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TMI Blog2019 (12) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... HAT:- In the case of Citizen co-operative Society [ 2017 (8) TMI 536 - SUPREME COURT] the majority of income was derived from nominal members and general public and hence the Hon'ble Supreme Court held that the business of the assessee is in the nature of a financial institution and not in the nature of providing credit facilities to its members. Hence the component of income derived from members (who are eligible to participate in profits) and other persons may also require examination and may influence the decision to be taken with regard to the eligibility of the assessee to claim deduction u/s 80P of the Act. If majority of income was derived from members (who are entitled to participate in profits), then the question that would ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of accepting deposits and providing credit facilities to its members, besides making investments. The assessee has claimed deduction u/s 80P of the Act and accordingly declared NIL income. 3. During the course of assessment proceedings, the AO noticed that the assessee was having different categories of members, viz., Regular Members, Associate members and Nominal members. He noticed that the nominal members are also mentioned as Associate Members, i.e, both categories were treated alike. The assessee was having 2038 nominal members/Associate members and 3831 regular members. Thus the percentage of nominal members worked out to 53.20%, which was in violation of provisions of sec.16 of the Karnataka Co-operative Societie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by the division bench of Bangalore ITAT in the case of M/s Bapooji Pattin Souharda Sahakari Niyamit vs. ITO (ITA No.544/Bang/2019 dated 04-09-2019) and submitted that the matters may be restored to the file of the AO for examining the facts as held in the above said case. 5. The Ld D.R, on the contrary, submitted that the AO had rejected the claim for deduction u/s 80P for the reason that the assessee has carried on business with nominal/associate members, who cannot be called as members within the meaning of sec.80P(2)(a)(i). He submitted that under the provisions of sec.80P(2)(a)(i) of the Act, the income earned by a co-operative society on credit facilities provided to its members alone is deductible. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been interchangeably referred to as Associate Members also. However, the Ld A.R is contending that there is difference between nominal member associate members. The Ld A.R further submitted that the limit of 15% prescribed in the Karnataka Co-operative Societies Act would apply only to associate members. Hence the question as to whether nominal members and associate members would fall in the same category or they are different from each other requires clarification. 8. The principle of Mutuality shall apply when there is parity of contributors and participators, i.e., the contributors as a class should be eligible to participate in profits also. In the case of Citizen Co-operative Society Ltd (397 ITR 1), the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in AY 2015-16 in the case of above said assessee without pointing out any other reason, the matter was restored to the file of the AO. 10. I notice that the Principle of Mutuality emphasized by Hon'ble Supreme Court in the case of Citizen Co-operative Society Ltd (supra) was not discussed in the above said decision. As stated earlier, the question whether nominal members and associate members would also quality as members within the meaning of sec.80P(2)(i) also requires examination in the light of provisions of Karnataka Co-operative Societies Act and/or Bye Laws of Society. In the instant case, the Ld A.R is also contending that there is difference between nominal members and associat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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