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2021 (3) TMI 984 - AT - Income TaxDisallowance of claim of deduction u/s. 80P(2)(a)(i) - CIT(A) held that the assessee is a co-operative society, eligible for claim of deduction u/s. 80P(2)(a)(i) with regard to income derived from business of providing credit facilities to its members but income earned from persons other than regular members of the assessee was not eligible for deduction u/s. 80P(2)(a)(i) - HELD THAT - Referring to Section 18 of the Karnataka Co-operative Societies Act, 1959 as amended with effect from 01.06.2014, the Co-operative Societies registered under the Karnataka Cooperative Societies Act, 1959 is allowed to do have nominal/associate members up to 15% for its total membership. In the instant case, the assessee has not provided the details sought by the CIT(A), namely, copies of bye-laws, details of investments, details of income derived from non-members, etc. The Hon'ble Apex Court in the case of The Mavilayi Service Cooperative Bank Ltd. Ors. 2021 (1) TMI 488 - SUPREME COURT had clearly stated that when assessee is accepting deposits and providing credit facilities to non-members, the respective State Coo-operative Act will have application. Since the assessee has not provided the details, in the interest of justice and equity one more opportunity should be granted to the assessee to provide the same. Issues raised in this appeal are restored to the files of the CIT(A). Appeal filed by the assessee is allowed for statistical purposes.
Issues:
Disallowance of deduction u/s. 80P(2)(a)(i) of the I.T. Act amounting to ?34,70,813. Analysis: 1. The appeal concerned the disallowance of a deduction under section 80P(2)(a)(i) of the Income Tax Act amounting to ?34,70,813 for the assessment year 2013-2014. The Assessing Officer denied the deduction, stating that the assessee, a cooperative society, primarily engaged in banking activities, was essentially a cooperative bank, making it ineligible for the deduction under section 80P(2)(a)(i) of the Act. 2. The CIT(A) partially allowed the appeal, acknowledging the assessee's eligibility for the deduction concerning income derived from providing credit facilities to its members. However, income earned from non-regular members was deemed ineligible for the deduction under section 80P(2)(a)(i) of the Act. 3. The assessee contended that it only accepted deposits and provided loans to nominal/associate members who were part of the society, not external parties. The assessee argued that the denial of the deduction was unjustified. Reference was made to a recent Supreme Court judgment in The Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT. 4. The Department's Standing Counsel highlighted the assessee's lack of cooperation in providing essential details to the CIT(A), such as bye-laws, investment and deposit details, and income from non-members. The Counsel relied on tribunal orders in similar cases to support their argument. 5. The Tribunal considered the definition of nominal or associate members under the Karnataka Co-operative Societies Act, 1959. It was noted that the Act was amended in 2014, limiting the number of nominal/associate members to 15% of the total membership. Since the assessee did not provide requested details, the Tribunal decided to grant the assessee another opportunity to furnish the necessary evidence to the CIT(A). 6. Consequently, the appeal was allowed for statistical purposes, and the issues were remanded to the CIT(A) for further consideration based on the additional evidence to be provided by the assessee. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the disallowance of the deduction under section 80P(2)(a)(i) of the Income Tax Act.
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