The issue of allowing deduction u/s 80P to the credit socities who has nominal member vis a vis credit societies with regular members has become all the more vital after the Hon’ble Supreme Court judgements in the case of Citizen Co-operative Society Ltd. vs. ACIT in Civil Appeal No.10245/2017 dated 08.08.2017.
Supreme court has denied the benefit of deduction under section 80P(2) of the Act on the ground that the socities was dealing with nominal member. However, it may be noted that the above judgment was rendered in the context of assessee society which was established on May 31, 1997 initially as a Mutually Aided Co-operative Credit Society having been registered, under Section 5 of Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995 with Registration No. AMC/RR/DCO/9714 by Registrar of Mutually Aided Co-operative Societies, Ranga Reddy.
Here, it must be noted that there is a difference in the meaning of “member” as per Andhra Pradesh Mutually aided co-op socities act vis a vis defintin as per Maharashtra Co-op Societies Act. As per Maharashtra Co-op Societies Act, the definition of “member” includes not only regular members but also nominal member as well as associate and sympathizer members.
In short, the ration laid down in the case of Citizen Co-operative Society Ltd. vs. ACIT in Civil Appeal No.10245/2017 dated 08.08.2017 may not be applicable to the co-operative socities registered in Maharashtra and other states as the Maharashtra Co-op Societies Act, duly recognizes the concept of nominal member as well as associate and sympathizer members.
This fact was duly considered by ITAT pune in the case of Sarrodya Gramin Bigar Sheti [ ITA No. 1606/PUN/2018] and has allowed deduction u/s 80P to the society even if the business is done with nominal or associate member.
The copy of the judgment is as under:
Sarrodya Gramin BigarSheti Pat SANSTHA Maryadit Vs. ITO
[ ITA No. 1606/PUN/2018]
– ITA No. 1606/PUN/2018
Justice – D. KARUNAKARA RAO, AM
Asstt. Year – 2015-16
PER : D. KARUNAKARA RAO, AM :
There are four appeals under consideration filed by the different assessees. The appeals in ITA Nos.1606, 1608 & 1609/PUN/2018 are directed against the order of CIT(A)-6, Pune commonly dated 28.06.2018 for the Assessment Year 2015-16. The appeal in ITA No.1607/PUN/2018 is directed against the order of CIT(A)-6, Pune dated 28.06.2018 for the Assessment Year 2010-11.
2. Since the issues raised by the different assessees in the grounds are almost common in all the four appeals, therefore, all the four appeals were heard together and are being disposed of by this composite order. Facts & Developments before Assessing Officer & CIT(A)
3. Briefly stated the relevant facts include that the assessee is a registered cooperative society registered under the Maharashtra Co-op. Society Act, 1960. The assessee filed the return of income declaring Nil income after claiming of deduction u/s 80P of the Act. The Assessing Officer took the case for “limited scrutiny” in view of the CASS guidelines and found that the assessee is not entitled to claim the deduction u/s 80P of the Act where the activities relate to giving loans to members/nominal members etc are earned the interest income. Further, the Assessing Officer noticed that the member/new members/family members are involved in this earning of the interest income. Following the Hon’ble Supreme Court judgements in the case of Citizen Co-operative Society Ltd. vs. ACIT in Civil Appeal No.10245/2017 dated 08.08.2017, the benefits of section 80P(2) of the Act was denied by the Assessing Officer.
- During the first appellate proceedings, the assessee relied on the decision of Pune Bench of the Tribunal in the case of ITO vs. Jankalyan Nagari Sah. Pat Sanstha Ltd., 24taxmann.com127 (Pune-Trib.) and the judgement of the Hon’ble Gujarat High Court in the case of CIT vs. Jafar Momin Vikas Co-op. Credit Society Ltd., 49 taxmann.com 571 (Guj-HC) etc in support of claim of the assessee. The CIT(A) examined the applicability of the said decisions as well as the judgement and also relied on the Hon’ble Supreme Court’s judgement in the case of Citizen Co-operative Society Ltd. (supra), which recognizes the existence of two kinds of members of cooperative society and held that the assessee does not amount to cooperative bank and invoked the provisions of section 80P(4) of the Act.
5. Aggrieved with the above decision of the CIT(A), the assessee is in appeals before the Tribunal.
Before the Tribunal
6. Before me, ld. Counsel for the assessee explained the above facts of the case and submitted that the similar issue came up for adjudication before this Tribunal in the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit vs. ITO in ITA No.1431/PUN/2018 and many others dated 03.07.2019 and submitted that the issue stands now covered by the said order of the Tribunal (supra). The contents of para 3 to 10 of the said order of the Tribunal (supra) are relevant in this regard.
7. On the other hand, ld. DR for the Revenue relied heavily on the orders of the revenue authorities.
8. On hearing both the sides and perusing the Paper Book filed before us and case laws cited above. On considering order of the Tribunal in the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit dated 03.07.2019 (supra), I find identical issue came up for adjudication before this Tribunal and the Tribunal, as per discussion given in para 3 to 10 of its order, decided the said issue in favour of the assessee. For the sake of completeness, the contents of para 3 to 10 of the said order of the Tribunal (supra) are extracted hereunder :-
“3. The relevant facts as culled out from the material on record are as under :-
Assessee is a Co-operative Society registered under Maharashtra Cooperative Credit Societies Act, 1960 and is stated to be engaged in providing credit facilities to its Members and accepts deposits from its members. Assessee filed its return of income for A.Y. 2015-16 on 29.09.2015 declaring total income at Rs.Nil after claiming deduction of Rs.18,38,878/- u/s 80P of the Act. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt.29.12.2017 and the claim of deduction u/s 80P of the Act was denied to the assessee and the total income was thus determined at Rs.18,38,878/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.01.06.2018 (in appeal No.PN/CIT(A)-6/ITO Wd.10(5)/10297/2017-18) dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds :
1 The Ld.CIT(A) – 6, Pune erred in law and on facts, in confirming the action of the learned AO in denying the deduction u/s 80P(2)(a)(i) of the ITA, 1961 amounting to Rs.18,38,878/-.
2. The learned CIT(A)-6, Pune and the learned AD erred in law and on facts in denying deduction u/s 80P of the ITA, 1961 amounting to Rs. 18,38,878/-. The IT authorities erred in treating the appellant as a ‘Business Financer’ instead of a mere Credit Co-operative Society (i.e. PAT-SANSTHA) dealing with members.
3. Further, the learned CIT(A)-6, Pune erred in law and on facts in not allowing the deduction u/s 80P(2)(d) of the ITA,1961 on account of the interest received from Pune District Central Co-operative Bank. The learned IT-Authorities ought to have appreciated that deposits were kept with co-operative banks from safety and prudence perspective.
The copy of the judgment is enclosed herewith for the benefit of the readers..