Can deduction u/s 80P be denied because the assessee has admitted Nominal Members?

IN THE INCOME TAX APPELLATE TRIBUNAL
“C” BENCH : BANGALORE

BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER

ITA No.210/Bang/2020
Assessment year : 2016-17 

M/s. Kadaba Sahakari Vyavasayika
 Bank Ltd.,
Kadaba Post, Kadaba Tq.
DK – 574 221.
PAN : AAAJK 0025 B
APPELLANT 

Vs. 

ITO,
Ward – 1,
Puttur.
RESPONDENT

Appellant by : Shri. V. Srinivasan, Advocate
Respondent by : Smt. R. Premi, JCIT(DR)(ITAT), Bengaluru

Date of hearing : 22.07.2021
Date of Pronouncement : 23.07.2021

O R D E R

Per N.V. Vasudevan, Vice President

This is an appeal by the assessee against the order dated 06.01.2020 of CIT(A), Mangaluru, relating to Assessment Year 2016-17.

2. The assessee is a Primary Agricultural Co-operative Society duly registered under the Karnataka Co-operative Societies Act,1959 and is engaged in the business of accepting deposits from members, lending credit facilities to its members (mainly agricultural loans), distribution of food grains and other products under State Govt's Public Distribution System, sale of fertilizers / pesticides etc., to farmers. 

3. The assessee filed its return of income for the Assessment Year 2016-17 on 14-10-2016 declaring a total income of Rs.64,060 after claiming deduction of Rs. 1,92,69,544 u/s 80P(2)(d) of the Act. Thereafter, the assessee’s case was selected for scrutiny under CASS and notice u/s 143(2) was issued by the AO on 04-072017. During the course of the assessment proceedings, the assessee submitted a revised Statement of Income declaring a Gross Total Income of Rs 2,17,53,604 and Total Income of Rs Nil, after claiming a Deduction of Rs 2,17,53,604 under Sec 80P of the Act.

4. The assessee furnished all the details asked for by the learned assessing officer as well as made detailed submissions as to why the deduction u/s 80P should be allowed and how the facts of the following case laws are distinguishable to the facts of the assessee:

a. M/s The Totgars' Co-operative Sale Society 08.02.2010 in Civil Appeal No. 1622 of 2010 ;

b. M/s. Totagars' Co-operative Sale Society dt 16.06.2017 in ITA No. 100066 of 2016 ;

c. M/s Citizen Co-operative Society, Hyderabad dt 08.08.2017 in Civil Appeal No. 10245 of 2017 .

5. The AO denied the deduction u/s 80P(2)(a)(i) amounting to Rs 1,41,26,010 [ income from lending of credit facility to Members ] and u/s 80P(2)(d) amounting to Rs. 51,43,534 towards interest earned on Term Deposits with SCDCC Bank / Other Co Op Societies and Dividend Income from Investment in Shares with SCDCC Bank / Other Co Op Societies. 

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