Adarsha Multipurpose Cooperative Society Ltd. Vs ACIT (ITAT Bangalore)
Nominal Members No Bar to Section 80P Deduction; ITAT Sends Cooperative Society’s Claim Back for Fresh Examination
The Bangalore ITAT held that the presence of nominal members cannot by itself be a ground to deny deduction under Section 80P(2)(a)(i) to a cooperative society. Relying on the Supreme Court’s decision in Mavilayi Service Co-operative Bank Ltd., the Tribunal observed that the view adopted by the lower authorities treating nominal members as non-members for denying deduction is no longer sustainable in law.
The assessee, Adarsha Multipurpose Cooperative Society Ltd., Puttur, had claimed deduction under Section 80P on interest income earned from deposits and also challenged the disallowance of provision for bad and doubtful debts. The CIT(A) had denied the deduction on multiple grounds, including that the society dealt with nominal members, was not a Primary Agricultural Credit Society, and that interest income from deposits was not eligible for deduction.
The Tribunal observed that if deposits with cooperative banks were made pursuant to a statutory requirement under the Karnataka Cooperative Societies Act, the resulting interest income could be regarded as income attributable to the business of the society and eligible for deduction under Section 80P(2)(a)(i). It further held that deduction under Section 80P(2)(d) may also be available where interest is earned from deposits with another cooperative society such as MASS Ltd., subject to verification.
The Tribunal also rejected the reasoning that deduction under Section 80P(2)(a)(i) is available only to Primary Agricultural Credit Societies, noting that no such restriction exists in the statute. Since several factual aspects required verification, including whether the deposits were statutory in nature and the treatment adopted in earlier years, the matter was restored to the Assessing Officer for fresh adjudication in accordance with law.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
