Can business of providing credit facilities to members be regarded as business carried on by a Co-operative society

IN THE INCOME TAX APPELLATE TRIBUNAL
“B’’ BENCH: BANGALORE
BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
ITA No.1256/Bang/2019
Assessment Year: 2016-17

M/s. Sri Ananthapadmanabha
Credit Co-operative Society Ltd.
1, R.G. Pai Complex,
Hebri
Karkala 574 104
PAN NO : AACAS9906L

vs

ITO Ward-3
Udupi

Appellant by : Shri V. Srinivasan, A.R.
Respondent by : Shri Priyadarshi Mishra, D.R.
Date of Hearing : 01.09.2021
Date of Pronouncement : 01.09.2021
O R D E R

The assessee is a co-operative credit society registered under Karnataka Co-operative Societies Act. The assessee claimed deduction u/s 80P(2)(a)(i) of the Act in respect of its entire income and accordingly filed return of income declaring NIL income. The assessing officer noticed that the assessee is having nominal/associate members and accordingly took the view that the assessee has violated the principles of mutuality. Accordingly, taking support of the decision rendered by the Hon’ble Supreme Court in the case of Citizens co-operative bank (2017)(84 taxmann.com 114), the AO held that the assessee is not eligible for deduction u/s 80P(2)(a)(i) of the Act.

2. The LD. A.R. submitted that the entire issue requires reexamination in the light of decision rendered by Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. and others (2021) 431 ITR 1. He submitted that the coordinate benches in the case of Thannirupantha Primary Agricultural Credit Cooperative Society Ltd. Vs. ITO (ITA No.276 & 277/Bang/2020 dated 30.7.2021) has restored an identical issue to the file of the A.O. for examining the deduction claimed u/s 80P(2)(a)(i) of the Act in the light of decision rendered by Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd.

3. The Ld. A.R. submitted that and identical issue was also restored to the file of A.O. in the case of Thannirupantha Primary Agricultural Credit Co-operative Society Ltd. Vs. ITO (supra) and accordingly prayed that this issue may be restored to the file of the A.O.

4. Since we have already restored the issue of claim of deduction u/s 80P(2)(d) of the Act, we restore this alternative contention also to the file of the A.O., since the claim of the assessee gets support from the decision rendered by Hon’ble High Court of Karnataka in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO (2015) 58 taxmann.com 35.

5. In the result, the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 1st Sept 2021.

Please find attached the enclosed file for the full judgement