OLAVANNA SERVICE CO-OPERATIVE BANK LIMITED,CALICUT vs. ITO, WARD-2(3), KOZHIKODE

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ITA 86/COCH/2024Status: DisposedITAT Cochin23 October 2024AY 2015-2016Bench: Shri Satbeer Singh Godara (Judicial Member), Shri Amarjit Singh (Judicial Member)3 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Supreme Court's decision in Mavlilayi Service Co-operative Bank Ltd. clarifies that providing credit facilities to non-members does not disentitle the society from Section 80P deduction, although profits from such facilities are not deductible. The Tribunal found no material supporting the Revenue's claim of income from non-members and directed the AO to allow the deduction.

What were the facts?

The assessee, Olavanna Service Co-op. Bank Ltd., appealed against the disallowance of its Section 80P deduction claim for AY 2015-16. The disallowance was based on the ground that the bank failed the test of mutuality due to collecting deposits from nominal and non-members.

What were the issues?

Whether a cooperative society is entitled to Section 80P deduction when it provides credit facilities to nominal and non-members, and whether the test of mutuality is failed in such cases.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: Shri Satbeer Singh Godara & Shri Amarjit Singh

For Respondent: Smt. V. Swarnalatha, Sr. D.R
Hearing: 19.08.2024Pronounced: 23.10.2024

O R D E R Per Bench This assessee’s appeal for A.Y. 2015-16 arises against the National Faceless Appeal Centre, Delhi [CIT(A)]’s DIN & Order No. ITBA/ NFAC/S/250/2023- 24/10551883476(1) dated 17.08.2023 in proceedings u/s. 250 of the Income Tax Act, 1961 (the Act).

Case called twice. None appears at assessee’s behest. We accordingly proceed exparte against the assessee.

2.

It emerges at the outset that the assessee’s identical sole substantive grievance raised in both the instant appeals seeks to reverse both the learned lower authorities action disallowing it’s sec.80P deduction claim in the course of assessment dated 27.12.2017 and upheld in the lower appellate proceedings as follows :

Olavanna Service Co-op. Bank Ltd. “Facts on record and appellant's submissions have been examined. It is noted that the AO has passed order u/s.143(3) on 27/12/2017 and the AO has denied deduction u/s.80P to the appellant on the ground that the appellant failed the test of mutuality and in doing so the AO has relied upon the verdict of Hon'ble Supreme Court in the case of Citizen Co- operative Society Ltd. vs. ACIT-9(1), Hyderabad However, subsequent to this, the Hon'ble Supreme Court has passed the judgment in thecase of Mavlilayi Service Co-operative Bank Ltd. (supra) and in which the Hon'ble Apex Court has clarified the provisions of Section 80P of the Act. The point of dispute here is that deposits are collected from nominal members and non-members who don't have say in running of the appellant society and any right on the profits of the appellant society and thus no identity between contributors to the surpluses and participators in the surpluses and thus the test of mutuality is failed. However, in this regard, the Hon'ble Supreme Court in Mavlilayi Service Co-operative Bank Ltd. (supra) has held that the fact that society is providing credit facilities to non members doesn't disentitle the society from availing of the deduction, however, no deduction can be allowed on profits and gains from credit facilities given to non- members. The appellant is therefore directed to file all necessary documents so as to enable the AO to compute and exclude from the deduction profits and gains accrued to the appellant from credit facilities given to non-members.”

3.

Suffice to say, the Revenue’s only objection as pe the above extracted lower appellate findings is that the assessee has provided credit facilities to nominal / associate as well as non-members as well. Hon’ble apex court’s recent landmark Olavanna Service Co-op. Bank Ltd. decision in “Mavilayi’s” case has settled the issue that once an assessee has derived it’s income from member as per the State Cooperative Law, sec.80P deduction could not be rejected. We do not see any material in the case file supporting the Revenue’s stand that any interest income has been derived by the assessee from no-members whatsoever. We accordingly direct the learned Assessing Officer to frame his computation after allowing the assessee’s impugned sec.80P deduction. Ordered accordingly.

4.

This appeal is filed with a delay of 112 days which is condoned considering assessee’s condonation averments explaining the reasons thereof beyond it’s control.

5.

This assessee’s appeal is allowed.

Order pronounced in the open court on 23rd October, 2024.

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