TMI Blog2020 (5) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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]. Whereas 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 Prin. CIT vs. S-1308 Ammapet Primary Agricultural Co-operative 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 disputed issue to the file of Assessing Officer to grant the benefit to the nominal members - Assessee's appeal is allowed for statistical purposes. - ITA No.1442/Bang/2019 - - - Dated:- 11-3-2020 - SHRI A.K. GARODIA AND SHRI PAVAN KUMAR GADALE, JJ. Appellant By: Shri G.S. Prashanth, C.A. Respondent By: Shri A. Ramesh Kumar, JCIT (D.R) ORDER SHRI PAVAN KUMAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I (SC) and thus the addition made needs to be deleted on the facts of the f) The authorities below failed to appreciate that the surplus funds which is not immediately required for business activity is invested and the interest on such deposits is eligible for deduction under section 80P of the Act under the facts and circumstances of the case. g) Without prejudice, if the interest income earned from deposits is considered as income from other sources, then the authorities below ought to have allowed the deduction towards the incidental expenses incurred under section 57 of the Act under the facts of the case. 3 The appellant denies itself liable to be levied to interest under section 234B of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with section 234B of the Act. Additional Grounds : I. a) The authorities below failed to appreciate that the Karnataka Co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety in Civil Appeal No. 10245 2017. The explanations were filed by the assessee on 21.07.2017 referred at Para 4 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 divisions of members i.e. A Class, B Class C Class being the nominal members. Whereas A Class members are 6,236 with voting and dividend rights, B Class members are the State Govt. eligible only for dividend and no voting rights, whereas C Class members are 2,789, being nominal members with no voting rights and no dividend. The Assessing Officer observed that the assessee has accepted deposits from members and also lend to members and, further accepts deposits from C Class nominal members and lend loans. Whereas, the C Class members does not have right to vote and no dividend is received. Accordingly, the Assessing Officer disallowed the claim of deduction under Section 80P(2)(a) of the Act and assessed the total income of ₹ 77,38,930 - and passed the order under Section 143(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Id. 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 judicial decisions, which shall apply to a society which is engaged in numerous activities but in the present case the assessee society is engaged in providing facilities of Banking business or credit facilities to its members. We found the issue of denial of deduction under Section 80P(2) and treatment of interest on deposits and also nominal members are treated as members for the purpose of benefit of section 80P(2) was dealt by the judicial forums. We consider it proper to refer to the decision of the co-ordinate Bench of the Tribunal in the case of The Jayanagar Co-operative Society Vs. ITO in ITA No.3254/Bang 2018 in respect of interest income earned by the society were the Assessing Officer denied the claim of the assessee observing tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 agriculture credit society registered under Gujarat State Cooperative Societies Act. The Hon'ble Supreme Court disentitled the assessee from claiming exemption under section 80P due to violation of provisions of MACSA, under which it was formed, and most of the business of the assessee was with carved out category of persons without approval of Registrar of the Societies. Weighing point of view of both sides, we find that balance tilt in favour of the assessee. We find that by virtue of sub-section (4) of section 80P, the assessee is entitled for deduction under section 80P(2). Further, Income Tax Act does not define member , nor has provided distinction bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application for the registration of society and a person admitted to the membership after registration in accordance with the provisions of the Act, the Rules framed thereunder and the By-laws and includes an associate member. The expression 'associate member' is defined under Section 2(6) of the TNCS Act to mean a member, who possesses only such privileges and rights of a member and who is subject only to such liabilities of a member as may be specified in this Act, the Rules and the By-law. http://www.judis.nic.in 13. Thus, the definition of the word 'members' includes an associate member and therefore, the Assessing Officer fell into an error in drawing a distinction between A Class members and B Class members. For the purpose of being entitled to a relief under Section 80P of the Act, all that is required is that the cooperative society should answer the description of a society engaged in carrying on the business of providing credit facilities to its member. Once the description is answered, then automatically, the benefit of Section SOP of the Act would stand attracted subject to the provisions contained in Sub-Section (2) of Section 80P of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressions 'members' and associate member' under the TNCS Act and held that an 'associate member' is also a 'member' in terms of Section 2(16) of the TNCS Act. Furthermore, the Assessing Officer himself found that the associate members are also admitted as members Of the society. In such circumstances, the Assessing Officer fell into an error in not granting any relief to the assessee society, which was rightly granted by the CIT (A) as confirmed by the Tribunal. In addition to that, the Assessing Officer has not pointed out that loans have been disbursed to all and sundry in terms of the provisions of the TNCS Act and in terms of Clause (b) to Sub-Section (4) of Section 80P of the Act, the society has an area of operation, operates within the taluk and will provide long term credit for agricultural and rural development activities as well. The CIT (A) rightly granted the relief to the assessee as confirmed by the Tribunal. We do not find any good ground to entertain these appeals. 18. Accordingly, the above tax case appeals are dismissed. The substantial questions of law framed are answered against the Revenue. We found the facts of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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