INCOME TAX OFFICER, WARD 3(1), KALYAN, KALYAN vs. VEEJ COMPANY SEVAKANCHI SAHAKARI PATH SANSTHA LTD, KALYAN

On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have remanded the matter to the AO considering the fact that the assessment order under question was passed u/s. 144 i.e. ex-parte.

The appellant craves leave to add, amend or alter any ground/grounds, which may be necessary.” Brief facts of the case are as under:

The assessee is an Employees Co-operative Credit Society and is registered under Maharashtra Co-operative Societies Act, 1960. The members of the Society are the employees of various Public Sector Electricity Companies of Maharashtra. The Society submitted its Return of Income for AY 2016-17 on 17/10/2016, declaring total income as NIL, after claiming deduction u/s. 80P(2)(a)(i) for Rs. 2,54,50,023/-. The case was selected for limited scrutiny. During scrutiny proceedings, the assessee furnished submission, Registration Certificate and annual report for FY 2015-16. 2.1 The Ld.AO noted that, assessee did not make any compliance to explain its return, and claim of deduction u/s. 80P(2)(a)(i). The Ld.AO, complete the assessment on Best Judgment Method u/s.144 on 19/12/2018. The Ld.AO noted that the assessee fits-in, in the definition of a “Co-operative Bank” as provided in Section 5(cci) & (ccv) of Part 5 of Banking A.Y. 2016-17 Veej Company Sevakanchi Sahakari Path Sanstha Ltd Regulation Act, 1949. The Ld.AO thus concluded that, in terms of Sec. 80P(4), the assessee should be considered as a Cooperative Bank and is not eligible to get the deduction u/s. 80P(2)(a)(i). Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A).

There is no dispute in respect of the fact that assessee is Co-operative Society, based on the verification carried by the Ld.CIT(A). As consequence assessee is eligible to claim deduction u/s.80P(2)(a) in respect of the business income earned by the assessee out of the activity carried on by it as per its object clause. 5.1 However, the Ld.AR submitted that, the some portion of the claim includes interest earned by the assessee out of fixed deposits with other co-operative societies as per the requirement under the Maharashtra Corporation Societies Act. In respect of such the interest the assessee’s the claim has to be considered under 80P(2)(d) of the Act because such income is said to be derived by the assessee from its investment activity. As the there A.Y. 2016-17 Veej Company Sevakanchi Sahakari Path Sanstha Ltd is specific clause under to consider such kind of income, the same cannot form part of the claim under 80P(2)(a)(i) of the Act. 5.2 We therefore, remit this issue back to the Ld.AO in order to consider the interest/dividends earned by the assessee from the investments made in other Cooperative Societies u/s. 80P(2)(d) of the Act. The assessee is directed furnish all requisite details in respect of the same, and consider the claim in accordance with the law. In respect of the balance amount earned by the assessee out of carrying on the business of banking or providing credit facilities to its members the same is allowed u/s.80P(2)(a)(i) of the Act. With the above direction we remit this issue back to the Ld.AO. Accordingly the grounds raised by the revenue stands partly allowed for statistical purposes. In the result the appeal filed by the revenue stands partly allowed for statistical purposes. Order pronounced in the open court on 20/05/2025