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Facts
The Revenue is aggrieved by the NFAC's order granting deduction under Section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act to the assessee, a co-operative society. The assessee did not appear, and the D.R. presented the case. The Apex Court's decision in Mavilayi Service Co-operative Bank Ltd. was discussed regarding the definition of 'member'.
Held
The Tribunal restored the issue of deduction under Section 80P(2)(a)(i) to the AO for de novo consideration, following the Apex Court's judgment in Mavilayi Service Co-operative Bank Ltd. For deduction under Section 80P(2)(d), the AO was directed to verify if interest/dividend was earned from investments with co-operative societies, citing the Supreme Court's ruling in Kerala State Co-operative Agricultural and Rural Development Bank Ltd.
Key Issues
Whether the co-operative society is entitled to deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act, 1961, for the assessment year 2018-19.
Sections Cited
80P(2)(a)(i), 80P(2)(d), 57
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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI PRAKASH CHAND YADAV
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by revenue is directed against order of NFAC for the assessment year 2018-19 dated 18.4.2024.
In this appeal, the department is aggrieved against granting of deduction u/s 80P(2)(a)(i) & 80P(2)(d) of the Income Tax Act, 1961 (in short “The Act”) to the assessee as claimed by the assessee.
None appeared for the assessee. We heard the ld. D.R.
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 co-operative 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 Sirsi Taluka Agricultural Produce Marketing Co-operative Society, Sirsi Page 2 of 4 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 prohibited under the said Act, for being taken as a member, the income earned on account of providing credit facilities to such member also qualify for deduction u/s 80P(2)(a)(i) of the Act. It was further held by the Hon’ble Apex Court that section 80P(4) of the I.T. Act is to be read as a proviso. It was stated by the Hon’ble Apex Court that section 80P(4) of the Act now specifically excludes only co-operative banks which are co-operative societies engaged in the business of banking i.e. engaged in lending money to members of the public, which have a license in this behalf from the RBI. The Hon’ble Apex Court had enunciated various principles in regard to deduction u/s 80P of the Act. 4.1. On identical factual situation, the Bangalore Bench of the Tribunal in the case of M/s. Ravindra Multipurpose Cooperative Society Ltd. v. ITO in (order dated 31.08.2021) had remanded the issue to the files of the A.O. for de novo consideration. The Tribunal directed the A.O. to follow the dictum laid down by the Hon’ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. (supra). The relevant finding of the Co-ordinate Bench of the Tribunal in the case of M/s. Ravindra Multipurpose Cooperative Society Ltd. v. ITO (supra), reads as follows:- “6. Grounds 2-4 & additional Ground No.1: In respect of associate / nominal members, Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT (2021) 123 taxmann.com 161 (SC) has held that the expression “Members” is not defined in the Income-tax Act. Hence, it is necessary to construe the expression “Members” in section 80P(2)(a)(i) of the Act in the light of definition of that expression as contained in the concerned co-operative societies Act. In view of this, the facts are to be examined in the light of Sirsi Taluka Agricultural Produce Marketing Co-operative Society, Sirsi Page 3 of 4 principles laid down by the Hon’ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. (supra).
Accordingly, we remit this issue of deduction u/s 80P(2)(a)(i) of the Act to the files of Ld.AO to examine the same de novo in the light of the above judgment. Needless to say that proper opportunity of being heard is to be granted to assess in accordance with law.”
4.2 In view of the order of the ITAT, which is identical to the facts of the case, we restore the issue of claim of deduction u/s 80P(2)(a)(i) of the Act to the file of the A.O. for de novo consideration. 5. Next issue in this appeal is with regard to granting of deduction u/s 80P(2)(d) of the Act.
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 out of investments with co-operative society, as observed by Hon’ble Supreme Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd. in Civil Appeal No.10069 of 2016, order dated 14.09.2023, the same is entitled to deduction u/s 80P(2)(d) of the I.T. Act. 6.1 Without prejudice to the above, we make it clear that if the interest earned by assessee from the banks is considered under the head “Income from other sources”, relief to be granted to the assessee u/s 57 of the Act in accordance with law. Accordingly, the issue is restored to the file of ld. AO for de-novo consideration with the above observations. 6.2 Accordingly, the issue in dispute is remitted to the file of ld. AO for fresh consideration.
Sirsi Taluka Agricultural Produce Marketing Co-operative Society, Sirsi Page 4 of 4
In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 26th June, 2024