Sangameshwar Co-operative Credit Society Vs ITO (ITAT Bangalore)
Nominal Member Is Also a Member, but the 15% Ceiling Matters: Entire Section 80P Deduction Cannot Be Denied Without Verification
The Bangalore Bench of the ITAT has held that a co-operative credit society cannot be denied its entire deduction u/s 80P(2)(a)(i) merely because it accepts deposits from or advances loans to nominal/associate members. Under the Karnataka Co-operative Societies Act, 1959, the term “member” includes a nominal member.
However, since section 18 of the Karnataka Act restricts associate membership to 15% of the total membership, the society must establish that its dealings were with eligible nominal/associate members within the statutory limit. The Tribunal restored the matter to the AO to segregate income attributable to regular members, eligible nominal members & genuine non-members.
Entire Deduction of ₹42.97 Lakh Disallowed
Shri Sangameshwar Co-operative Credit Society was registered under the Karnataka Co-operative Societies Act, 1959 and engaged in providing credit facilities to its members. Its membership included regular as well as nominal/associate members.
For AY 2018-19, the society filed a revised return declaring gross total income of ₹44,01,998 and claimed deduction of ₹42,97,998 under Chapter VI-A, resulting in taxable income of ₹1,04,000.
During scrutiny, the AO called upon the society to furnish the names & addresses of regular, nominal and other members; details of interest received from each category; particulars of fixed deposits and their source; interest earned on bank investments; and a detailed working of the deduction claimed u/s 80P.
