Rejection of deduction claimed u/s 80P(2)(a)(i) / 80P(2)(d) of the Income-tax Act,1961

This Income Tax Appellate Tribunal case involves The Puttur Primary Co-op Agriculture and Rural Development Bank Ltd. challenging the rejection of deductions claimed under sections 80P(2)(a)(i) and 80P(2)(d) of the Income-tax Act, 1961. The Assessing Officer (AO) disallowed the deductions, citing the bank's dealings with nominal members and its interest income from fixed deposits. The Tribunal referred to previous decisions by co-ordinate benches and higher courts to guide the resolution of these issues.

IN THE INCOME TAX APPELLATE TRIBUNAL
“B’’ BENCH: BANGALORE

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

 ITA No.1449/Bang/2019
 Assessment Year : 2016-17

The Puttur Primary Co-op
Agriculture and Rural
Development Bank Ltd.
01, Puttur PCARD Bank Ltd.
Santhekatte Puttur
Dakshina Kannada 574 201
PAN NO : AAALT0387M
APPELLANT 

Vs. 

ITO Ward-1
Puttur
RESPONDENT

Appellant by : Smt. Sheetal, A.R.
Respondent by : Shri Priyadarshi Mishra, D.R.

Date of Hearing : 20.04.2021
Date of Pronouncement : 14.06.2021

O R D E R

PER B.R. BASKARAN, ACCOUNTANT MEMBER:

 The appeal filed by the assessee is directed against the order dated 27.03.2019 passed by Ld CIT(A), Mangaluru and it relates to the assessment year 2016-17. The grounds urged by the assessee give rise to the following two issues:-

(a) Rejection of deduction claimed u/s 80P(2)(a)(i) of the Income-tax Act,1961 ['the Act' for short].

(b) Rejection of deduction u/s 80P(2)(d) of the Act in respect of interest income earned on fixed deposits. 

2. The Ld A.R submitted that the assessee is a co-operative society engaged in the business of accepting deposits from and lending loans to its members. The assessee filed its return of income claiming deduction u/s 80P of the Act. The AO rejected the claim on the reasoning that the assessee has dealt with nominal/associate members who do not have right to vote and to participate in the surplus, thus failing in mutuality principles. The assessee had earned interest income/dividend income of Rs.38,62,790/- from deposits/investment kept with M/s South Canara District Cooperative Bank/Bharath Co-op Bank Ltd etc. The AO held that the assessee is not eligible to claim deduction u/s 80P(2)(d) of the Act in respect of above said income. In this regard, the AO placed his reliance on the decision rendered by Hon’ble Karnataka High Court in the case of PCIT vs. Totgars Co-operative Sale Society Ltd (395 ITR 611)(Kar).

3. The Ld A.R submitted that the appeal filed by the assessee before Ld CIT(A) challenging the additions made by the AO was dismissed. Hence the assessee has filed this appeal before the Tribunal. The Ld A.R submitted that both the above said issues are covered by the decision rendered by the co-ordinate bench in the case of Karkala Co-op S. Bank Ltd (ITA Nos.1288 & 1289/Bang/2019 relating to Assessment Year: 2015-16 & 2016-17 – order dated 18-02-2021. She submitted that the co-ordinate bench has restored the first issue to the file of AO with the direction to apply the decision rendered by Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. Vs.CIT (2021) 123 taxmann.com 161 (SC). With regard to the second issue, the co-ordinate bench has directed the AO to follow the decision rendered by the jurisdictional Hon’ble Karnataka High Court in the case of Totgars Co-operative Sale Society Ltd. Vs. ITO (2015) 58 taxmann.com 35 (Karn). Accordingly, the Ld A.R submitted that the decision rendered by the co-ordinate bench may kindly be followed in this case also in respect of both the issues.

4. We heard Ld D.R and perused the record. The first issue relates to the claim of deduction u/s 80P(2)(a)(i) of the Act. We notice that an identical issue has been considered by the co-ordinate bench in the case of Karkala Co-op S Bank Ltd (supra), wherein an identical issue has been restored to the file of AO for examining it afresh. For the sake of convenience, we extract below the relevant observations made by the co-ordinate bench:- 

To know more in details find the attachment file