In this case assessee-society was involved into giving funds to the non-members. It could not be termed as co-operative society meant only for its members and providing credit facilities to its members, hence assessee was not entitled to deduction under section 80P(2)(a)(i) of Income Tax Act, 1961 because the principle of mutuality is not followed.
ITAT remand the appeal to the file of the CIT (A) to decide the issue afresh in the light of observations made in order.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal is filed by the Revenue against the order of the CIT (A), Belagavi, dt. 18.12.2017, for the assessment year 2009-10.
2. The Revenue has raised the following grounds :
3. At the outset, it was submitted by the Ld. DR that the CIT (A) had not considered the binding decision of the Hon’ble Supreme Court in the matter of Citizen Cooperative Society v. ACIT [397 ITR 1], wherein at para 24, it was held as under :
24) Undoubtedly, if one has to go by the aforesaid definition of ‘co-operative bank’, the appellant does not get covered thereby. It is also a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a licence from the Reserve Bank of India, which the appellant does not possess. Not only this, as noticed above, the Reserve Bank of India has itself clarified that the business of the appellant does not amount to that of a co-operative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80P.
It was the case of the Ld. DR that the assessee is involved into giving funds to the non-members. For that purposes, our attention was drawn to assessment order wherein the AO had examined the status of the assessee and came to the conclusion that the assessee is not entitled for deduction u/s.80P(2)(a)(i) because the principle of mutuality is not followed.
04. Per contra, the Ld. AR relies on the decision of the Tribunal in the matter of M/s. Udaya Souharda Credit Co operative Society Ltd [ITA No.2831/Bang/2017, dt.17.08.2018. The Ld. AR submitted that the assessee is not into banking business and therefore no licence is required from the RBI. Further it was submitted that the assessee is registered under the Karnataka Cooperative Societies’ Act, 1959, and therefore the assessee is entitled to deduction u/s.80P(2)(a)(i) of the Act.
05. We have heard the rival contentions and perused the material on record. We have reproduced hereinabove, para 24 of the order of the Hon’ble Supreme Court in the matter of Citizen Cooperative Society (supra), which is relevant here. In a recent order in the matter of M/s. Udaya Souharda Credit Co operative Society Ltd [ITA No.2831/Bang/2017, dt.17.08.2018], it was noted by the Tribunal that Karnataka State has notified Karnataka Co – Operative Societies Act, 1959 as well as the Karnataka Souharda Sahakari Act, 1997 and both Acts are in force. Therefore, conversion from one into another is possible. Thereafter the Tribunal held that the deduction u/s.80P can only be applied to a cooperative society registered under the Karnataka Co- Operative Societies Act, 1959 and thereafter the matter was restored back to the AO for fresh decision after making necessary enquiry and investigation. In the present case, the facts are identical and one more plea was raised pertaining to mutuality.
06. In view of the above, respectfully following the decision of the Hon’ble Supreme Court in Citizen Cooperative Society (supra) and Udaya Souharda Cooperative Society (supra), we remand the appeal to the file of the CIT (A) to decide the issue afresh in the light of the observations made hereinabove. Needless to say the CIT (A) shall give opportunity of hearing to the assessee and shall also consider the submissions, if any made by the assessee in this regard and also seek a remand report from the AO, and thereafter decide the matter in accordance with law.
07. In the result, appeal of the Revenue is allowed for statistical
Order pronounced in the open court on 29th day of March, 2019.