ITO Vs Sahakara Nagar Credit Cooperative Society Ltd. (ITAT Bangalore)
ITAT Bangalore held that eligibility u/s. 80P should be assessed in the light of the relevant state cooperative law. Under Karnataka Cooperation Societies Act [KCSA], the presence of nominal and associate members is lawful and does not break the mutuality principle. Hence, deduction u/s. 80P available.
Facts- The assessee is a cooperative society carrying out banking business and providing credit facilities to the members. The assessee for the year under consideration declared gross total income of Rs. 1,76,24,174/-.The entire gross total income of Rs. 1,76,24,174/- claimed as deduction u/s. 80P(2)(a)(i) of the Act.
In the assessment proceeding, the AO found that the assessee is catering to the different classes of members having different rights with regard to participate in the share profit and dividend. Therefore, the essential feature, i.e. the concept of mutuality, is missing in the case of the assessee, hence the assessee is not eligible to claim the benefit of the provision of section 80P(2)(a)(i) of the Act.
AO further found that the business income includes interest income of Rs. 79,28,908/- earned from FD with the Cooperative Bank. The AO held that the income earned from the FD with cooperative bank is neither eligible for deduction u/s. 80P(2)(a)(i) of the Act nor eligible u/s. 80P(2)(d) of the Act. Thus, the same is taxable as income from other sources.
