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2022 (11) TMI 826 - AT - Income TaxDeduction u/s 80P(2)(a)(i) in respect of interest earned from credit facilities provided to nominal members - Claim disallowed as credit facilities provided to non-members were not eligible for deduction - HELD THAT:- The assessee Co-operative society is admittedly engaged in carrying on the business of banking and providing credit facilities. Section 80P(2)(a)(i) provides that in the case of co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, the whole of the amount of profits and gains of business attributable to such activities shall be deductible in the computation of total income. The claim of assessee for deduction has been negated by the authorities below, inter alia, on the ground that it admitted certain Members, described as ‘Nominal Members’, who were neither entitled to dividend nor voting rights. On going through the above definition of ‘Member’, it becomes overt that the term ‘Member’ also includes a Nominal Member. Once it is accepted that the assessee, governed by the Karnataka Act, made advances to certain Nominal Members from whom interest income was earned, there can be no doubt whatsoever that the deduction u/s 80P(2)(a)(i) has to be allowed. Taking note of the fact that the Citizen Co-operative Society Ltd. vs. ACIT [2017 (8) TMI 536 - SUPREME COURT] judgment dealt with the Andhra Act wherein the term ‘Member’ did not include Nominal Member, the Hon'ble Supreme Court in Mavilayi Service [2021 (1) TMI 488 - SUPREME COURT] held that the interest on loans given to Nominal Members under the Kerala Act was eligible u/s 80P(2)(a)(i) of the Act as the term ‘Member’ under the Kerala Act included ‘Nominal Members’. As evident that when the loans are given to Nominal Members and the relevant State Act includes, ‘Nominal Member’ within the purview of ‘Member’, there can be no question of denial of benefit u/s 80P(2)(a)(i). We overturn the impugned order on this score and direct to allow the deduction. Appeal of assesee allowed
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