INCOME TAX OFFICER WARD-2 , GADAG vs. OM SAI COOPERATIVE SOUHARDA SAHAKARI NIYAMIT , GADAG

i) Whether Ld.CIT(A) was correct in holding that the provision of Sec8O(P) of the IT Act is applicable to co-operative societies, which are engaged in business of banking including providing credit facilities to their members? ii) Whether Ld.CIT(A) was correct in holding that the assessee is a co-operative society and not a cooperative bank in terms of section 80P(4) of the Income Tax Act without considering the meaning of co-operative bank as envisaged under part V of Banking Regulation Act,1949 wherein it is defined that co-operative bank includes primary co-operative bank, which further defined as co- operative society with the primary objective of transactions of Banking business? iii) Whether Ld.CIT(A) is correct in pronouncing its decision against

Having carefully examined the orders of the authorities below in the light of the rival submission, we find that in identical circumstances, the jurisdictional High Court has restored the matter back to the AO to readjudicate the issue in the light of the judgment of the Apex Court in the case of Citizen Co-operative Society Limited (supra). Relevant observation of the Hon’ble Apex Court is extracted hereunder for the sake of reference: “6. The sole substantial question of law raised by the appellants requires to be answered on the determination of the crucial question whether the respondent-assessee is a co-operative society or a co-operative bank. In the judgment referred to by the learned counsel for the revenue in the Citizen Co-operative Society Limited, supra, a categorical finding was given by the Assessing Officer that the Reserve Bank of India has itself clarified that business of the appellant does not amount to that of a co-operative bank, the appellants therefore would not come within the mischief of sub-section (4) of Section 80P. It was held that the activities of the appellants therein was to .1329 & 1330/Bang/2017 Page 3 of 4 cater two distinct categories of people namely, nominal members and the ordinary members. The activities of the assessee therein was construed to be financial business contrary to the provisions of the Co-operative Societies Act. As such, it was held that, the said assessee was not entitled to deduction under Section 80P(2)(a)(i) of the Act. 7. A cursory view of the order impugned herein would indicate that no finding is forthcoming regarding the aspect of the activities carried out by the respondent-assessee, whether as a co-operative society or not. In the absence of such factual finding, the legal propositions rendered by the Hon’ble Apex Court cannot be applied. As such, we are of the considered opinion that the matter requires reconsideration by the Assessing Officer to the effect whether the respondent-assessee comes within the realm of co-operative society to get entitlement of deduction under Section 80P(2)(a)(i) of the Act. 8. Hence, we remand the matter to the Assessing Officer to answer this question and then decide the matter in the light of the judgment of the Hon’ble Apex Court in the case of Citizen Co-operative Society Limited, supra, as expeditiously as possible. Thus, without rendering any finding on the substantial question of law raised, order of the Income Tax Appellate Tribunal impugned herein, is set aside. We direct the Assessing Officer to reconsider the matter in the light of the observations aforesaid.”

In the light of the judgment of the jurisdictional High Court, I feel it proper to restore the matter to the file of the AO for readjudication of the issue afresh after affording opportunity of being heard to the assessee.

Accordingly, I set aside the order of the CIT(A) and restore the matter to the AO in terms indicated above.

In the result, appeal of the Revenue is allowed for statistical purposes.