The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that co-operative societies providing credit to their members are eligible for deductions under Section 80P(2)(a)(i) of the Income Tax Act,1961.
Hunnur Souhard Credit, the appellant assessee, filed an appeal against the National Faceless Assessment Centre (NFAC) order dated 16.05.2024 for the 2017-18 assessment year, challenging the ex-parte rejection of their claim under Section 80P(2)(a)(i) of the Income Tax Act.
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Section 80P(2)(a)(i) of the Act provides a tax deduction for co-operative societies. It states that a co-operative society can claim a deduction on its income if the income is earned from providing credit facilities to its members. This section aims to support and encourage co-operative societies that help their members financially. The deduction helps reduce the taxable income of the society, lowering its tax liability.
The Tribunal reviewed the submissions and materials available on record and noted that the assessee’s appeal had been dismissed without a substantive examination of the issues. It considered necessary to remit the matter back to the Commissioner of Income Tax (Appeals)[CIT(A)] for a fresh hearing, ensuring the assessee had the opportunity to present their arguments fully.
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The bench based its decision on the Supreme Court’s judgment in Mavilayi Service Co-operative Bank Ltd. v. CIT. In this case, the Supreme Court had ruled that co-operative societies providing credit facilities to their members were eligible for deductions under Income tax Section 80P(2)(a)(i).
The court clarified that the term “member” in this context should be interpreted according to the definitions provided in the respective State Co-operative Societies Acts. Furthermore, the Supreme Court indicated that Section 80P(4) should be read as a proviso, excluding only those co-operative societies engaged in banking with a license from the RBI.
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Additionally, the tribunal referenced the case of M/s. Ravindra Multipurpose Cooperative Society Ltd. v. ITO, where similar issues were remitted for re-adjudication based on judicial principles established by the Supreme Court.
The two-member bench comprising Yogesh Kumar U. S (Judicial Member) and Waseem Ahmed (Accountant Member) partly allowed the appeal and remitted the issues to the CIT(A)/NFAC for a fresh review, ensuring that the assessee had a full opportunity to present their case.
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