2019 (4) TMI 207 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - assessee is involved into giving funds to the non-members - whether the assessee is a co-operative society meant for its members only and whether any income was earned by way of investment/loans etc to non-members? - HELD THAT - In a recent order in the matter of M/s. Udaya Souharda Credit Co operative Society Ltd 2018 (8) TMI 1063 - ITAT BANGALORE , it was noted by the Tribunal that Karnataka State has notified Karnataka Co Operative Societies Act, 1959 as well as the Karnataka Souharda Sahakari Act, 1997 and both Acts are in force. Therefore, conversion from one into another is possible. Thereafter the Tribunal held that the deduction u/s.80P can only be applied to a cooperative society registered under the Karnataka Co- Operative Societies Act, 1959 and thereafter the matter was restored back to the AO for fresh decision after making necessary enquiry and investigation. In the present case, the facts are identical and one more plea was raised pertaining to mutuality. Thus following the decision of Citizen Cooperative Society (2017 (8) TMI 536 - SUPREME COURT) and Udaya Souharda Cooperative Society (supra), we remand the appeal to the file of the CIT (A) to decide the issue afresh in the light of the observations made hereinabove - Appeal of the Revenue allowed for statistical purpose.

Issues:
1. Admission of additional evidence in contravention of Rule 46A.
2. Acceptance of affidavit without examining the balance-sheet.
3. Failure to consider the remand report regarding deduction u/s 80P(2)(a)(i).
4. Failure to call for a remand report on the nature of cooperative society and income earned.
5. Failure to apply the decision of the Hon'ble Supreme Court in a similar case.
6. Conclusion that the society is eligible for deduction u/s 80P(2)(a)(i).
7. Consideration of pending Special Leave Petition before the Supreme Court.

Analysis:
1. The Revenue appealed against the CIT(A)'s order for the assessment year 2009-10. The main issue raised was the admission of additional evidence in the form of an affidavit without giving the Assessing Officer an opportunity to examine it, which was argued to be in contravention of Rule 46A.

2. Another ground of appeal was the acceptance of the affidavit without examining the balance-sheet, which was considered essential to determine the nature of the members dealt with by the society and whether it was engaged in business with non-members.

3. The Revenue contended that the CIT(A) failed to consider the remand report submitted by the AO regarding the deduction u/s 80P(2)(a)(i) as the assessee allegedly did not substantiate its claim despite being given an opportunity.

4. It was argued that the CIT(A) should have called for a remand report to ascertain whether the society was exclusively for its members and if any income was generated from non-members, in line with the decision-making process of the Hon'ble Apex Court.

5. The failure to apply the ratio of a decision of the Hon'ble Supreme Court in a similar case was highlighted, as the society was catering to a category of members called associate members, which was deemed different from regular members.

6. Despite the Revenue's contentions, the CIT(A) concluded that the society was a cooperative society eligible for deduction u/s 80P(2)(a)(i), disregarding the arguments based on previous court decisions.

7. The consideration of a pending Special Leave Petition before the Supreme Court was also mentioned, indicating a potential impact on the final decision in a similar case. Ultimately, the Tribunal allowed the Revenue's appeal for statistical purposes and remanded the case to the CIT(A) for a fresh decision considering the observations made and ensuring due process.

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