PERUVEMBA SAHAKARANA URBAN CREDIT SOCIETY,PRUVEMBA vs. INCOME TAX OFFICER WARD-2, PALAKKAD

Brief facts of the case are that the assessee is a primary agricultural credit co- operative society registered under the Kerala Co-operative Societies Act. The return of income for AY 2016-17 was filed on 10.03.2018 declaring Nil income after claiming deduction of Rs. 30,82,959/- u/s. 80P of the Income Tax Act, 1961 (the Act). Against the said return of income, assessment was completed by the Assessing Officer (AO) vide order dated 26.12.2018. While doing so the AO had denied exemption u/s. 80P(2)(a)(i) of the Act by holding that the assessee is not a primary agricultural co-operative society, as it also provides credit facilities to nominal Peruvemba Sahakarana Urban Credit Society members who are classified as class B and class C members and placing reliance on the decision of the Hon'ble Supreme Court in the case of The Citizen Co-operative Society Ltd. v. Asst. CIT [2017] 397 ITR 1 (SC).

Being aggrieved, an appeal was filed before the CIT(A) who vide the impugned order confirmed the action of the AO.

Being aggrieved, the assessee is in appeal before the Tribunal. The solitary issue that arises in both the appeals is where the lower authorities were justified in denying deduction u/s. 80P(2)(a)(i) of the Act solely on the ground that the assessee co-operative society also provided credit facilities to nominal members. The issue in the appeal is no more res integra as it is settled by the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC) after making a reference to its earlier judgement in the case of UP Cooperative Cane Unions’ Federation Ltd. 11 SCC 287 wherein it is held that the expression “member” includes nominal members under the Kerala Cooperative Societies Act and therefore it was held that denial of exemption u/s. 80P(2)(a)(i) of the Act is unjustified solely on the ground that the assessee society also provides loans to the nominal members. In the light of the decision by the Hon'ble Apex Court, the AO is directed to allow the deduction u/s. 80P(2)(a)(i) of the Act as claimed by the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.