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2024 (1) TMI 844 - AT - Income TaxDisallowance u/s 80(P)(2)(a)(i) - assessee society has violated section 18 of the Karnataka Co-operative Societies Act, 1959 by having more than 15% associate members (other than regular members) - CIT(A) deleted addition - HELD THAT:- 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 expression “members”, since it is not defined under the Income-Tax Act, the meaning/expression “members” must be considered n the context of the provision of the law enacted by the State legislature under which Co-operative Society claiming exemption has been formed. It is, therefore, necessary to consider the expression “member” in section 80P(2)(a)(i) of the Act in the light of definition as contained in section 18 of the Karnataka Co-operative Societies Act, 1959. As per amendment, w.e.f. 01.06.2014, Co-operative Societies registered under the Karnataka Co-operative Societies Act, 1959, is allowed to have nominal / associate members (non-members) up to 15% of its total membership. In the instant case, as mentioned earlier, the assessee society is providing credit facilities to non-members exceeding 15% of its total membership. Therefore, assessee would not be entitled to deduction u/s 80(P)(2)(a)(i) of the Act on income arising from dealing with non- members. Only profits attributable to non-members alone would not be entitled to deduction u/s 80P(2)(a)(i) of the Act. Thereby meaning proportionate deduction is to be allowed in respect of the income arising out of business with the members of the assessee society. In the light of the above said judgment of the Hon’ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd., (supra), we restore the issue to the AO to determine the proportionate deduction under section 80P(2)(a)(i) of the Act with regard to the income earned from the assessee’s dealings with its regular members. Addition u/s 68 - cash deposit of the Specified Bank Notes (SBN) from period 10.11.2016 to 31.12.2016 - as per AO assessee society was not authorized to accept the SBNs subsequent to the demonetization announced by virtue of the order of Government of India (Refer Gazette Notification No.2652 dated 8.12.2016) - assessee had claimed that this money was deposited by its customers in its bank accounts and the AO was provided with party-wise details, the identity of the creditors from whom the amounts is collected etc - CIT(A) has deleted the addition made u/s 68 - HELD THAT:- The assessee had furnished the details such as from whom the amounts are collected, where it is accounted and the details of the loans and deposits. Hence, the assessee cannot be made liable u/s 68 of the Act as unexplained credit. The evidence produced by the assessee was rejected only on the basis that assessee was not authorized to collect the SBNs subsequent to 8.11.2016. On identical factual situation, in the case of Bhageeratha Pattina Sahakara Sangha Niyamita [2022 (2) TMI 1243 - ITAT BANGALORE] we hold that ld. CIT(A) was justified in deleting the addition made u/s 68 of the Act. Decided in favour of assessee.
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