2021 (9) TMI 899 - AT - Income Tax

Disallowance of claim of deduction u/s 80P - AO noticed that the assessee was having income both from members and non-members - Since the assessee was having income from non-members - HELD THAT - As in the case of Mavilayi Service co-operative Bank Ltd. Ors. 2021 (1) TMI 488 - SUPREME COURT had held that expression members is not defined under the Income-tax Act. Therefore, it was held by the Hon ble Apex Court that necessarily the expression members in section 80P has to be construed in the light of the expression as contained in the respective State Co-operative Societies Act. The Hon ble Apex Court held that if associate / nominal members are treated as members under the State Co-operative Societies Act, there is no violation of the provisions under the State Co-operative Societies Act, and therefore, the assessee would be entitled to the benefit of deduction u/s 80P - the issue of deduction u/s 80P needs to be reconsidered afresh by the A.O - The issues raised in this appeal are restored to the files of the A.O - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
- Whether the CIT(A) was justified in confirming the disallowance of claim of deduction u/s 80P of the I.T.Act.

Analysis:
The appeal in this case was against the CIT(A)'s order regarding the disallowance of deduction u/s 80P of the I.T.Act for the assessment year 2017-2018. The Assessing Officer (A.O.) observed that the assessee, a co-operative society, had income from both members and non-members. Due to income from non-members, the A.O. concluded that the principle of mutuality was violated, denying the deduction u/s 80P based on the judgment of the Hon'ble Apex Court in a specific case. The CIT(A) upheld the A.O.'s decision, stating that the judgment applied to the case and the principle of mutuality was missing, with no successful challenge from the assessee.

The assessee then appealed to the Tribunal, presenting various documents and relying on a recent judgment by the Hon'ble Apex Court in another case. The Tribunal considered the recent judgment and held that the expression "members" in section 80P should be interpreted based on the State Co-operative Societies Act. If associate/nominal members are recognized as members under the State Act, the assessee is entitled to the deduction u/s 80P. Consequently, the Tribunal directed the A.O. to reconsider the deduction issue, providing the assessee with a fair hearing and deciding in accordance with the law.

Ultimately, the Tribunal allowed the appeal for statistical purposes, ordering the A.O. to review the deduction claim afresh in light of the principles established by the recent Hon'ble Apex Court judgment. The decision was pronounced on September 20, 2021.