TMI Blog2019 (1) TMI 1588X X X X Extracts X X X X X X X X Extracts X X X X ..... pal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member Revenue by: Shri Lalit P. Jain, Sr. D.R. Assessee by: None ORDER Amarjit Singh, This assessee s appeal for A.Y. 2013-14, arises from order of the CIT(A)-I, Vadodara dated 14-10-2016, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The solitary ground of appeal in this case filed by the assessee is against the decision of ld. CIT(A) in confirming the action of the assessing officer in not allowing the deduction u/s. 80P of the act on interest amount of ₹ 1,18,21,506/- received from banks. During the course of assessment, on verification of the details filed by the assessee, the assessing officer noticed that assessee had earned interest income totaling to ₹ 1,18,21,506/- from nationalized and co-operative banks i.e. 1,16,54,552/- from nationalized banks and ₹ 1,66,954/- from co-operative banks. The assessing officer observed that interest income was not derived by the assessee from its activity of providing credit facility to its members, therefore, assessee was asked to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. A.Y. Assessee Revenue 1 1992/Ahd/2017 2014-15 The Narsanda Mercantile Co.Op. Credit Society Ltd. DCIT, Nadidad 2 1313/Ahd/2018 2015-16 The Sant Taluka Teachers Co-op. Credit Society Ltd. ACIT, Panchmahal Circle, Godhra 3 1314/Ahd/2018 2015-16 The Satyaprakash Co-op. Credit Society Ltd. ACIT, Panchmahal Circle, Godhra 4 1295/Ahd/2018 2015-16 Shri Friends Coop. Credit Society Ltd. ITO, Ward-3(1)(2), Vadodara 5 1296/Ahd/2018 2015-16 Shri Shramjivi Nagrik Sahakari Mandli Ltd. ITO, Wd-3(1)(2), Vadodara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activity of marketing of agricultural produces grown by its members. The assessee co-operative society also accepts deposits from its members and provides credit facility to its members, runs Kirana Stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods carriage, etc. [Para 10] The assessment years involved in the instant appeals are assessment years 2007-08 to 2011-12. The bone of contention is that the deduction under section 80P(2) is now claimed by the assessee under section 80P(2)(d) and not under section 80P(2)(a) of the Act. The reason is that now the investments and deposits after the Supreme Court's decision against the assessee in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC), the assessee herein has shifted the deposits and investments from Schedule Banks to Co-operative Bank and such Co-operative Bank is essentially a Cooperative Society also and clause (d) allows deduction of income by way of interest or dividends derived by the assessee co-operative Society from its investments with any other co-operative Society. [Para 11] The sheet anchor of the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to' can include within its ambit and scope even the interest income earned by the assessee, a co-operative society from a Co-operative Bank. This exclusion by section 80P(4) even though without any amendment in section 80P(2)(d) is sufficient to deny the claim of the assessee for deduction under section 80P(2)(d). The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural credit society. [Para 14] The amendment of section 194A(3)(v) excluding the Co-operative Banks from the definition of 'Cooperative Society' by Finance Act, 2015 and requiring them to deduct tax at source under section 194A also makes the legislative intent clear that the co-operative banks are not that specie of genus co-operative society, which would be entitled to exemption or deduction under the special provisions of chapter VIA in the form of section 80P of the Act. [Para 15] If the legislative intent is so clear, then it cannot be contended that the omission to amend clause (d) of section 80P(2) of the Act at the same time is fatal to the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the above facts and legal findings we consider that the income by way of interest earned by deposit or investment of idle or surplus does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus clause (d) of section 80P(2) of the act would not apply in the facts and the circumstances of the present case. The assessee has earned interest income on surplus funds deposited with nationalized bank and the cooperative Bank and the same is not attributable to business operation of the assessee co-operative society as interest earned on the fund invested with the commercial bank is not operational income from providing credit facilities to its members. We consider that earning of such interest income either from nationalized or cooperative bank will not change nature and character of the income. On perusal of the provision of section we observe such deduction is pertinent to the operational income earned by the co-operative society from the activities in which it is engaged and not the other income which accrues to the society in the form of interest from investment of surplus funds with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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