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2018 (12) TMI 906 - AT - Income TaxDisallowance u/s.40A(2)(b) - assessment of co-operative society - excess benefit, beyond reasonableness, to the member having substantial interest - Held that:- No disallowance under that section can be made in the assessment of co-operative society. The Hon’ble Bombay High Court also in the case of CIT vs Manjara Shetkari Sahakari Sakhar Karkhana Ltd. [2007 (8) TMI 260 - BOMBAY HIGH COURT] has held that "the section 40A(2) does not apply to the co-operative society, hence no disallowance under that section can be made in the assessment of the Cooperative society". Further it is also noticed that assessee has explained that an individual shareholder cannot have beneficial interest of more than 0.05% in the shares of the co-operative society. It is also noticed that authorized capital in the case of assessee was ₹ 5 Cr. and an individual member cannot subscribe more than 25,000/- worth of shares, without approval from the Government. These facts were not disputed/disproved by the AO. We are of the view that the provisions of section 40(A)2(b) are not applicable to co-operative society. Therefore, we are inclined with the decision of CIT(A), that the provision of section 40(A)2(b) of the Act, were not applicable to the case of the assessee, therefore we do not find any merits in the appeal of the revenue and the same is dismissed. - Decided against revenue.
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