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2019 (11) TMI 1565 - AT - Income TaxEligibility of deduction u/s 80P - assessee is a co-operative society registered under the Karnataka Co-operative Societies Act 1959 - Denial of deduction as assessee was providing credit facilities to Non-members namely associate / nominal members - nominal and associate members of assessee is more than 15% of the total membership there has been a violation of provisions of Karnataka Co-operative Societies Act 1959 - HELD THAT - Admittedly assessee has been accepting deposits and given loans primarily to associate / nominal members. the assessee-society is accepting deposits and also providing credit facilities to nominal / associate members far exceeding 15% of its total business. A.O. has come to a categorical finding that regular members is less than 15% whereas non-members i.e. nominal / associate members are exceeding 87% of the total members. This categorical finding of the A.O. has not been dispelled by the assessee before the Tribunal. Therefore there is a clear violation of provisions dealing with non-members as per Karnataka Co-operative Societies Act 1959. Therefore the ratio of the judgment of the Hon ble Supreme Court in the case of Citizen Co-operative Society 2017 (8) TMI 536 - SUPREME COURT is clearly applicable to the facts of the instant case Assessee could not controvert the categorical finding of CIT (A) regarding violation of the provisions of Karnataka Co Operative Societies Act 1959 as noted above - Decided against assessee.
Issues:
1. Disallowance of deduction u/s. 80P(2)(a)(i) of the Act. 2. Denial of interest income on investments as deduction u/s. 80P(2)(a)(i) and 80P(2)(d) of the Act. 3. Violation of provisions of Karnataka Co Operative Societies Act, 1959. Issue 1: Disallowance of deduction u/s. 80P(2)(a)(i) of the Act: The appeal challenged the order of the CIT (A) confirming the disallowance of a claimed deduction under section 80P(2)(a)(i) of the Income Tax Act. The AR of the assessee argued that a similar issue was decided by the tribunal in another case and urged that the matter be remanded back to the AO for fresh decision based on judicial pronouncements. However, the DR of the revenue supported the CIT (A)'s order, citing a tribunal decision where it was held that a cooperative society violating the Co Operative Society Act cannot claim benefits under section 80P. The tribunal found the AR's arguments insufficient to counter the CIT (A)'s findings, leading to the dismissal of the appeal. Issue 2: Denial of interest income on investments as deduction u/s. 80P(2)(a)(i) and 80P(2)(d) of the Act: The appeal also contested the denial of interest income on investments as deductions under sections 80P(2)(a)(i) and 80P(2)(d) of the Act. The tribunal noted the AR's reliance on previous tribunal orders and a judgment of the Madras High Court, but found that the facts in those cases differed significantly from the present case. As the present case involved a violation of the prescribed number of associate members under the Karnataka Co Operative Societies Act, the tribunal upheld the denial of deductions for interest income on investments. Issue 3: Violation of provisions of Karnataka Co Operative Societies Act, 1959: The central issue revolved around the violation of the provisions of the Karnataka Co Operative Societies Act, 1959, specifically regarding the number of associate members exceeding the permissible limit of 15% of total regular members. The tribunal relied on a previous decision where it was held that such a violation disqualifies a cooperative society from claiming benefits under section 80P. The tribunal found that the violation in the present case aligned with the findings in the previous decision, leading to the dismissal of the appeal. In conclusion, the tribunal dismissed the appeal filed by the assessee, upholding the disallowance of deductions under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act due to the violation of the Karnataka Co Operative Societies Act, 1959. The decision was based on the precedent set by previous tribunal orders and the interpretation of relevant legal provisions.
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