Naravi Vyavasaya Seva Sahakari Bank Limited Vs ITO (ITAT Bangalore)
Summary: M/s Naravi Vyavasaya Seva Sahakari Bank Limited filed ITA Nos. 2552 & 2553/Bang/2025 for Assessment Years 2017-18 and 2018-19 against separate orders of the National Faceless Appeal Centre under section 250 of the Income-tax Act, 1961. The appeals were heard together by the Bangalore Bench ‘B’ of the Income Tax Appellate Tribunal. The order was pronounced on 19.05.2026.
For AY 2017-18, the effective dispute concerned deduction under section 80P(2)(a)(i) in respect of income attributable to Class ‘C’ nominal members. The assessee is a primary agricultural society governed by the Karnataka Co-operative Societies Act, 1959. Its membership comprised 1,687 regular members, 4,070 nominal members and 4 associate members. The Assessing Officer treated the large number of nominal members as a violation of section 18 of the Karnataka Co-operative Societies Act and held that the society had lost the principle of mutuality. Relying on Citizen Co-operative Society Ltd., the AO disallowed the section 80P deduction.
The assessee contended that the 15% restriction in amended section 18 applied to associate members and not nominal members, and that nominal members were expressly recognised under the State law and the society’s bye-laws. The CIT(A) rejected the main claim but directed proportionate restriction of the section 80P deduction to income attributable to Class ‘C’ members.
