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Income Tax Appellate Tribunal, “SMC” BENCH, PANAJI
Before: SHRI PARTHA SARATHI CHAUDHURY, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, PANAJI (VIRTUAL HEARING HELD AT I.T.A.T. PUNE BENCHES, PUNE) BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM ITA No. 191/PAN/2019 : A.Y. 2015-16 Shri Shivyogi Urban Co-op. Credit Society Ltd., M.G. Market, Tal. Athani, Dist. Belagavi PAN: AAJTS 7501 F : Appellant Vs. The I.T.O. Ward ,1(4), Belgavi Respondent
Appellant by : Shri Chetan Chaugule (through virtual) Respondent by : Shri N. Shrikanth (through virtual)
Date of Hearing : 14-11-2022 Date of Pronouncement : 16-11-2022
ORDER This appeal preferred by the assessee emanates from the order of the ld. CIT(A) Belgaum dated 13-03-2019 for assessment year 2015-16 as per the following grounds of appeal. 1. Because, the learned Commissioner of Income Tax (Appeals) erred in law as well as on facts whiIe disallowing the deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961 by only relying upon the Supreme Court judgement of Citizen Co-operative Society Ltd. 2. Because, the learned Commissioner of Income Tax (Appeals) failed to appreciate that the Appellant is registered under Karnataka Cooperative Societies Act, 1959 and the judgement relied upon by the respondent, in the case of Supreme Court judgement of Citizen Co-operative Society Ltd Hyderabad, is not applicable to the Appellants case since the facts are different from the judgement . relied upon. 3. That the learned lower authorities failed to appreciate that the Appellant is registered under Karnataka Cooperative Societies Act, 1959 and the judgement relied upon by the respondent in the case of Supreme Court judgement of Citizen Co- operative Society Ltd, Hyderabad is not applicable to the Appellants case since the facts are different from the judgement relied upon. 4. Because, the learned lower authorities have erred in denying the deduction claimed under section 80P(2)(a)(i) of Income Tax Act, 1961 by not following section 80P(2)(a)(i) of Income Tax Act, 1961 and also not considering the provisions of Membership under the Karnataka Cooperative Societies Act, 1959. 5. The assessee craves leave add/alter any of the grounds of appeal before or at the time of hearing.”
2 ITA 191/PAN/2019 Shri Shivyagi Urban Co-op. Credit Society Ltd. A.Y. 2015-16 2. The brief facts of this case are that the assessee is a Co-operative Society registered under the Karnataka State Co-operative Societies Act. The assessee filed return of income on 21-09-2015 declaring total income at Rs. 16,86,259/- after claiming deduction u/s 80P(2)(a)(i) of the income-tax Act, 1961 (hereinafter referred to as “the Act”) under Chapter VIA of Rs. 16,86,259/- the total income declared is NIL. However, the claim of the assessee for deduction u/s 80P(2)(a)(i) of the Act was rejected by the A.O vide his order u/s 143(3) of the Act dated 16-11-2017 on the ground that the assessee had rendered credit facilities to non-members hence the ratio of the decision of Hon’ble Supreme Court decision, in the case of Citizen Co-op. Society Ltd., Hyderabad Vs. ACIT C-9(1), Hyderabad is applicable and as such, the assessee is not entitled to claim deduction u/s 80P.
The ld. A.O placing reliance on the aforesaid decision of Hon’ble Supreme court (supra) disallowed the claim of deduction of the assessee u/s 80P(2)(a)(i) of the Act by stating that the assessee was dealing with Nominal/Associate Members in contravention to the decision of Hon’ble Supreme Court (supra). Elaborating on this order, the ld. CIT(A) vide para 7.2 to para 7.3 in a tabular form demonstrated that about more than 63% were Nominal/Associate Members. It was further observed that so far as the Karnataka Co-operative Societies Act is concerned under which the assessee was registered, the assessee society should not have admitted Nominal Members more than 15% of the total members. Whereas in this case, the number of total Nominal Members is more than 63% which is in violation of the said Karnataka Co-operative Societies Act and hence claim of deduction of the assessee as disallowed by the ld. A.O was upheld by the ld. CIT(A). The ld. CIT(A) further opined that the assessee-society distributed majority of loans to the Nominal/Associate Members and thereby earned substantial interest income from rendering credit facilities to the nominal members and only a small portion of income is earned from regular members which is again in violation of Karnataka
3 ITA 191/PAN/2019 Shri Shivyagi Urban Co-op. Credit Society Ltd. A.Y. 2015-16 Co-operative Societies Act, 1959. Regarding this particular observation, the ld. D.R submitted that the findings needs more clarity as to what is the majority percentage of the loan that is given to the nominal members and what is the percentage of substantial interest income earned by the assessee by giving credit facilities to the nominal members. These findings should be brought out in absolute clarity with exact amounts involved before deciding the issue which the ld. CIT(A) has not done. In this regard, it was prayed by the ld. D.R. that the matter may be remanded back to the file of the ld. CIT(A) to come out with a specific finding on the said issue. The ld. A.R agreed to the proposition for remanding the matter back to the file of the ld. CIT(A).
Having heard the parties in the interest of justice, I set aside the order of the ld. CIT(A) and remand the matter back to his file to come out with a specific finding and a speaking order as to the exact amount of loans given to the nominal members and also the exact amount of income earned by the assessee-society for giving credit facilities to nominal members and then re-adjudicate the issue as per law complying with principles of natural justice. The grounds of appeal are allowed for statistical purposes. 5. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 16th November, 2022.
Sd/- PARTHA SARATHI CHAUDHURY JUDICIAL MEMBER
Pune; Dated : 16th November, 2022 Ankam
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Copy of the Order forwarded to :
The Appellant 2. The Respondent 3. The CIT (Appeals)- Belagavi 4. The Pr. CIT Belagavi 5. DR, ITAT, “SMC” Bench, Panaji 6. Guard File. //सत्यापित प्रपत// True Copy// BY ORDER,
Sr. Private Secretary ITAT, Pune
/// TRUE COPY ///
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Date 1 Draft dictated on 14-11-2022 Sr.PS 2 Draft placed before author 15-11-2022 Sr.PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr. Sr.PS/PS PS/PS 6 Kept for pronouncement on 16-11-2022 Sr.PS/PS 7 Date of uploading of order 16-11-2022 Sr.PS/PS 8 File sent to Bench Clerk 16-11-2022 Sr.PS/PS . 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order