The Tax Publishers2020 TaxPub(DT) 4219 (Bang-Trib)

INCOME TAX ACT, 1961

Section 80P(2)(a)(i)

Nominal members were members and deposits received and loan advanced to the nominal cannot be treated as from non-members or from public and in the nature of banking business. That being so, assessee was engaged in primary agricultural activities and providing credit facilities and agricultural facilities to farmer-members of a particular region, therefore, claim of deduction under section 80P(2) could not be denied. Hence, AO was directed to grant benefit to nominal members and provide adequate opportunity of hearing to assessee.

Deduction under section 80P(2)(a)(i) - Co-operativce society - AO treated assessee-society as co-operative bank on account of having nominal members -

Assessee was a Primary Agricultural Co-operative Society duly registered under Karnataka Co-operative Societies Act, 1959 and was engaged in the business of accepting deposits from members and lending credit facilities to its members. It claimed deduction of under section 80P(2)(a)(i). AO disallowed deduction on the ground that exemption would not be available to co-operative banks, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Assessee submitted that assessee society was providing credit facilities to its members including nominal members and other members. Held: 'Member' includes nominal, associate or sympathizer member. Therefore, nominal members were members and deposits received and loan advanced to the nominal members cannot be treated as from non-members or from public and in the nature of banking business. That being so, assessee was engaged in primary agricultural activities and providing credit facilities and agricultural facilities to farmer-members of a particular region, therefore, claim of deduction under section 80P(2) could not be denied. Hence, AO was directed to grant benefit to nominal members and provide adequate opportunity of hearing to assessee.

Followed:Kodavoor Vyavasaya Seva Sahakari Sangha Niyamitha v. ITO ITA Nos. 707, 762, 765, 942, 1190 & 1191/Bang/2019, dated 26-8-2019 : 2019 TaxPub(DT) 5448 (Bang-Trib).

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2015-16



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