KANAK PATTIN SAHAKARI SANGH NIYIAMIT, BILAGI,BILAGI vs. INCOME-TAX OFFICER, WARD-1 & TPS, BAGALKOT

Page 2 of PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order passed by the NFAC, Delhi dated 12.09.2023 for A.Y. 2020-21 on following grounds of appeal: “1. The Ld. Commissioner of Income Tax (Appeals) erred in law as well as on facts in rejecting the genuine claim of deduction of the appellant in respect of income earned from Associate Members u/s 80P(2)(a)(i) to the extent of Rs.17,50,465.00 as claimed by the appellant. The appellant prays for grant of the deduction as claimed.

2. The Ld. CIT Appeal has held that "category of member" is vital for allowing the claim of deduction u/s 80P. Plain reading of the provisions of S.80 P shows that it simply refers to "members". It does not make any bifurcation of members. When the statute does not differentiate between different categories of members, for allowing or otherwise of claim of deduction u/s 80P(2)(a)(i), it is not within the powers of AO to make such bifurcation and disallow the deduction claimed u/s 80P.

3. The CIT(A) erred in not applying the ratio of the decision of the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Co Operative Ltd., Vs ITO W(1) Tumkur & Lalitamba Pattin Souharda Sahakari Niyamit Vs ITO W(1) Gadag

4. The CIT(A) erred in holding that charging of interest under sections 234B and 234C is consequential in nature and mandatory,

5. Each of the above grounds is without prejudice to one another and the appellant craves leave to add, delete, amend or otherwise modify or withdraw one or more of the above grounds either before or at the time of hearing of this appeal.”

2. Brief facts of the case are as under: 2.1 The assessee is a co-operative credit society and is engaged in the activity of accepting deposits and providing credit facilities to its members and making investments.

Page 3 of 2.2 The Ld.AO observed that, the assessee is providing credit facilities to regular members, as well as nominal/Associate members, and has earned interest income from them. The Ld.AO denied the deduction claimed by the assessee u/s. 80P(2)(a)(i)/80P(2)(d) by holding that, the principle of mutuality does not exist, as the interest income has been earned by the assessee by providing credit facility to its both members and non- members. The Ld.AO thus relying on the decision of Hon’ble Supreme Court in case of Citizen Co-operative Society Ltd. reported in (2017) 397 ITR 1 disallowed the deduction claimed by the assessee u/s. 80P(2)(a)(i) amounting to Rs. 17,50,465/-.

2.3 Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A).

2.4 Before the Ld.CIT(A), the assessee relied on various decisions including the decision of Hon’ble Supreme Court in case of Mavilayi Service Co- operative Bank Ltd. v. CIT reported in 431 ITR 1, however disallowed the claim of assessee by upholding the observations of the Ld.AO.

2.5 Aggrieved by the order of the Ld.CIT(A) / NFAC, the assessee is in appeal before this Tribunal.

3.1 On the contrary, the Ld.DR relied on the orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us.

Page 5 of NFAC / Ld.CIT(A) and the NFAC/Ld.CIT(A) shall pass a detailed order on merits. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 22nd March, 2024.