B U E H B Co-op. Society Ltd. Vs ITO (ITAT Bangalore)
Nominal Members No Bar for 80P Deduction – ITAT Grants Relief & Allows Expense Set-off on SBI Interest
The assessee, a co-operative society, was denied deduction under Section 80P by the AO and CIT(A) mainly on the ground that it had nominal members and earned interest from bank deposits. The CIT(A) also passed an ex-parte order due to non-compliance.
The ITAT Bangalore held that the presence of nominal/associate members does not disentitle deduction, particularly when such membership is permitted under the Karnataka Co-operative Societies Act, relying on the Supreme Court ruling in Mavilayi Service Co-operative Bank Ltd.
On interest income :
- Interest from Apex Co-operative Bank (statutory deposits)- eligible u/s 80P(2)(a)(i)
- Interest from co-operative bank (BDCC) – eligible u/s 80P(2)(d)
- Savings bank interest from SBI – treated as incidental and eligible for deduction
- Fixed deposit interest from SBI – taxable as income from other sources, but deduction of cost of funds and proportionate expenses allowed u/s 57 ive societies are also eligible for deduction u/s 80P, as the Act does not restrict the benefit based on the nature of the co-operative society.
Accordingly, the appeals were partly allowed (AY 2017-18) and fully allowed (AY 2018-19), granting substantial relief to the assessee.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
