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2022 (7) TMI 113 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - assessee is a co-operative credit society having A class Members as well as B class Members as its society s Members - case of the AO is that in so far as deposits received from B class Members, there is no mutuality and they are only nominal members - HELD THAT - Similar issue on identical facts was subject matter in appeal before the Tribunal in the case of AA-435 Velankattuvalasu Primary Agricultural Cooperative Credit Society Ltd 2022 (4) TMI 1414 - ITAT CHENNAI . We hold that irrespective of the fact that whether the assessee is having A class Members or B class Members, the assessee is entitled for claiming exemption under section 80P(2)(a)(i) of the Act. Thus, the ground raised by the assessee is allowed. Interest income received from Erode District Central Co-operative Bank - The assessee has claimed deduction of interest Income received under section 80P - AO has denied the same and held that the interest income falls in the category of Other Income and brought to tax, which was confirmed by the ld. CIT(A). Similar issue on identical facts was subject matter in appeal before the Tribunal in the case of The Salem Agricultural Producers Co-operative Marketing Society Ltd. 2016 (9) TMI 699 - MADRAS HIGH COURT - we hold that the assessee is eligible for claiming deduction under section 80P(2)(d) of the Act. Thus, the ground raised by the assessee is allowed.
Issues Involved:
1. Deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. Taxability of interest income received from Erode District Central Co-operative Bank. Issue-Wise Detailed Analysis: 1. Deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961: Facts and Arguments: The assessee, a co-operative credit society, claimed a deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer (AO) denied this deduction, arguing that deposits received from "B" class members, who are nominal members, do not meet the principle of mutuality. The AO relied on the Supreme Court judgment in Citizen Co-Operative Society Limited v. ACIT, which held that activities involving nominal members do not qualify for mutuality and thus do not entitle the assessee to the deduction. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision. Tribunal's Analysis and Judgment: The Tribunal reviewed the case and noted that similar issues were previously addressed in the case of AA-435 Velankattuvalasu Primary Agricultural Cooperative Credit Society Ltd. v. ACIT. In that case, the Tribunal had considered the Supreme Court judgment in Citizen Co-Operative Society Limited v. ACIT and another Supreme Court judgment in Mavilayi Service Co-operative Bank Limited vs. CIT. The Tribunal concluded that the assessee is entitled to the deduction under Section 80P(2)(a)(i) regardless of whether it has "A" class or "B" class members. The Tribunal emphasized that the principle of mutuality is not defeated as long as the transactions are confined to members, including associate members, and not the general public. Therefore, the assessee's claim for deduction under Section 80P(2)(a)(i) was allowed. 2. Taxability of Interest Income from Erode District Central Co-operative Bank: Facts and Arguments: The assessee received interest income of ?2,82,017 from Erode District Central Co-operative Bank. The AO classified this interest income as "Other Income" and subjected it to tax. The CIT(A) confirmed this classification. Tribunal's Analysis and Judgment: The Tribunal referred to its earlier decision in The Salem Agricultural Producers Co-operative Marketing Society Ltd. v. ITO, which was upheld by the Hon'ble Jurisdictional High Court. In that case, it was held that interest income earned from investments in a co-operative bank qualifies for deduction under Section 80P(2)(d) of the Income Tax Act. The Tribunal found that the interest income received by the assessee from Erode District Central Co-operative Bank is eligible for deduction under Section 80P(2)(d), as it is income derived from investments made in another co-operative society. Consequently, the Tribunal allowed the assessee's claim for deduction of the interest income under Section 80P(2)(d). Conclusion: The Tribunal allowed the appeal filed by the assessee, granting the deduction under Section 80P(2)(a)(i) for the entire business profit and under Section 80P(2)(d) for the interest income received from Erode District Central Co-operative Bank. The orders of the lower authorities were reversed, and the assessee's claims were upheld.
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