Disallowance of deduction claimed by a cooperative society u/s 80P(2)(a)(i) of the IT Act

The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has allowed an appeal filed by a co-operative credit society concerning the disallowance of a deduction claimed under Section 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer had disallowed the deduction, citing a violation of the principles of mutuality due to the presence of nominal/associate members. However, the ITAT has set aside the previous order and restored the matter to the Assessing Officer for a fresh examination, in light of a recent Supreme Court decision.

IN THE INCOME TAX APPELLATE TRIBUNAL
“B’’BENCH: BANGALORE
BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER

ITA No.468/Bang/2020
Assessment Year:2016-17

The Primary Co-op. Agricultural
& Rural Development Bank Ltd.
Near KSRTC Bus Stand
Sullia
Karnataka
PAN NO : AAALT0052B

ITO Ward-1
Puttur

Appellant by : Shri A. Ravish Rao, A.R.
Respondent by : Shri Priyadarshi Mishra, D.R.
Date of Hearing : 02.09.2021
Date of Pronouncement : 02.09.2021
O R D E R

The assessee has filed this appeal challenging the order dated 06.01.2020 passed by Ld CIT(A), Mangaluru and it relates to the assessment year 2016-17.

2. 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 and declared total income of Rs.4,06,730/-. 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 Hyderabad bench of Tribunal in the case of Citizens co-operative bank, the AO held that the assessee is not eligible for deduction u/s 80P(2)(a)(i) of the Act.

3. We heard Ld. D.R. and perused the record. Since the issue of deduction u/s 80P(2)(a)(i) of the Act requires fresh examination in the light of decision rendered by Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. (supra), we set aside the order passed by Ld. CIT(A) on this issue and restore the same to the file of the A.O for examining it afresh as discussed above.

4.In the result, the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 2nd Sept 2021.

Please find attached the enclosed file for the full judgement