TMI Blog2012 (12) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... out the Banking activities like borrowing, raising or taking up of money and lending or advancing of money for the purpose of agricultural work and sale purchase of seeds urea. The AO has observed that these societies are financed by the District Central Cooperative Bank to provide further credit facilities in its area on behalf of the State Government. PACS are the nodal agencies which run as per the guidelines of State Government to facilitate the farmers of the villages for their credit requirement as well as to fulfill seed, urea etc. requirement. The society accepted the loans from the cooperative bank and advance the same to farmers/villager situated in rural area for agricultural purposes. The AO noticed that assessee had filed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise deduction of ₹ 50,000/- only to be allowed. The assessee in its reply submitted that it was engaged in carrying out the banking activities like borrowing, raising or taking up of money from member and non-members and lending and advancing of money to its members only for the purposes of agricultural work since the dates of its incorporation. It was further pointed out that assessee was financed by the District Central Cooperative Bank to provide further credit facilities to its members only in its area on behalf of the State Government. It was further clarified that PACS accepted the loans from the Cooperative Bank and advance the same to farmers/villager situated in rural area for agricultural purposes only after accepting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s did not provide any credit facilities to non-members from interest income earned by it. The AO concluded that since assessee was accepting deposit from non-members, it tantamount to the fact that it had provided banking facilities to persons other than members. He observed that if a society was accepting deposits from nonmembers, that money got circulated through advances to its members who in return paid interest on the advances and income had been generated by the society. Therefore, society was not eligible to claim 100% deduction u/s 80P. He further observed that the tax concessions are allowed only to those societies who are engaged in activities as per the conditions laid down in the Act and not on the basis of their names. He furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y because the assessee was unable to bifurcate the expenditure for the deposits from the members and non-members, deduction u/s 80P(2)(a)(i) and 80P(2)(a)(iv) could not be disallowed. 6. Being aggrieved with the order of Ld. CIT(A), the department has raised following grounds :- On the facts and circumstances of the case, the Ld. CIT(A) has erred in law and facts by allowing the deduction under section 80P of the Income Tax Act, 1961 amounting to ₹ 20,50,680/-. 7. Ld. DR relied on the order of AO. The assessee has filed written submissions and has relied on the decision of Tribunal in the case of :- (a) ACIT vs The Palhawas Primary Agriculture Co-op. in ITA No- 2368/Del/2011 others. In the written submissions, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from carrying on the business of banking or providing credit facilities to its members or income earned by the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members. The source of funds utilized for earning these incomes can not be a basis for making disallowance under these provisions. The business of banking can not be restricted to carrying on activities with members only because there is no such impediment imposed u/s 80P(2)(a)(i). The direct source of income is ultimately from the credit facilities provided to its members or from sale of seeds, agricultural implements to members only etc contemplated under section 80(2)(a)(iv). We, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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