M/S. HUBLI TALUKA PRIMARY SCHOOL TEACHERS CO-OPERATIVE SOCIETY,HUBLI vs. INCOME TAX OFFICER, WARD -1(3), HUBLI

With regard to deduction claimed u/s. 80P(2)(a)(i) of the Act, the AO called upon the assessee to furnish the details of the members to whom credit facilities were extended by the assessee and to verify as to whether the assessee dealt only with its members so as to be eligible to claim deduction u/s. 80P(2)(a)(i) of the Act in the light of the decision of the Hon’ble Supreme Court in the case of Citizen Co-operative Society Ltd. V. ACIT [2017] 84 taxmann.com 114 [SC]. Similarly with reference to deduction u/s. 80P(2)(d) of the Act, the AO was of the view that surplus funds of the assessee were invested in banks and therefore the income was to be assessed under the head ‘income from other sources’ and since income was derived from business of the assessee, deduction 80P(2)(d) of the Act was to be denied.

The AO completed the assessment since proper details were not furnished by the assessee and denied claim for deduction as made by the assessee in its return of income.

Before the CIT(Appeals), the assessee sought to file the details with regard to its membership and claimed that it was entitled to deduction u/s. 80P(2)(a)(i) of the Act. The CIT(A) in para 5 of his order took the view that the assessee was unable to give a reasonable cause that prevented it from submitting the details during the regular assessment proceedings like details of regular and nominal members, etc. The CIT(Appeals) therefore confirmed the order of the AO.

In this appeal before the Tribunal, the only ground raised by the assessee is with regard to denial of deduction u/s. 80P(2)(a)(i) of the Act.

The primary contention of the ld. counsel for the assessee is that the income was earned only from providing credit facilities to members and that the assessee did not have opportunity of giving the details in this regard. The ld. DR relied on the order of CIT(Appeals).

After considering the rival submissions, I am of the view that the question with regard to deduction u/s. 80P(2)(a)(i) of the Act has to be examined afresh by the AO in the light of the details with regard to the bye- laws of the assessee’s society, provisions of Karnataka State Co-operative Societies Act and other relevant facts and circumstances. It is only in the light of these available details that the principle laid down by the Hon’ble Supreme Court in the case of Citizen Co-operative Society Ltd. (supra) can be examined. I therefore set aside the order of CIT(Appeals) and remand the issue of deduction u/s. 80P(2)(a)(i) of the Act to the AO for fresh decision, after affording opportunity of being heard to the assessee. The assessee is directed to file all the required details along with English translation before the AO.

In the result, the appeal by the assessee is treated as allowed for statistical purposes.