TMI Blog2019 (7) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... . Respectfully following the decision of the ITAT, Bangalore Bench, (supra) restoring the matter to the file of the AO for fresh examination and adjudication Eligible of persons to be members under the Karnataka State Co-operative Societies Act, 1959 - classification / restriction under the Act - HELD THAT:- On similar facts, the Co-ordinate Bench of this Tribunal in its decision in the case of Chatrapati Sivaji Co-operative Credit Society Ltd., Vs. ITO [ 2018 (12) TMI 1662 - ITAT BANGALORE] restored this issue back to the file of the AO O for fresh adjudication after examination / verification of the facts in the light of the judgments of Totgars Co-operative Sale Society Ltd., Vs. ITO [ 2010 (2) TMI 3 - SUPREME COURT] and case of Tumkur Merchants Souharda Co-operative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] - the assessee s appeal is allowed for statistical purposes. - ITA No.1032/Bang/2019 - - - Dated:- 12-7-2019 - Shri Jason P Boaz, Accountant Member For the Assessee : Shri. Ashok G. Mudnur, CA For the Revenue : Shri. Karuppusamy, S. R. Addl. CIT ORDER PER JASON P. BOAZ, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural Cooperative bank Ltd Ammapet, Salem Tax Case Appeal No 882 891 of 2018 dt 6.12.2018 (Madras HC) . 3. The learned Commissioner of Income Tax (Appeals),Hubballi has erred in applying Citizen Coop Society Vs CIT C-9 (1) Hyderabad Supreme Court case which facts are different from that of t appellant Society. 4. The learned Commissioner of Income Tax (Appeals),Hubballi has erred in not considering the provisions of Karnataka State Cooperative Societies Act 1959 regarding types of members eligible to become members as there is no classification/restriction under the Income Tax Act 1961. As held in the The Principal Commissioner of Income Tax Salem-7 Vs M/s S-1308 Ammapet Primary Agricultural Cooperative bank Ltd Ammapet, Salem 5. The learned Commissioner of Income Tax (Appeals),Hubballi has erred in treating Interest earned from Cooperative Banks as Income from Other Sources of ₹ 5,09,310/- and disallowed claim u/s 80P(2)(a)(i) even when deposits are out of regular business funds. 6. The appellants craves leave to add/alter any of the grounds of appeal on or before the date of fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of the appellant, is that the activities of the appellant are 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 these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found, as a matter of fact, that he depositors and borrowers are quiet distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative society. It is also found that the appellant is engaged in the activity of granting loans to ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are afraid such a society cannot claim the benefit of Section 80P of the Act. 28. This appeal, therefore, fails and is hereby dismissed with costs. 5.3.2 On the similar issue, the ITAT, Bangalore Bench, in the case of Jyoti Co-operative Credit Society Ltd., Vs. ITO in its order in ITA No.50/Bang/2019 dated 08.05.2019, after considering the aforesaid decision of the Hon ble Apex Court in the case of Citizens Co-operative Society Ltd., (supra), at paras 6 and 7 thereof has held as under:- 6. I find that as per this judgment of Hon'ble Supreme Court rendered in the case of Citizen Co - Operative Society Limited vs. ACIT (Supra), this is not the ratio that that even if a small portion of total income is earned from nominal members, deduction u/s 80P should not be allowed qua such income although deduction is to be allowed ,in respect of income from regular members as held by CIT (A) in the present case. In'-fact, in that case, apart from this objection that most of the business of the assessee was with nominal members, there were various other objections also such as deposit from nominal members-was also received and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out by the assessee with nominal members and general public, if any. The assessee should also demonstrate about the difference in facts of the present case and facts in the case of Citizen Co -Operative Society Limited vs. ALIT (Supra). The AO can also demonstrate as to how the facts are similar. Thereafter the CIT (A) should pass speaking and reasoned order as per law. 5.3.3 Respectfully following the decision of the ITAT, Bangalore Bench, in the case of Jyoti Co-operative Credit Society Ltd., (supra), I am of the view that the interest of substantial justice will be well served, by setting aside the orders of the authorities below on this issue and restoring the matter to the file of the AO for fresh examination and adjudication. I, therefore, set aside the order of the CIT(A) and restore this matter to the file of the AO for fresh adjudication, after affording the assessee adequate opportunity of being heard in the matter and to file details / submissions in this regard as were required to be filed in the case of Jyoti Co-operative Credit Society Ltd., at para 7 thereof (supra) which shall be duly considered by the AO before deciding the issue. It is acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the deduction under Section 80P(2) of the Act is claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under Section 80P(2)(a) of the Act which was the claim in AY 1991-92 to 1999-2000. The reason given by the Assessee was that in AY 2007-08 to 2011-12 investments and deposits after the Supreme Court's decision against the assessee Totgar's Co-operative Sale Society Ltd. (supra), were shifted from Schedule Banks to Cooperative Bank. U/s.80P(2)(d) of the Act, income by way of interest or dividends derived by a Co-operative Society from its investments with any other Co-operative Society is entitled to deduction of the whole of such interest or dividend income. The claim of the Assessee was that Co-operative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2) of the Act. The Hon'ble Karnataka High Court followed the decision of the supreme Court in The Totgars Co-operative Sales Society Ltd. (supra) and held that interest earned from Schedule bank or cooperative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d) of the Act was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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