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Facts
The assessee, a Women's Multipurpose Co-operative Society, filed its return declaring Nil income after claiming Rs. 27,32,008/- u/s 80P. The AO disallowed this deduction, assessing total income at Rs 27,32,010/-. The NFAC confirmed the AO's order. The appeal concerns grounds related to the denial of deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Act.
Held
The Tribunal referred to the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd., stating that income from credit facilities provided to members, including nominal/associate members (if permitted by the Co-operative Societies Act), is eligible for deduction u/s 80P(2)(a)(i). Section 80P(4) excludes only co-operative banks engaged in public banking. For interest income from investments, it directed the AO to verify if it was from investments with co-operative societies, citing the Supreme Court's decision in Kerala State Co-operative Agricultural and Rural Development Bank Ltd. If income is treated as 'income from other sources', relief u/s 57 would be applicable.
Key Issues
Whether the assessee is entitled to deduction under Section 80P(2)(a)(i) for income from credit facilities to members, and under Section 80P(2)(d) for interest income from investments. The scope of 'member' and the applicability of Section 80P(4) were also considered.
Sections Cited
80P(2)(a)(i), 80P(2)(d), 80P(4), 57(iii), 56
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal by assessee is directed against order of NFAC for the assessment year 2016-17 dated 12.02.2024. The assessee has raised following grounds of appeal:
2. Facts of the case are that the assessee is a Women's Multipurpose Co-operative Society which filed its return of income for the AY 2016-17 on 31/03/2018 declaring total income at Rs Nil after claiming deduction of Rs 27,32,008/- u/s 80P of the Act. The case was selected for limited scrutiny under CASS and subsequently assessment proceedings were completed assessing the total income of the assessee at Rs 27,32,010/-, wherein the entire deduction claimed u/s 80P of Rs 27,32,010/- by the assessee was disallowed by the AO. Aggrieved with the assessment order, the assessee went Puttur Mahila Vividoddesha Sahakari Sangha N., Puttur Page 2 of 5 in appeal before NFAC. NFAC confirmed the order of ld. AO. Once again assessee is in appeal before us by way of above grounds.
3. The main crux of the aforesaid grounds is with regard to the ground relating to deduction claimed under section 80P(2)(a)(i) of the Act and 80P(2)(d) of the Act, which have been denied. Against this assessee is in appeal before us.
4. 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 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. 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 Puttur Mahila Vividoddesha Sahakari Sangha N., Puttur Page 3 of 5 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 principles laid down by the Hon’ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. (surpa).
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.”