[A] is further not justified in observing that the appellant being a Souharda is not a Co-operative Society and that the decision of the Hon'ble Supreme Court in the case of CITIZEN CO-OPERATIVE SOCIETY reported in 397 ITR 1 is applicable to the case of the appellant while upholding the denial of deduction claimed u/s.80P[2][a][i] of the Act without appreciating that the said judgement was explained in the later decision of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank reported in 431 ITR 1 and therefore, the appellant ought to have been allowed the deduction claimed u/s. 80P[2][a][i] of the Act under the facts and in the circumstances of the appellant's case. 3. The learned CIT[A] is not justified in upholding the disallowance of proportionate employee cost of Rs.91,85,684/- and proportionate administrative overheads of Rs. 35,63,408/- claimed u/s 57 of the Act from out of the interest income earned from co-operative banks offered under the head "other sources" under the fac....
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....0P(2)(a)(i) placing reliance on the decision of Hon'ble Supreme Court in the case of Citizen Cooperative Society Ltd. vs. ACIT [2017] 250 Taxman 0078 wherein it is held that the cooperative society which fails the test of mutuality cannot be allowed deduction u/s. 80P of the Act. With regard to the expenses u/s. 57(iii) of the Act the AO restricted the deduction only to the cost of funds and disallowed the claim made towards proportionate coast incurred towards employees and administrative overheads to the tune of Rs. 35,63,408. Aggrieved, assessee filed further appeal before the CIT(A) who confirmed the addition by holding that: - "5.3 The arguments of the assessee boils down to the fact that assessee is eligible for claim under section 80P(2)(a)(i), where the Assessing Officer argues that taxpayer is into "finance business" having collected deposits from the general public. Whereas the very concept of Co-operative Societies envisages the concept of mutuality which means the deposits can be received from members only. Later on through various judicial pronouncements it was extended to non members as well as nominal members also (please read the recent Judgment by the ....
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....cility to general public can be considered as a Primary Agricultural Credit Society working on the concept of mutual benefit. The Cooperative sector was envisaged for the upliftment of the agricultural and farm sector. And for that purpose exemption from taxation was given to those entities who fall under the definition of "Primary Agricultural Credit Society". The taxpayer is a credit cooperative society registered under Karnataka Credit Cooperative Societies Act. The deduction under Sec 80P(2)(a)(i) was rejected for reasons- (a) citing the decision of hon'ble SC in The Citizens Credit Co Operative Society Limited, Hyderabad in Civil Appeal No 10245 of 2017 merely because of the fact that the Appellant had admitted Nominal Members with restrictions on their voting rights and right to get share in the profits of the society and (b) holding that Souharda Sakakari is not a co op society and hence, not eligible for deduction u/s 80P. Since it can be categorically stated that Saraswati Credit Souharda Sahkari Limited, the taxpayer is registered under Karnataka Souharda Sahkari Act, 1997 and it was held in the case of Citizens Cooperative Society that Souharda Society is not a Coope....
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....A.R. drew our attention to the submissions made before the CIT(A) wherein the assessee had made a detailed submission substantiating that the business of the assessee is carried out with its members only (pages 47 to 49 of the paper book). The learned A.R. further submitted that under the Karnataka Souharda Sahakari Act, 1997 even loans to nominal and associate members are also considered as members and therefore the income derived from lending loans to members including nominal and associate members is also eligible for deduction u/s. 80P(2)(a)(i) of the Act. The learned A.R. also submitted that complete list of all deposits and loans outstanding as of 31.03.2018 along with details of name and address of borrowers, membership number, type of facility granted, PAN and Aadhar number etc., were furnished before the CIT(A). The ld AR argued that the CIT(A) has not examined these details which substantiates the claim that the findings of the AO that the assessee deriving income from non members which is factually not correct. The ld AR further argued that the CIT(A) has merely placed reliance on the decision of the Hon'ble Apex Court in the case of Citizen Cooperative Society Ltd. ....
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....s the position in other assessment years, which is as follows: Sl. No. Assessment year Interest received on investment with banks and co-operative banks 1. 2011-12 81,60,055/- 2. 2012-13 1,24,94,050/- 3. 2013-14 1,68,28,561/- 4. 2017-18 2,34,70,800 5. 2018-19 2,67,08,210/- 2.2 The same has been denied. Against this assessee is in appeal before us. 3. We have heard the rival submissions and perused the materials available on record. The Hon'ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. (123 taxman.com 161) had held that the cooperative societies providing credit facilities to its members is entitled to deduction u/s 80P(2)(a)(i) of the Act. The Hon'ble Apex Court after considering the judicial pronouncements on the subject, had stated the term "member" has not been defined under the Income-tax Act. It was, therefore, stated by the Hon'ble Apex Court that the term "member" in the respective State Co-operative Societies Acts under which the societies are registered have to be taken into consideration. The Hon'ble Apex Court held that if nominal / associate member is not....
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.....O. to decide in the light of above order of Tribunal cited (supra). 3.2 Alternatively, assessee raised ground that the assessee earned interest income from deposit with scheduled banks and co-operative banks. Facts regarding this ground are that the assessee earned interest income from deposits with Scheduled banks and Cooperative banks, which has been assessed as "income from other sources" and no deduction u/s 80P(2)(d) of the Act has been granted to the assessee. Now the contention of the assessee is that this income is to be assessed as "business income" and deduction u/s 80P(2)(d) of the Act to be granted. Without prejudice to this, it was submitted that the assessee is entitled for deduction u/s 57(iii) of the Act with regard to cost of funds incurred if the income is assessed as "income from other sources" u/s 56 of the Act. 4. We have heard the rival submissions and perused the materials available on record. As regards the claim of deduction u/s 80P(2)(d) of the I.T. Act, we direct the A.O. to verify whether interest / dividend is received by the assessee out of investments made with Cooperative Societies. If the assessee earns interest / dividend income ....