TMI Blog2017 (12) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, in view of the aforesaid discussion, set-aside the order of the CIT(A) and direct the Assessing Officer to examine and consider as to whether or not the assessee’s activities are in compliance with the Maharashtra State Co-operative Act, 1960 as also the Maharashtra State Co-operative Regulations, 1961. If it is so found, then, in the absence of any licence from the Reserve Bank of India, the assessee cannot be treated as an entity falling within the restrictions imposed in Sec. 80P(4). So however, if the findings of the Assessing Officer are to the contrary, he shall be free to take appropriate action as per law. - ITA NOS. 1237/MUM/2013 And 6251/MUM/2013 And ITA NOS. 327 TO 329/MUM/2016 - - - Dated:- 29-11-2017 - SHRI G.S. PA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operative credit society registered under the Maharashtra State Co-operative Act, 1960. For the assessment year under consideration, it filed a return of income declaring the total income at NIL, inter-alia, after claiming exemption u/s 80P(2)(a)(i) of the Act. Pertinently, the plea of the assessee was that it was accepting deposits and allowing credit facilities to its members and thus was entitled for exemption u/s 80P(2)(a)(i) of the Act with respect to the income earned. The Assessing Officer as well as the CIT(A) have negated the plea of the assessee on the ground that the case of the assessee falls within the restriction contained in Sec. 80P(4) of the Act inasmuch as the assessee-society was doing co-operative banking business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed deduction under Sections 36(1)(viia)(b) as well as 36(i)(viii) of the Act, which are primarily in relation to banking entities. Secondly, the Assessing Officer notes that the Tax Auditor itself has commented that assessee-society is doing co-operative banking. Thirdly, in para 8, the Assessing Officer records that assessee has taken huge loans besides availing cash-credit facility with the Mumbai District Central Co-operative Bank. 5. Insofar as the reference by the Assessing Officer to assessee s claim of deductions under Section 36(1)(viia)(b) as well as 36(i)(viii) of the Act and the remark by the Tax Auditor are concerned, the same can at best be taken as wrong claims and cannot be determinative of the legal position. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in violations of the provisions of the MACSA under which it is formed. It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people. The first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of nominal members . These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in real sense. Most of the business of the appellant was with this second category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been earned on such investment for example, ING Mutual Fund [as said by the MD vide his statement dated 20.12.2010]. [Though the bank formed the third party vis-a-vis the assessee entitled between contributor and recipient is lost in such case. The other ingredients of mutuality are also found to be missing as discussed in further paragraphs]. In the present case both the parties to the transaction are the contributors towards surplus, however, there are no participators in the surpluses. There is no common consent of whatsoever for participators as their identity is not established. Hence, the assessee fails to satisfy the test of mutuality at the time of making the payments the number in referred as members may not be the member o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then, in the absence of any licence from the Reserve Bank of India, the assessee cannot be treated as an entity falling within the restrictions imposed in Sec. 80P(4) of the Act. So however, if the findings of the Assessing Officer are to the contrary, he shall be free to take appropriate action as per law. Needless to mention, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and only thereafter shall pass an order afresh in accordance with law keeping in mind our aforesaid directions. 9. In the result, appeal of the assessee for Assessment Year 2009-10 is allowed for statistical purposes, as above. 10. It was a common point between the parties that the facts and circumstances in ITA Nos. 6251/M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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