INCOME TAX OFFICER WARD-6(2)(2), BANGALORE vs. M/S MAHALAKSHMI SAUHATDA CREDIT CO-OPERATIVE LIMITED , BANGALORE

This appeal is preferred by the assessee against the order of CIT(A), interalia, on the following grounds: 1) The Impugned order is illegal, improper, unjust and much against all known canons of law. 2) The learned Assessing Officer has erred in disallowing deduction U/s 80P(2)(a)(i) of the Income-tax Act., 1961 and concluding the assessment treating the appellant as a Co-operative Bank instead of Co-operative Society. 3) The Learned Assessing Officer has also erred in passing order by invoking subsection(4) of Section SOP which is in .fact applicable to Co- operative Bank engaged in business of banking. 4) The Appellant contends that it is a Registered Credit Co-operative society providing credit facilities to its members only for the various purposes like Housing, Vehicle, Business, Site Purchase and Other Personal Purposes. And it also accepts deposits like Fixed Deposits, Recurring Deposits, Pigmy Deposits etc., from its members only. 5) The learned Assessing Officer has again erred by mis-interpreting "if the intention of the legislature was not to grant deduction U/s 80P(2)(a)(i) to Co- .1605/Bang/2017 Page 2 of 5 operative Societies carrying on the business of providing credit facilities to its members, then the section would have been deleted. The new proviso inserted to section 80P(4) applicable only to Co-operative Banks and not to Credit Co-Operative Societies and Souharda Credit Co-operative Societies".

During the course of hearing, the learned DR has contended that the issue is squarely covered by the orders of the Tribunal, thus the issue can be sent back to the AO to readjudicate the issue in the light of the judgment of jurisdictional High Court in the case of Pr.CIT Vs. Vijay Souharda Credit Sahakari Ltd., in which the matter has been restored back to the file of the AO in the light of judgment of the Apex Court in the case of Citizen Co-operative Society Limited vs. Assistant Commissioner of Income Tax in Civil Appeal No.10245/2017 disposed of on 08.08.2017.

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 cater two distinct categories of people namely, nominal members and the ordinary members. The activities of the assessee therein was construed to be .1605/Bang/2017 Page 3 of 5 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.