2020 (3) TMI 330 - AT - Income Tax

Exemption u/s 80P - assessee is a MSEB Employees Co-operative Credit Society Ltd. registered under the Maharashtra State Co-operative Act formed for the mutual benefit of employees working with Maharashtra State Electricity Board (MSEB) in the adjoining districts of Chandrapur and Gadchiroli - HELD THAT - The earnings out of investments in PDCC, Credit Co-operative Banks and others, are exempt u/s 80P of the Act. See SARRODAY GRAMIN BIGARSHETI SAHAKARI PATH 2019 (9) TMI 1333 - ITAT PUNE

Summary

Issues Involved:

1. Justification of disallowances under sections 80P(2)(a)(i), 80P(2)(d), and 80P(2)(c)(ii).
2. Consideration of income earned from nominal members.
3. Applicability of the Supreme Court judgment in Citizen Co-operative Society Ltd. vs. ACIT.

Detailed Analysis:

1. Justification of Disallowances under Sections 80P(2)(a)(i), 80P(2)(d), and 80P(2)(c)(ii):

The primary issue revolves around whether the CIT(A) was justified in endorsing the disallowances made by the Assessing Officer (AO) concerning deductions claimed by the assessee under sections 80P(2)(a)(i), 80P(2)(d), and 80P(2)(c)(ii). The assessee, a co-operative credit society, initially claimed deductions under these sections, which were subsequently disallowed by the AO based on the Supreme Court judgment in Citizen Co-operative Society Ltd. vs. ACIT. The CIT(A) upheld the AO's decision.

The Tribunal considered the arguments presented by the assessee's counsel, who contended that the Supreme Court judgment in Citizen Co-operative Society Ltd. was not applicable to their case. They argued that the facts of their case were identical to those in Sarroday Gramin Bigarsheti Sahakari Path Sanstha Maryadit vs. ITO, where the Pune Bench of the Tribunal allowed similar deductions. The Tribunal noted that the AO had relied on the Supreme Court judgment, but the Tribunal in Sarroday Gramin Bigarsheti Sahakari Path Sanstha Maryadit had distinguished the facts and relied on the Bombay High Court's judgment in Jalgaon District Central Cooperative Bank Ltd., which supported the assessee's claim for deductions under section 80P.

2. Consideration of Income Earned from Nominal Members:

The assessee argued that the income earned from nominal members had already been offered to tax, and thus, the disallowance was unwarranted. The Tribunal noted that in similar cases, such as Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit vs. ITO, the issue of income earned from nominal members was adjudicated in favor of the assessee. The Tribunal emphasized that the Maharashtra Co-operative Societies Act includes nominal members within the definition of "members," and there was no violation of any Act in the instant case. Therefore, the income earned from nominal members should not be a basis for disallowing the deductions claimed under section 80P.

3. Applicability of the Supreme Court Judgment in Citizen Co-operative Society Ltd. vs. ACIT:

The Tribunal analyzed whether the Supreme Court judgment in Citizen Co-operative Society Ltd. vs. ACIT was applicable to the present case. The assessee's counsel argued that the facts of their case were different from those in the Citizen Co-operative Society Ltd. case, which involved violations of the Andhra Pradesh Mutually Aided Co-operative Act. The Tribunal agreed with the assessee's counsel, noting that the Maharashtra Co-operative Societies Act's definition of "members" includes nominal members, unlike the Andhra Pradesh Act. The Tribunal also referred to the Madras High Court's decision in PCIT vs. M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd., which distinguished the Citizen Co-operative Society Ltd. case based on differences in the definition of "members."

The Tribunal concluded that the Supreme Court judgment in Citizen Co-operative Society Ltd. was not applicable to the present case. They relied on the Bombay High Court's judgment in Jalgaon District Central Cooperative Bank Ltd., which supported the inclusion of nominal members within the definition of "members" and allowed the deductions claimed under section 80P.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the disallowances under sections 80P(2)(a)(i), 80P(2)(d), and 80P(2)(c)(ii) were unjustified. They emphasized that the income earned from nominal members should not be a basis for disallowing the deductions and that the Supreme Court judgment in Citizen Co-operative Society Ltd. was not applicable to the present case. The Tribunal's decision was based on the consistent application of legal principles as established in similar cases and judgments by higher judicial forums.