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TMI Blog2020 (9) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in case of Citizen Co- operative Society Ltd. [ 2017 (8) TMI 536 - SUPREME COURT ] has held that, it is also important to ascertain as to what is the nature of income which is claimed as exempt, and as to how principle of mutuality is not violated in respect of such income. An examination of (i) memorandum of association, articles of association, (ii) byelaws and other documents explaining rules and regulations of the society is necessary, so as to clearly understand the purpose and the nature of business done by it. An examination of different categories of members of a society and what are the conditions attached to their being admitted as members and their rights as contributors of funds to the society and participants in sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 3. Assessee during year under consideration filed nil return of income after claiming deduction of ₹ 84 67,703 /- under section 80P of the Act. The return was selected for scrutiny and during assessment proceedings, Ld.AO noticed that principles of mutuality were violated by assessee. Ld.AO thus denied deduction claimed under section 80P of the Act, by following decision of Hon ble Supreme Court in case of Citizen co-operative society Ltd., reported in (2017)84 taxman.com114. Ld.AO disallowed entire deduction under section 80P by observing as under: a) interest income earned out of investment with co-operative banks was treated as income from other sources not eligible for deduction under section 80P(2)(d) relying on Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jewel loans are only given to farmers who hold agricultural land. 6.3. He submitted that, ratio of Hon ble Supreme Court in case of Citizen Co-operative Society Ltd., (supra), will not be applicable to facts of present case. Ld.AR submitted that, assessee s facts are more similar with facts in case of Tumkur Merchans Souharda Credit Co-operative Ltd. vs.ITO, reported in 230 Taxman 309. He also submitted that, there has been various decisions of this Tribunal, wherein identical issue has been remanded to Ld.AO for due verification of facts. 7. On the contrary, Ld.Sr.DR submitted that, issue may be remanded to Ld.AO for due verification of facts in the light of decisions of Hon ble jurisdictional High Court, as well as Hon ble Apex Court refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat are the conditions attached to their being admitted as members and their rights as contributors of funds to the society and participants in surplus and the byelaws of the society is necessary. Deduction u/s.80P2(a)(i) is allowed only in respect of income arising out of transactions with members. The relevant law governing co-operative Society of State providing status of different categories of members, in so far as affairs of co- operative Society are concerned, is also required to be examined. It is only income which arises from dealing with members and which is either in the nature of banking or providing credit facilities to members that would be allowed as deduction. All these aspects requires examination. Ld.AO will allow opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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