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TMI Blog2021 (11) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... its member-agriculturists and distribution of ration articles, distribution of fertilizer's, provider of crop insurance facility, link between government and farmers in case of agricultural related subsidy loan schemes in rural village areas, where till now there is no banking facility is reached. 2. Your appellant submits that being a Primary Agricultural Credit Co-operative Society, they are eligible for deduction u/s 80P of the Income Tax Act in respect of interest and dividend earned from their investment with the South Canara District Co-operative Bank Ltd. 3. Your appellant submits that the decision of the honorable Supreme Court in the case of Citizens co-op. Society is not applicable to their case and provide the following compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Considering the question of `mutuality', we once again insist that the major portion of transactions are with the regular members and only a very small portion of transactions are with the nominal members. Further there are no co-op. societies in the State of Karnataka which do not have nominal members. Hence applying the decision of the honorable Supreme Court in this manner will result in disallowance of section 80P deduction for all the coop. societies and will render the section infructuous. 4. The learned AO erred in applying the decision in the case of the The Tatagars Co-op. Sale Society in ITA No.100066 of 2016, where the respondent society was a `Marketing Co-op. Society', whereas your appellant is a a `primary agricultura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. The assessment u/s 143(3) was completed vide order dated 10.12.2019 wherein the claim of deduction u/s 80P of the I.T.Act was denied by the Assessing Officer. The Assessing Officer held that the assessee has violated the principles of mutuality by placing reliance on the judgment of the Hon'ble Apex Court in the case of The Citizen Co-operative Society Ltd. v. ACIT reported in 397 ITR 1 (SC). The Assessing Officer also denied the claim of deduction u/s 80P(2)(d) of the I.T.Act since interest / dividend income was earned out of investments with co-operative banks. For denying the claim of deduction u/s 80P(2)(d) of the I.T.Act, the Assessing Officer relied on the judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and perused the material on record. The Hon'ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. (supra) had held that the co-operative societies providing credit facilities to its members is entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act. The Hon'ble Apex Court after considering the judicial pronouncements on the subject, had stated the term "member" has not been defined under the Income-tax Act. It was, therefore, stated by the Hon'ble Apex Court that the term "member" in the respective State Co-operative Societies Acts under which the societies are registered have to be taken into consideration. The Hon'ble Apex Court held that if nominal / associate member is not prohibited under the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression "Members" is not defined in the Income-tax Act. Hence, it is necessary to construe the expression "Members" in section 80P(2)(a)(i) of the Act in the light of definition of that expression as contained in the concerned co-operative societies Act. In view of this, the facts are to be examined in the light of principles laid down by the Hon'ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. (surpa). Accordingly, we remit this issue of deduction u/s 80P(2)(a)(i) of the Act to the files of Ld.AO to examine the same de novo in the light of the above judgment. Needless to say that proper opportunity of being heard is to be granted to assess in accordance with law." 5.1 In view of the order of the ITAT, which is identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest was chargeable to tax under Section 56 of the Income Tax Act without allowing deduction in respect of proportionate costs incurred as permissible under Section 57. 12. It is no doubt true that the appellant did initially claim deduction under Section 80P(2). Upon the pronouncement of the order by the Apex Court, in these appeals referred to supra, the income earned on the interest is declared as "other income" falling under Section 56 of the Income Tax Act. Then the next immediate question that follows is as to whether the entire fund i.e., in deposit with the Bank is taxable or the proportionate expenditure incurred by the appellant requires deduction. It is logical that when the Revenue is permitted to assess and recover tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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