TMI Blog2021 (8) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... principles laid down by the Hon ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. (supra). Accordingly, we remit this issue of deduction u/s. 80P(2)(a)(i) of the Act to the file of Assessing Officer to examine the same afresh in the light of the above judgment. Appeal of the assessee is allowed for statistical purposes. - ITA No.544/Bang/2019 - - - Dated:- 24-8-2021 - Shri N.V. Vasudevan, Vice President And Shri Chandra Poojari, Accountant Member For the Appellant : Shri Ishwar Yanni, CA For the Respondent : Shri Kannan Narayanan, Jt. CIT(DR)(ITAT), Bengaluru. ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order of CIT(Appeals), Belgaum dated 28.01.2019 for the assessment year 2013-14. 2. The assessee has raised the following grounds of appeal:- 1. The Ld. Commissioner of Income Tax (Appeals) erred in law as well as on facts in rejecting the genuine claim of the appellant in respect of deduction u/s 80P(2)(a)(i) to the extent of ₹ 86,60,540.00 as claimed by the appellant. The appellant prays for grant of the deduction as claimed. 2. The Ld. Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting loans to general public. Where as in our society, we have sanctioned the loans to members only. As per the KSS Act, to obtain the loan, a person shall be a member of the society. Therefore our society has complied the KSS Act. This judgment is not applicable as loans are not sanctioned to other than members. vi. Para 15(xi) of the judgment, the society both in form and substance, the activity is in violation of the Co operative Societies Act and co operative society rules. Where as our society has complied both the KSS Act Rules. vii. Para 16 of the judgment, that provisions of Section 80P(2)(a)(i) were grossly violated as the appellant society was found not dealing with its members only but also with general public as well. On that basis, further submission of AR of Dept. was that the principle of mutuality was missing in this case. Where as in our case the Principle of Mutuality is very much exist. Therefore this case is not applicable. viii. Para 18 of the judgment, that Section 80P of the Act is a benevolent provision which is enacted by the Parliament in order to encourage and promote growth of co - operative sector in the economic life of the country. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the state legislature of Karnataka. Demanding an early approval of this bill by both the houses of Karnataka Legislature, a committee 'Souharda Samvardhana Samithi' under the chairmanship of Justice Rama Jois came into existence. It was due to the combined efforts of Sahakara Bharathi Karnataka and Souharda Samvardhana Samithi, The Karnataka Souharda Sahakari Act-1997 (KSSA, 1997) was passed in the legislature. With the consent of The President of India, it was enforced from January 2001. 4. The Ld. Commissioner of Income Tax (Appeals) erred in law and on facts in not following the Hon'ble High Court of Karnataka, Dharwad Bench in the case of Tumkur Merchants Souharda Credit Co - Operative Ltd V/s ITO and Guttugedarara Credit Co-Operative Society Ltd., Vs. ITO. The High Court of Karnataka is the jurisdictional high court to the Ld. CIT (Appeal). The Assessee society has made deposits with BDCC Bank others as a short term deposit. These deposits are made up out of idle funds which are required for lending purpose. As when the society requires money, it withdraws the deposit. Therefore investment is attributable to the main activity of the assessee society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer re-examined the issues of the case by taking into cognizance the ratio of decision of Hon ble Supreme Court decision, in the case of Citizen Co-op Society Ltd, Hyderabad v. ACIT, C- 9(1), Hyderabad in Civil Appeal No.10245 of 2017 dated 8.08.2017 and passed an elaborate assessment order on 15.03.2018 denying the deduction claimed u/s. 80P by giving a finding that the appellant society has provided credit facilities to three categories of members viz., i) Regular member ii) Associate members and iii) Nominal members. In the instant case, it was noticed by the AO during assessment proceedings, that the assessee society was earning income not only from the members but majority of the income from the nominal/ Associate members. Hence, AO disallowed the deduction of ₹ 87,10,540/-claimed u/s.80P(2)(a)(i) of the Act. 7. The AO while concluding the assessment had noticed from the balance sheet of the assessee society that the assessee had share capital fruity regular members at ₹ 37,14,700 and that of nominal members at ₹ 3,54,44,035/- . The assessee had not issued any share certificates to the associate/nominal members which proved that the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther obtained a certification of registration in the name of 'Co-operative Society' to claim deduction. Neither the assessee has got itself converted into a co-operative society as per the Amending Act 13/2004 which provides conversion of co-operatives under the Karnataka Souharda Act, 1997 into Co-operative Society. 11. Placing reliance on the Tribunal s order in ITA No. 2831/Bang/2017 dt. 17.08.2018 in the case of M/s. Udaya Souharda Credit Cooperative Society Limited wherein it was held that as per the provisions of section 80P of the Act, deduction can only be allowed to the co-operative societies registered under the co-operative societies Act, the CIT(A) noted that without a proper registration under co-operative societies Act, nobody can claim it to be co-operative society as the activities of the co-operative societies are to be controlled under the co-operative societies Act through Registrar of the Cooperative Societies. 12. The CIT(Appeals) held that, in the assessee's case, mutuality principles have failed as substantial business is being carried out with the general public or nominal members and also in view of the assessee being registered as Sou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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