TMI Blog2012 (10) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... gether. 2. All these appeals have been filed on the same ground which reads as under:- 1. On the facts and circumstances of the case, the ld. CIT(A) has erred in law in deleting the addition made by disallowing exemption u/s 80P without appreciating the facts of the case. 3. Briefly stated, the facts of the case are that the assessee-appellants are agriculture cooperative societies registered under Co-operative Society Act, Haryana, carrying out banking activities like borrowing, raising or taking up money and lending or advancing money for the purpose of agriculture, sale and purchase of seeds and fertilizers etc. The appellant society is financed by the District Central Co-operative Bank to provide further credit facilities in its specified area on behalf of State Govt. to facilitate the farmers of villages for their credit requirements as well as to fulfil other ancillary and logistic requirements. 4. The above appellant societies declared net profit and claimed deduction u/s 80P(2)( a )( i ) and 80 P(2)( a )( iv ) of the Act. On bare reading of the assessment order, we note that relevant findings read as under:- 3.4 From the reply filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing them to its members as the similar activities are being provided to the non-members also. 5. We also noted that on the basis of above findings, the AO rejected the claim of assessee by cooperative society made u/s 80P(2)(a)(i) (iv) and initiated penalty proceedings but allowed a deduction of ₹ 50000 u/s 80P(2)(c)(ii) of the Act. The ld. DR supported the assessment order and submitted that when the counsel of the assessee submitted his inability to bifurcate the income and expenditure from members and non-members, then the AO rightly held that the assessee did not discharge its onus of justifying claim for deduction sought u/s 80P(2)(a)(i) and (iv) and again he rightly rejected the same. 6. We have also considered the impugned order of the CIT(A) and its relevant findings read as under:- 4. I have considered the issue and the submissions made by the AR. It is not in dispute that the credit facilities and supply of seeds, urea etc. were given only to the members of the appellant society. Only with regard to the deposits, the appellant accepted from non-members also. Acceptance of deposits from non-members does not in any way affect the revenue generated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not pertain to the income of interest accrued from investment made out of reserve fund in compliance with statutory provisions to enable the cooperative banking society to carry on banking business but as it was held by the CIT(A) that it was not in dispute that the credit facilities and supply of seeds, urea etc. were given only to the members of the appellant society. The dispute was only with regard to the deposits which the appellant accepted from non-members. 9. The ld. DR submitted that the exemption u/s 80P(2)(a)(i) of the Act is available and restricted to the interest income earned from credit or loans provided to its members only. The DR also added by drawing our attention to para 3.4 in appeal nos. 2368/Del/11, 2369/Del/11 and 2370/Del/11 and para 3.2 in appeal no. 2371/Del/11 of assessment order and vehemently submitted that when the counsel of assessee society was asked to submit bifurcated details of income and expenditure pertaining to its members and non-members, he expressed his inability to submit the same. In the result, the AO rightly rejected the claim u/s 80P(2)(i) (iv) and being a generous assessing officer, he suo moto granted/allowed exemption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the society is not entitled for exemption u/s 80P of the Act. The ratio of this case is not applicable to the present case of banking cooperative societies. 12. On the basis of foregoing discussion and careful consideration of the facts of the present case, we respectfully observe that the ratio of above judgement of Hon'ble Apex Court in the case of Karnataka State Co-operative Apex Bank ( supra ) is not available to the present appellant assessee as the factual issues in these appeals are not related to interest income earned arising from investments made from reserve fund, in compliance with statutory provisions to enable the assessee cooperative societies to carry on banking business but factual issue in appeals in hand is only related to the deposits which the appellant society accepted from non-members. The ld. CIT(A) noted that the acceptance of deposits from non-members does not, in any way, affect the revenue generated by the appellant in providing credit facilities and supply of seeds, urea etc. to the members. We observe that the deposits from non-members do not arise any income. On the other hand, the banking society used these deposits to provide credits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The ld. DR placed his reliance on the judgement of Hon'ble Punjab Haryana High Court in the case of Punjab State Co-operative Milk Producers Federation Ltd. v. CIT [2011] 336 ITR 501/[2012] 20 taxmann.com 834 where the Hon'ble Division Bench held that member societies engaged in marketing milk and milk products when credit facilities are provided by the assessee for working capital of members, then interest earned is not entitled to special deduction under section 80P of the Act. In this case, the Hon'ble High Court also held that the credit facilities provided to its members were ancillary to its main object and it was not carrying on the business of banking or providing credit facilities to its members, therefore, as a result, the assessee society was not found entitled to the benefits of section 80P(2)(a)(i) of the Act. We respectfully consider the ratio of this judgement but in the present case, the benefit of the ratio is not available to the revenue as the present case is related to the assessees of banking business as their main object. 16. On the basis of foregoing discussion, we are of the view that the AO was not justified in disallowing deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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