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| The Tax Publishers2020 TaxPub(DT) 3779 (Bang-Trib) INCOME TAX ACT, 1961
Section 80P
Since deduction under section 80P(2)(a)(i) is allowed only in respect of income arising out of transactions with members and examination of relevant law governing co-operative societies of State providing status of different categories of members, in so far as affairs of co- operative society were concerned, was also required to be examined, matter was remanded back to AO for reconsideration afresh.
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Deduction under section 80P - Allowability - Interest income earned out of investment with co-operative banks -
Assessee was a co-operative society registered under Karnataka Co-operative Societies Act, 1959 and was engaged in business of providing credit facilities to its members and distribution of ration card. Only issue alleged by assessee in instant appeal was regarding denial of deduction under section 80P. AO alleged that interest income earned out of investment with co-operative banks was treated as income from other sources not eligible for deduction under section 80P(2)(d). Held: Supreme Court in case of Citizen Co-operative Society Ltd. held that it was also important to ascertain as to what was nature of income which was claimed as exempt, and as to how principle of mutuality was not violated in respect of such income. An examination of memorandum of association, articles of association, byelaws and other documents explaining rules and regulations of society was necessary, so as to clearly understand purpose and nature of business done by it. An examination of different categories of members of a society and what were the conditions attached to their being admitted as members and their rights as contributors of funds to the society and participants in surplus and the byelaws of the society was necessary. Deduction under section 80P(2)(a)(i) is allowed only in respect of income arising out of transactions with members. All such aspects required examination. AO was directed to allow opportunity of being heard to assessee and filing appropriate evidence, if desired, by assessee to substantiate its case, before deciding issue.
REFERRED : The Citizen Co-Operative Society Limited v. ACIT (2017)84 taxman.com114 (SC) : 2017 TaxPub(DT) 2053 (SC), The Pr. CIT v. Totagars Co-Operative Sale Society 2017 TaxPub(DT) 1748 (Karn-HC), Tumkur Merchants Souharda Credit Cooperative Limited v. ITO (2015) 230 Taxman 309 (Karn-HC) : 2015 TaxPub(DT) 2857 (Karn-HC)
FAVOUR : Matter remanded.
A.Y. : 2015-16
IN THE ITAT, BANGALORE BENCH
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