SHRI JINNAPPANNA CHOUGULE LALBAHADUR CREDIT SOUHARD SAHAKARI SANGH NIYAMIT,BELGAUM vs. INCOME TAX OFFICER, BELGAUM

, submissions of the assessee and findings of the A.O but sustained the denial of claim and disallowances and partly allowed the assesse appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal with the Hon’ble Tribunal.

6. At the time of hearing, the Ld.AR submitted on the first disputed issue that the CIT(A) has erred in confirming the action of the A.O overlooking the facts and submissions Shri Jinnappanna Chougle Lalbahadur Credit Souhard Sahakari Sangh Niyamit. that the assessee is a cooperative credit society registered under the Karnataka Souharda Sahakari Act 1997 and the CIT(A) has wrongly observed that the assessee is not entitled to claim u/sec 80P(2)(a)(i) of the Act as the society is dealing with associate/ nominal members and there is violation of the provisions of the Act. The Ld.AR emphasized that the CIT(A) has erred in interpreting the provisions as the Associate/Nominal members are recognised by the governing by laws of the society and under the Karnataka Souharda Sahakari Act 1997.Further there are no dealing with non members/ outsiders by the society. The Ld.AR made alternative claim that the disallowance of the income tax paid and provision for bad and doubtful debts be granted consequential deduction u/sec80P(2)(a)(i) of the Act on account of enhanced business income. The Ld.AR supported the submissions with the paper book and judicial decisions. Per Contra, the Ld.DR relied on the order of the CIT(A).

7. Heard the rival submissions and perused the material on record. The first disputed issue envisaged by the Ld.AR on the denial of deduction u/s 80P(2)(a)(i) of the Act to the Cooperative Society which is registered under the Karnataka Souharda Sahakari Act 1997 and the CIT(A) has overlooked the provisions as the Associate/Nominal members are recognised by the governing by laws of the society and there are no dealings with outsiders. Whereas The Honble Income Tax Tribunal Panaji Bench in Shri Jinnappanna Chougle Lalbahadur Credit Souhard Sahakari Sangh Niyamit. ITA.No.158,159 & other 27 numbers/PAN/20223/24&25 dated 28-11-2025 –Akshaya Co-Op Credit society & others Vs ITO has dealt at Para 5 of the order on the subject matter of nominal members and associate members read as under:

“ 5. On the first disputed issue, the AO and CIT(A) has not allowed the claim of deduction under section 80P(2)(a)(i) of the Act, where the Cooperative credit society deals with the three class of members i.e Regular, Nominal and Associate Members.

The assessee is a co-operative society registered under the Goa Cooperative Societies Act 1961 and is engaged in the business of providing credit facilities to its members. The society deals with three classes of member’s i.e. regular members, Nominal members and Associate members and are recognized by the governing law and the bye laws. The Ld. AR submissions are that the society deals only with its members and there are no dealings with outsiders, non-members or with public at large. The Ld. DR stated that the assessee has violated the provisions of the co-operative societies act and cooperative society’s rules and the number of nominal members are exceeding more than 15% of the regular members and therefore the claim u/sec 80P (2) (a) (i) under the Income tax act 1961 is not allowed. The Ld.AR relied on the decision of the Hon’ble Supreme Court in the case of Maviyali Service Co-operative Bank Ltd v CIT reported in 123 taxmann.com 161 (SC) / 431 ITR 1 (SC) has held that ,” when nominal members are defined in the governing law dealings with them are entitled for deduction u/s 80P.”. In the present case the nominal and associate members are recognized by the governing law i.e: The Goa Co-operative Societies Act 2001 and the bye laws of the society. The Ld.DR submitted that "If the society is found to be giving loans to general public or to persons who are not its members in the strict sense, it would be acting as a co-operative bank, thereby disentitling it from deduction under Section 80P.". We find the assessing officer has not verified these facts that the Primary members are only having voting rights and share in the surplus of the society and the Nominal members are admitted as per the provisions of the cooperative society and there are no dealings with outsiders or non- members. We considering the facts and submissions restore this disputed issue for limited purpose to the file of the assessing officer for verification and examination as discussed above and to adjudicate on merits. And we allow this ground of appeal for statistical purpose.”

Shri Jinnappanna Chougle Lalbahadur Credit Souhard Sahakari Sangh Niyamit. both the categories of socities should be restricted to the income forming part of gross total income. And these grounds of appeal are partly allowed for statistical purpose.”

8. Therefore, considering the facts, circumstances, submissions and the ratio of the judicial decisions dealt in the above issue and also follow the judicial precedence. Accordingly, set aside the order of the CIT(A) on this issue and restore the disputed issues of nominal members and associate members to the file of the Assessing Officer to adjudicate on similar directions discussed and further the assesse should be provided adequate opportunity of hearing and shall cooperate in submitting the information. And this ground of appeal of the assessee is allowed for statistical purposes.

9. On the second and third disputed issue, The Ld.AR made alternative claim that disallowance of the income tax paid and provision for bad and doubtful debts be granted consequential deduction u/sec80P(2)(a)(i) of the Act on account of enhanced business income. The Ld.AR has demonstrated that the income tax paid pertaining to earlier year was debited to profit & loss account placed at Page 10 of the paper book but while computing the total income by over sight the income tax amount should was not added back as inadmissible expenses. Hence considering the facts and submissions, the claim is not allowable and the action of the CIT(A) is confirmed and dismiss this ground of appeal of the Assessee.

Shri Jinnappanna Chougle Lalbahadur Credit Souhard Sahakari Sangh Niyamit. The assessee has debited provision for bad and doubtful debts in the profit& Loss account and the Ld.AR submitted that the assessee has made provision towards loans provided to members which are doubtful and has to be allowed as deduction from the business income. Whereas the Ld.DR submitted that such provisions are specific to banks and financial institutions and not to credit cooperative societies. On perusal of facts there is no finding on this disputed issue by the lower authorities and hence this issue is restored to the file of the assessing officer to verify the claim and adjudicate on merits. Accordingly this ground of appeal is allowed for statistical purpose. (A.Y.2017-18)

10. As the facts and circumstances in this appeal is identical to (except variance in figures) and the decision rendered in above paragraph 7, 8 & 9 would apply mutatis mutandis for this appeal also. Accordingly the grounds of appeal of the assesse are partly allowed for statistical purposes. (A.Y.2018-19)

11. As the facts and circumstances in this appeal is identical to (except variance in figures) and the decision rendered in above paragraph 7 & 8 would apply mutatis mutandis for this appeal also.

Shri Jinnappanna Chougle Lalbahadur Credit Souhard Sahakari Sangh Niyamit. Accordingly the grounds of appeal of the assesse are partly allowed for statistical purposes.