INCOME TAX ACT, 1961

Section 80P(2)

Deduction under section 80P(2) - Allowability - AO alleged that assessee was dealing with general public by admitting them as nominal members -

Assessee was engaged in the business of accepting deposits and providing credit facilities to its members, besides making investments and claimed deduction under section 80P. AO noticed that assessee was having different categories of members, viz., Regular members, Associate members and Nominal members. Assessee was having 2038 nominal members/Associate members and 3831 regular members. Thus the percentage of nominal members worked out to 53.20%, which was in violation of provisions of section 16 of the Karnataka Co-operative Societies Act, which had prescribed a limit of 15%. Accordingly, assessee was dealing with general public by admitting them as nominal members and held that assessee was not entitled to deduction under section 80P. Held: In the case of Citizen Co-operative Society [(Civil Appeal No. 10245 of 2017) : 2017 TaxPub(DT) 5616 (SC)] the majority of income was derived from nominal members and general public and hence business of the assessee was in the nature of a financial institution and not in the nature of providing credit facilities to its members. Hence, the component of income derived from members and other persons might require examination and may influence the decision to be taken with regard to eligibility of the assessee to claim deduction under section 80P. Therefore, matter was remanded back to AO for fresh adjudication.

REFERRED :

FAVOUR : In assessee's favour by way of remand

A.Y. :

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