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TMI Blog2024 (9) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. Ors. [ 2021 (1) TMI 488 - SUPREME COURT] 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 Act. The Hon ble Apex Court after considering the judicial pronouncements on the subject, had stated that the term member has not been defined under the Income-tax Act. Also section 80P(4) of the I.T. Act is to be read as a proviso. It was stated by the Hon ble Apex Court that section 80P(4) of the Act now specifically excludes only co-operative banks which are co-operative societies engaged in the business of banking i.e. engaged in lending money to members of the public, which have a licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is partly allowed for statistical purposes. - Shri Waseem Ahmed, Accountant Member And Shri Keshav Dubey, Judicial Member For the Appellant : Smt. Harsha J., A.R. For the Respondent : Shri V. Parithivel, D.R. ORDER PER KESHAV DUBEY, JUDICIAL MEMBER: This appeal filed by the assessee is directed against order of CIT(A)/NFAC for the AY 2018-19 dated 8.7.2024 passed u/s 250 of the Income Tax Act, 1961 (in short The Act ). The assessee has raised various grounds of appeal. 2. Facts of the case are that the assessee society, Nava Karnataka Souhard Credit Co-operative Limited being a credit cooperative society registered under Karnataka Souhardha Sahakari Act, 1997 had e-filed the return of income for the AY 2018-19 on 1.10.2018 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. Further, Nominal members and associated members have not been provided with voting rights which prejudices the concept of mutuality as the mandates of such members cannot be carried out. It is a matter of fact that the nominal and associated classes of members are specifically barred from holding voting rights and are not entitled to share in the profits or losses of the society. These members are deprived of any right or interest in the property of the society. In other words, these nominal members are solely contributors to earning surpluses and not participators in the surpluses and hence the concept of mutuality in the said entity ceases to exist. The denial of voting rights is patently discriminatory and does not enable the member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheduled Banks and earned interest of Rs. 2,92,14,754/- out of such investment which as per legislature the assessee is not supposed to get deduction u/s 80P(2)(d). He observed that the Hon'ble High court of Karnataka in the case The Totagars Co-operative Sale Society in ITA No. 100066/2016 16.06.2017 held that the interest received from the cooperative bank and urban banks are to be assessed under section 56 of the Income tax Act. Though the assessee is under obligation to invest compulsorily as per the Karnataka Co Operative Society Act, 1959, the resultant interest is nothing but income in the hands of the society. The assessee has invested the idle funds which were not required for lending to its members with Co-op Banks or schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h then the entity is a cooperative bank and not a cooperative society and therefore, deposits placed with other cooperative banks are not entitled to exemption under section 80P(4) of the Act. Further, he observed that the distinction between a cooperative society and cooperative bank is brought out by Banking Regulation Act. In view of the above discussion, the ld. CIT(A) held that the interest income of Rs. 2,92,14,754/- derived by the assessee society from loans/advances/investment in share/Schedule Bank/District Cooperative Bank is not eligible for deduction under section 80P(2)(a)(i) of the Act and requires to be added to the income of the assessee as Income from Other Sources under section 56 of the Income tax Act, 1961. Hence, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icense in this behalf from the RBI. The Hon ble Apex Court had enunciated various principles in regard to deduction u/s 80P of the Act. On identical factual situation, the Bangalore Bench of the Tribunal in the case of M/s. Ravindra Multipurpose Cooperative Society Ltd. v. ITO in ITA No.1262/Bang/2019 (order dated 31.08.2021) had remanded the issue to the files of the A.O. for de novo consideration. The Tribunal directed the A.O. to follow the dictum laid down by the Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. Ors. v. CIT Anr. (supra). The relevant finding of the Co-ordinate Bench of the Tribunal in the case of M/s. Ravindra Multipurpose Cooperative Society Ltd. v. ITO (supra), reads as follows:- 6. Grounds 2-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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