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2022 (9) TMI 347 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - loans given to nominal members - Whether CIT(A) have erred in denying the exemption claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961 available to Co-operative Societies engaged in the business of banking or providing credit facilities to its members and accepting deposits from its members? - HELD THAT:- We note that the assessee is a Co-operative Credit Society registered under the Karnataka State Co-operative Societies Act, 1959 having two categories of members i.e. regular members and associate/nominal members. We also note that the objective of the society is that of providing credit facilities to its members The basis adopted by the ld. AO for the purpose of making disallowance relates to credit facilities provided to the category of members which are associate/nominal members. We note that the issue in the present appeal before us has been concluded by the decision of Hon’ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] wherein it is held that full bench judgement in the case of Citizen Co-op Society Ltd. [2017 (8) TMI 536 - SUPREME COURT] wherein the Hon’ble Supreme Court has considered the decision of Co-ordinate Bench of Supreme Court in the case of Citizen Co-operative Bank Ltd. [2017 (8) TMI 536 - SUPREME COURT] as held that section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee - once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in subsection (2) of section 80P must be given by way of deduction - section 80P(4) is in the nature of a proviso to the main provision contained in section 80P(1) and (2). This proviso specifically excludes only co-operative banks, which are cooperative societies who must possess a license from the RBI to do banking business. Given the fact that the assessee is not so licensed, the assessee would not fall within the mischief of section 80P(4). Thus, respectfully following the said decision of Hon’ble Supreme Court in the given facts and circumstances of the case, we direct the ld. AO to delete the addition made and allow the deduction claimed by the assessee u/s 80P(2)(a)(i) of the Act. Accordingly, the grounds of appeal of the assessee are allowed.
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