The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ) allowed the claim of deduction under Section 80P (2)(a)(i) in respect of interest earned from credit facilities extended to members, including nominal and associate members.
The assessee M/s. Sullia Taluk Women’s Multipurpose Cooperative Society Ltd. is a primary agricultural co-operative society engaged in the business of accepting deposits from members, lending loans to members. For the assessment year under consideration, the assessee society has filed its return of income on 27.10.2017 declaring total income of Rs. 2,300/- after claiming deduction of Rs.13, 17,794/- under Section 80P of the Income Tax Act. The return of income was processed under Section 143(1) of the Income Tax Act. The case was selected for scrutiny under CASS. Notice under Section 143(2) has been issued to the assessee on 27.08.2018 and details have been called for under Section 142(1) of the Income Tax Act.
The AO analysed all the details furnished by the assessee and held that assessee could not claim the deduction under Section 80P(2)(a)(i) as it failed to satisfy the principle of mutuality due to the presence of nominal and associate members to whom the credit facilities were extended by the assessee.
The CIT (A), assessee submitted that assessee is eligible for 80P (2)(a)(i) deduction in respect of the interest earned on credit facilities provided / extended to the members. It also submitted that the assessee was eligible for deduction under Section 80P (2)(d) on the interest / dividend earned from investments made in other co-operative societies / co-operative banks.
Further CIT(A) for disallowing the claim under Section 80P(2)(a)(i) was that the assessee was dealing with the members of different classes such as regular / nominal / associate members. In respect of the nominal members / associate members who did not have certain rights in the society, the principle of mutuality did not exist.
Mr. Ganesh R Ghale, representing the revenue submitted that principle of mutuality was not satisfied as assessee extends credit facilities to nominal / associate members who do not have any right in the assessee society. In respect of 80P (2)(d) deduction, further submitted that interest / dividend income earned by assessee by making investments which has been simply accrued falls out the ambit of 80P and therefore the AO has rightly treated the entire interest as income from other sources.
The two member bench of the tribunal comprising Waseem Ahemed ( Accountant member) and Beena Pillai ( Judicial member) allowed the claim of the assessee under Section 80P(2)(a)(i) of the Income Tax Act in respect of the interest earned by the assessee from credit facilities extended to members that includes nominal / associate members. Accordingly, appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
