The Bangalore bench of Income Tax Appellate Tribunal ( ITAT ) ruled that income from providing credit facilities to nominal members of cooperative society are eligible for exemption under Section 80P(2)(a)(i) Income Tax Act,1961.
The assessee Charvaka Seva Sahakari Bank Ltd. is a Primary Agriculture Co-operative society, engaged in the business of accepting deposits from members, lending loans, and providing banking facility in rural villages. Assessee society has filed its Return of Income on 23.09.2016 declaring Total Income of Rs.71,330/- after claiming deduction of Rs.52,39,262/- u/s. 80P of the Income Tax Act. Thereafter the case was selected for scrutiny.
During the year under scrutiny, the Ld.AO observed that the assessee had earned Rs. 22,87,757/- as interest and Rs.3,33,116/- as dividend on investment in South Canara District Co-op. Bank. Assessee society has claimed deduction u/s. 80P of the Income Tax Act on the interest and dividend earned through investments in South Canara District Co-op. Bank .Thereafter after examining the submission of Assessee the AO disallowed the entire claim.
Aggrieved, the assessee filed an appeal before the CIT(A), who dismissed the appeal. Thereafter the assesse filed another appeal before the tribunal.
Assesee representative, Sheetal Borkar, argued that eligibility of claim u/s. 80P(2)(a)(i) where nominal members are also considered to be part of cooperative society and are eligible for the purpose of exemption u/s. 80P.
Parithivel, the Department representative, supported the decision of lower authorities .
It was observed that the assessee was also having nominal members from whom deposits were taken and credit facilities were provided. Further Considering the definition of ‘member’ under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i).
After observing the submissions of both parties the two-member bench of Chandra Poojari, ( Accountant member ) and Beena Pillai, ( Judicial Member ) held that income from providing credit facilities to nominal members of cooperative society are eligible for exemption under Section 80P(2)(a)(i) Income Tax Act,1961.
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