Jinnappanna Chougule Vs ITO (ITAT Panaji)
80P Deduction on Nominal Members Reopened: Cooperative Credit Society Gets Fresh Opportunity
The Panaji Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the appeals of a cooperative credit society registered under the Karnataka Souharda Sahakari Act, 1997, and set aside the denial of deduction under section 80P(2)(a)(i) insofar as it related to transactions with associate/nominal members.
The Tribunal noted that the Assessing Officer and the CIT(A) had denied the deduction on the premise that dealings with associate/nominal members amounted to transactions with non-members. The ITAT observed that such members were recognized under the governing Souharda Act and the society’s bye-laws, and that there was no finding that the society dealt with outsiders or the general public. Relying on judicial precedents, including Supreme Court jurisprudence recognizing nominal members when permitted by the governing law, the Tribunal held that the issue required proper factual verification.
Accordingly, the matter relating to eligibility of 80P deduction vis-à-vis nominal/associate members was restored to the file of the Assessing Officer for fresh examination and adjudication, after granting due opportunity of hearing.
On other issues, the ITAT confirmed the disallowance of income tax paid as not allowable, while the issue relating to provision for bad and doubtful debts was also remanded to the AO for verification, as no clear findings existed earlier. Similar directions were issued for AYs 2017-18 and 2018-19, the facts being identical.
Overall, the appeals were partly allowed for statistical purposes, reaffirming that denial of section 80P benefit cannot be mechanical and must rest on proper examination of the society’s bye-laws and actual dealings.
FULL TEXT OF THE ORDER OF ITAT PANAJI
