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TMI Blog2020 (3) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 - ITAT AHMEDABAD] and M/S. S-1308 AMMAPET PRIMARY AGRICULTURAL COOPERATIVE BANK LTD. [ 2019 (1) TMI 116 - MADRAS HIGH COURT] which is covered in favour of the assessee. Accordingly, we are of the substantive opinion that the nominal members are also eligible for the Benefits of credit society. Accordingly we restore entire disputed issue to the file of Assessing Officer to grant the benefit to the nominal members and the assessee should be provided adequate opportunity of hearing and co-operate in submitting the information for early disposal of the case and allow the grounds of appeal of the assessee for statistical purposes. - ITA No.1423/Bang/2019 - - - Dated:- 18-3-2020 - Shri A.K. Garodia, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Assessee : Shri S. Ramasubramanian, C.A. For the Revenue : Shri Manjeet Singh, Addl. CIT (D.R) ORDER PER SHRI PAVAN KUMAR GADALE, JM : The assessee has filed an appeal against the order of Commissioner of Income Tax (Appeals), Mangalore passed under Section 143(3) and 250 of the Income Tax Act, 1961 ('the Act'). 2. The assessee has raised the following grounds of appeal as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were filed by the assessee on the two disputed issues considered at Para 07 and 8.3 of the order. The Assessing Officer dealt on the submissions, financial statements and on status of the nominal members who do not have voting rights and also not eligible for dividend, and the provisions under Section 80P of the Act. Further the assessing officer found that there are three categories of members i.e. A Class, C D Class being the nominal members. Whereas A Class members are having voting and dividend rights, C Class members eligible only for dividend and no voting rights, whereas D Class members are nominal members with no voting rights and no dividend. The Assessing Officer observed that the assessee society has accepted deposits from members and lend to members and, further accepts deposits from D Class nominal members and lend loans. Whereas, the D Class members does not have right to vote and no dividend is received. Accordingly, the Assessing Officer disallowed the claim of deduction under Section 80P(2)(a) of the Act and assessed the total income of ₹ 1,21,26,993/- and passed the order under Section 143(3) of the Act dt.20.12.2018. Aggrieved by the order, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(a)(i) of the Act further Assessing Officer found that the assessee has provided Banking facilities to the nominal members. Whereas the ld. AR has restricted his arguments to the extent of denial of deduction under Section 80P(2) of the Act and further submitted that the nominal members has been categorized as members and are eligible for benefits. Whereas CIT (Appeals) has relied on the judicial decisions, which shall apply to a society which is engaged in numerous activities but in the present case the assessee society is engaged in providing facilities of Banking business or credit facilities to its members. We found the issue of denial of deduction under Section 80P(2) and treatment of interest on deposits and also nominal members are treated as members for the purpose of benefit of section 80P(2) was dealt by the judicial forums. We consider it proper to refer to the decision of the co-ordinate Bench of the Tribunal in the case of The Jayanagar Co-operative Society Vs. ITO in ITA No.3254/Bang/2018 in respect of interest income earned by the society were the Assessing Officer denied the claim of the assessee observing that interest income earned on investment of surplus fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the Assessee in AY 2007-08 to 2011-12 was that the deduction under Section 80P(2) of the Act is claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under Section 80P(2)(a) of the Act which was the claim in AY 1991-92 to 1999- 2000. The reason given by the Assessee was that in AY 2007-08 to 2011-12 investments and deposits after the Supreme Court's decision against the assessee Totgar's Co-operative Sale Society Ltd. (supra), were shifted from Schedule Banks to Cooperative Bank. U/s.80P(2)(d) of the Act, income by way of interest or dividends derived by a Co-operative Society from its investments with any other Co-operative Society is entitled to deduction of the whole of such interest or dividend income. The claim of the Assessee was that Cooperative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2) of the Act. The Hon'ble Karnataka High Court followed the decision of the supreme Court in The Totgars Co-operative Sales Society Ltd. (supra) and held that interest earned from Schedule bank or cooperative bank is assessable under the head income from other sources and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt his view. While the case of the assessee is that being a primary agriculture credit society, it is entitled for exemption under sub-section (4) of section 80P. Judgment of Hon ble Apex Court relied upon by the Revenue is distinguishable on facts. In that case assessee was a cooperative society registered under Multi State Cooperative Societies Act, 2002, while in the present case, assessee is a primary agriculture credit society registered under Gujarat State Cooperative Societies Act. The Hon ble Supreme Court disentitled the assessee from claiming exemption under section 80P due to violation of provisions of MACSA, under which it was formed, and most of the business of the assessee was with carved out category of persons without approval of Registrar of the Societies. Weighing point of view of both sides, we find that balance tilt in favour of the assessee. We find that by virtue of sub-section (4) of section 80P, the assessee is entitled for deduction under section 80P(2). Further, Income Tax Act does not define member , nor has provided distinction between regular member and nominal member and therefore, its meaning and objects has to be understood in the context of def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeability of interest income under the head income from other sources and the observations of Hon'ble Supreme Court in the case of Totgar s Co-operative Sales Society Ltd. Vs. ITO 322 ITR 283 (SC) and Hon'ble Karnataka High Court decision in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. 230 Taxman 309 (Kar) as discussed in above paras. Whereas in respect of the claim of Nominal Members included in the definition of Member we find support on our view rely on the decision of Trapaj Vibhageeya Khet Udyog Mal Rupantar Food Processing Sahakari Mandali Ltd. Vs. DCIT (supra) and Prin. CIT Vs. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. (supra) which is covered in favour of the assessee. Accordingly, we are of the substantive opinion that the nominal members are also eligible for the Benefits of credit society. Accordingly we restore entire disputed issue to the file of Assessing Officer to grant the benefit to the nominal members and the assessee should be provided adequate opportunity of hearing and co-operate in submitting the information for early disposal of the case and allow the grounds of appeal of the assessee for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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