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DATE: March 19, 2019 (Date of pronouncement)
DATE: May 10, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 80P(4): The AO is not obliged to grant deduction by merely looking at the certificate of registration issued by the competent authority under the Co-op Societies Act. Instead, he has to conduct an enquiry into the factual situation as to the activities of the assessee and arrive at a conclusion whether benefits can be extended or not. Chirakkal 384 ITR 490 (Ker) overruled. Antony Pattukulangara 2012 (3) KHC 726 & Perinthalmanna 363 ITR 268 (Ker) approved. Citizen Co-operative Society 397 ITR 1 (SC) followed)

In Chirakkal, the Divjsion Bench did not notice the earlier judgment in Perinthalmanna. After referring to the provisions under the Kerala Co-operative Societies Act and the Banking Regulation Actl 1949 the Division Bench held that the certificate of registration issued by the Department categorizing the assessee as Primary Agricultural Credit Society could be reIied on solely to grant deduction under Section 80P of the Income Tax Act

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DATE: August 8, 2017 (Date of pronouncement)
DATE: August 16, 2017 (Date of publication)
AY: -
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CITATION:
S. 80P Test of Mutuality: An assessee cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members if it has carved out a category called ‘nominal members’. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in the real sense. Most of the business of the assessee was with this category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found that the depositors and borrowers are quite distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative society

It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people. The first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of ‘nominal members’. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in real sense. Most of the business of the appellant was with this second category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found, as a matter of fact, that the depositors and borrowers are quiet distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative society. It is also found that the appellant is engaged in the activity of granting loans to general public as well. All this is done without any approval from the Registrar of the Societies. With indulgence in such kind of activity by the appellant, it is remarked by the Assessing Officer that the activity of the appellant is in violation of the Co-operative Societies Act

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COURT:
CORAM: ,
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DATE: January 15, 2016 (Date of pronouncement)
DATE: September 24, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 80P(2)(d): Interest and dividend earned by a co-op society on investments with other co-operative societies is eligible for deduction. The question whether the co-op society is engaged in the business of banking for providing credit facilities to its members and the head under which the income is assessable is not material (Totagar’s Co-op Society 322 ITR 283 (SC) distinguished)

The Supreme Court in the case of Totagar’s Co-operative Sale Society Ltd held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this , the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop society if such income is included in the gross total income of the such coop society

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