MAHALASA URBAN CO-OPERATIVE CREDIT SOCIETY LIMITED,PHONDA vs. INCOME TAX OFFICER, WARD - 2(3), PANAJI
What did the Tribunal hold?
The Tribunal held that the assessee is a cooperative society and not a cooperative bank, and the presence of nominal members does not disqualify it from claiming deduction under Section 80P. The Tribunal also followed CBDT Circular No. 37/2016 to allow the claim regarding disallowance under Section 40(a)(ia).
What were the facts?
The assessee, a cooperative society, appealed against the CIT(A)'s order which had directed the AO to verify if the society had nominal members and, if so, treat it as a cooperative bank, leading to disallowance of deduction under Section 80P and application of Section 40(a)(ia). The assessee argued that it was not a cooperative bank and the CIT(A) lacked jurisdiction for such conditional directions.
What were the issues?
Whether a cooperative society with nominal members can be treated as a cooperative bank for the purpose of denying Section 80P deduction, and whether Section 40(a)(ia) disallowance is applicable when Section 80P deduction is allowed.
Which sections of the Income-tax Act were involved?
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- Mavilayi Service Co-operative Bank Ltd. v. CIT999 citing431 ITR 1 · 2021 · SC
Income Tax Appellate Tribunal, PANAJI BENCH : PANAJI
Before: SHRI SATBEER SINGH GODARA & SHRI G.D. PADMAHSHALI
ORDER PER SATBEER SINGH GODARA, J.M. :
This assessee’s appeal for assessment year 2015- 2016, arises against the CIT(A) Panaji-1, Panaji’s order dated 10.01.2019, in case no.ITA.No. CIT(A), PNJ-1/10420/2017-18, in proceedings u/sec.143(3) of the Income Tax Act, 1961 (in short "the Act").
2 ITA.No.56/PAN./2019 None appeared at assessee’s behest, despite service of notice. It is accordingly proceeded ex-parte.
The assessee pleads the following grounds in the instant appeal :
“In the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has no jurisdiction u/s 251 for remanding to AO or directing the AO to decide, subject to conditions, in accordance with directions; and accordingly the remarks be expunged in Para 7 of the impugned order that "Subject to satisfying the AO that it does not have nominal members by producing a certificate from the appellant itself to this effect, and also a certificate from the auditor stating that it does not have nominal members” while allowing the ground "addition made by learned AO of Rs.39,96,666/- disallowing claim of deduction u/s 80P be struck down " after already holding "that the appellant is not a co-operative bank but a co- operative society”
2. In the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has no jurisdiction u/s 251 for remanding to AO or directing the AO to decide, subject to conditions, in accordance with directions; and accordingly the remarks be expunged in Para 9 of the impugned order that "subject to the condition that the 3 ITA.No.56/PAN./2019 nominal members criteria be fulfilled i.e. the appellant should not have nominal members. Accordingly, as a result of verification by the AO, if the society is found to be a co-operative bank, then the provisions of section 40(a)(ia) will apply and the claim of assessee will fail. Alternatively, if it is found that the appellant is not having nominal members, then this ground will succeed. The AO may verify and give effect to the order accordingly.” while allowing the ground "additions made by learned AO u/s 40(a)(ia) of Rs.42,73,878/- be deleted "
3. In the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred in not considering, while deciding that the appellant is not a co- operative bank, the fact that the appellant cannot and does not have the facility; that "the mode by which the withdrawal of the deposit can be effected is by the issue of cheques, drafts, orders or otherwise, that is, by like methods", which is a sine qua non to constitute BANKING as held by the Apex Court and accordingly banking is not the primary object or principal business of the appellant.”
Learned D.R. next invited our attention to the CIT(A)'s detailed discussion reading as under:
4 ITA.No.56/PAN./2019
We find no merit in the Revenue’s stand supporting the learned lower authorities action denying sec.80P(4) deduction to the assessee. It is also come on record that this assessee has all along been functioning as a co-operative
5 ITA.No.56/PAN./2019 society, duly registered under the state co-operative law(s) as well as the Banking Regulations Act, 1949. That being the case, we quote hon’ble apex court’s recent landmark decision in Mavilayi Service Co-operative Bank Ltd. vs. CIT [2021] 431 ITR 1 (SC), that the impugned deduction could not be denied either by treating a cooperative society as a cooperative bank nor taking into consideration the alleged nominal members. We accordingly accept it’s impugned deduction claim of sec.80P representing interest income of Rs.39,96,666/-.
Next comes sec.40(a)(ia) disallowance issue of Rs.42,73,878/- regarding non-deduction of TDS on interest payments involving term deposits exceeding Rs.10,000/-. Suffice to say, the CBDT’s land mark circular no.37/2016 dated 02.11.2016 has already made the position clear that no such disallowance is liable to be sustained in case an assessee has been held eligible for various deductions under Chapter-VI of the Act since consequential effect is enhancement of it’s business income only. We thus accept the assessee’s argument regarding this second issue as well.
No other ground or argument has been pressed before us.
This assessee’s appeal is allowed in above terms.
More judgments on Section 80P
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- Shri Na vs Ari Khedut Sahkari Society Ltd…ITA 362/SRT/2025[2016-17]Status: Disposed9 Oct 2026AY 2016-17
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