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2020 (3) TMI 1112

..... embers under Karnataka Co-operative Societies Act, 1959 - HELD THAT:- As decided in M/S. KODAVOOR VYAVASAYA SEVA SAHAKARI SANGHA NIYAMITHA [2019 (8) TMI 1269 - ITAT BANGALORE] restore the entire disputed issue to the file of Assessing Officer to adjudicate afresh in the light of the decision of chargeability of interest income under the head ‘income from other sources’ and the observations of Hon'ble Supreme Court in the case of Totgar’s Co-operative Sales Society Ltd. Vs. ITO [2010 (2) TMI 3 - SUPREME COURT] and Tumkur Merchants Souharda Credit Co-operative Ltd.[2015 (2) TMI 995 - KARNATAKA HIGH COURT] In respect of the claim of Nominal Members included in the definition of Member we find support on our view rely on the decision of Trapaj Vibhageeya Khet Udyog Mal Rupantar Food Processing Sahakari Mandali Ltd. Vs. DCIT [2018 (8) TMI 273 - ITAT AHMEDABAD] and M/S. S-1308 AMMAPET PRIMARY AGRICULTURAL COOPERATIVE BANK LTD. [2019 (1) TMI 116 - MADRAS HIGH COURT] which is covered in favour of the assessee. Accordingly, we are of the substantive opinion that the nominal members are also eligible for the Benefits of credit society. Accordingly we restore entire disp .....

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..... f income on 15.10.2016 with total income of ₹ 40,730/- after claiming deduction u/sec 80P of the Act. The Return of Income was processed under Section 143(1) and the case was selected for scrutiny under CASS, and Notice under Section 143(2) of the Act was issued. In compliance, the ld. AR appeared from time to time and furnished the details and the case was discussed. The assessee has claimed deduction under Section 80P of the Act, as the society earns interest on deposits with South Canara Dist Cooperative Bank relying on the decision of jurisdictional High Court. But the Assessing Officer issued Show Cause Notice for disallowance of the claim relying on the decision of Hon'ble Supreme Court in the case of Citizen Co-operative Society in Civil Appeal No.10245/2017. The explanations were filed by the assessee on the two disputed issues considered at Para 07 and 8.3 of the order. The Assessing Officer dealt on the submissions, financial statements and on status of the nominal members who do not have voting rights and also not eligible for dividend, and the provisions under Section 80P of the Act. Further the assessing officer found that there are three categories of member .....

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..... nominal members. We considered the observations of the co-ordinate bench of the Tribunal in the case of M/s. Kodavoor Vyavasaya Seva Sahakari Sangha Niyamitha & Others Vs. ITO (supra) at page 5 to 12 Para 4 & 5 which is read as under : 4. We heard the rival submissions and perused the material on record. Prima facie, the sole disputed issue being denial of claim of deduction under Section 80P(2)(a)(ii) of the Act. The Assessing Officer has dealt on the interest income from investment / deposits in Banks, whereas the assessee society is engaged in business of carrying on banking and providing credit facilities. In the present assessment year, the assessee has made fixed deposits with Karnataka DCC Bank and received interest income and the assessee has claimed deduction under Section 80P(2)(a)(i) of the Act further Assessing Officer found that the assessee has provided Banking facilities to the nominal members. Whereas the ld. AR has restricted his arguments to the extent of denial of deduction under Section 80P(2) of the Act and further submitted that the nominal members has been categorized as members and are eligible for benefits. Whereas CIT (Appeals) has relied on the j .....

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..... deduction. 5. While learned AR relied on the decision of the Hon ble Karnataka High Court in the case of Tumukur Merchants Souharda Credit Co-operative Ltd., 230 taxman 309 (Karn), the DR relied on a subsequent decision of the Hon ble Karnataka High Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd., 395 ITR 611 (Karn.). We have carefully gone through the said judgment. The facts of the case before the Hon ble Karnataka High Court was that the Hon ble Court was considering a case relating to Assessment Years 2007-08 to 2011-12. In case decided by the Hon ble Supreme Court in the case of the very same assessee, the Assessment Years involved was Assessment Years 1991-92 to 1999-2000. The nature of interest income for all the Assessment Years was identical. The bone of contention of the Assessee in AY 2007-08 to 2011-12 was that 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 ag .....

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..... e not disputed by the Revenue authorities are that the assessee is a primary agricultural credit society registered under the Gujarat Cooperative Societies Act, 1961. It is engaged in providing credit facilities to the farmers in the region of Bhavnagar district. As per the AO, members of the assessee-society consisted of two types viz. regular member and nominal members. It is the case of the Revenue that assessee is doing more business with nominal members than the regular member in order to earn more profit, which is against the law, and therefore, there is a break-down of principle of mutuality resulting disentitlement of exemption under section 80P. The ld.AO relied upon the judgment of Hon ble Supreme Court in the case of Citizens Cooperative Society Ltd. (supra) to support his view. While the case of the assessee is that being a primary agriculture credit society, it is entitled for exemption under sub-section (4) of section 80P. Judgment of Hon ble Apex Court relied upon by the Revenue is distinguishable on facts. In that case assessee was a cooperative society registered under Multi State Cooperative Societies Act, 2002, while in the present case, assessee is a primary agr .....

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..... of the assessee and direct the ld.AO to re-compute income of the assessee by allowing claim under section 80P(2)(4) of the Act. Also in Tax Case Appeal No.882 and 891 of 2018 of Hon'ble Madras High Court in the case of The Prin. Commissioner of Income Tax Vs. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. held in paras 11 to 18 as under : We found the facts of the present case are similar to the decision rendered by the co-ordinate Bench and the jurisdictional High Court in respect of Members definition and chargeability of interest income under income from other sources . We follow the judicial precedence and restore the entire disputed issue to the file of Assessing Officer to adjudicate afresh in the light of the decision of chargeability of interest income under the head income from other sources and the observations of Hon'ble Supreme Court in the case of Totgar s Co-operative Sales Society Ltd. Vs. ITO 322 ITR 283 (SC) and Hon'ble Karnataka High Court decision in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. 230 Taxman 309 (Kar) as discussed in above paras. Whereas in respect of the claim of Nominal Members included in the definition o .....

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