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TMI Blog2015 (5) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of Rs. 10/- each and has voting rights with certain other privileges. Nominal Members/Associate Members has to deposit only Re.1/- per share and does not have voting rights. However, Nominal Members and Associate Members (collectively called as non-members) can deposit amounts and also obtain loans as per the bye laws of the society. In the course of assessment proceedings, the Assessing Officer was of the opinion that assessee admittedly received deposits mainly from Non- Members, particularly taking deposits of the bail amount from the bailees and keeping them in deposits on the orders of the court while granting bail to the accused persons. While completing the assessment, Assessing Officer was of the opinion that assessee has violated the provisions of Mutually Aided Co-operative Societies Act, 1995 and has not strictly followed the bye laws of the society and therefore not eligible for deduction u/s.80P(2)(a)(i). Assessing Officer also analysed the provision of Banking Regulation Act and considered that accepting the deposits/moneys from the public are akin to banking business, therefore, analyzing the provisions of the Banking Regulation Act and powers of RBI etc., has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment Order as she has failed to give a clear finding whether the assessee is a cooperative society though it has violated the principles of the Andhra Pradesh Mutually Aided Cooperative Societies Act (APMACSA), 1995. 2. The observation of CIT(A) is misplaced with regard to deduction u/s.80P(2)(i)(a), is even otherwise given to assessee even if it accepts deposits from nonmembers. 3. The principle of Mutuality relied upon by the Assessing Officer emanate to distinguish that the assessee has violated the principles of mutuality, which the CIT(A) fails to comprehend. Having established on record that the assessee has deposited money in Regional Rural Banks, the status of which is not recognized in the Income Tax Act, as Cooperative Bank, can the interest arising out of the deposit of this Regional Rural Bank would qualify for deduction u/s.80P(2)(d)". 5. As can be seen from the above, the Ground No.1 is mis-placed. Assessee-society is clearly a co-operative society and Assessing Officer herself has stated that assessee is a co-operative society, but violated the provisions of the Co-operative Societies Act. Therefore, Ground No.1 in our view is misconceived. 6. Ground No.2 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities." 22.1. As per this section, the exemption provided under subsection (2) or sub-section (3) does not apply to the incomes of the Cooperative Bank other than a primary agricultural Cooperative Society or a primary Cooperative Agricultural and Rural Development Bank. However, the above provision applicable in the case of Cooperative Bank is not in respect of interest received from Cooperative Banks by a Cooperative Credit Society/Cooperative Society. Section 80P(2)(d) is applicable to the assessee society in respect of incomes by way of interest or dividends received by the cooperative society from its investments with any other cooperative society. Therefore, in the case of the assessee society, sub-section (4) is not applicable and deduction under section 80P(2)(d) is certainly eligible to assessee. In the assessment of a Cooperative Bank, the incomes may not be exempt after 01.04.2007 by virtue of sub-section (4), but assessee is not a Cooperative Bank. Therefore, the Revenue ground is not only illogical but also not supported by the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion fee and take loans from society and make deposits with society without other privileges, they cannot be considered equal to the Members of the society. There are certain judgments given under the Co-operative Societies Act in the case of Societies involved in banking business, by virtue of which distinction between Members and Non-Members was not considered material and their equal treatment as far as business of banking is concerned was accepted. However, as rightly pointed out by the Ld.CIT(A), assessee is not involved in business of banking and has only involved in providing credit facilities to the Members of the society. 10. In view of this it is to be examined whether there are incomes from the credit facilities provided to Non-Members i.e., Nominal/Associate Members. If so, assessee is not eligible for deduction on those profits. In the case of 'The Advocates Mutually Aided Coop Society', in ITA Nos.546, 547 & 1331/Hyd/2012 & ITA No.1860/Hyd/2013 & ITA Nos.548 & 549/Hyd/2012 & ITA No.1859/Hyd/2013 pronounced on 20- 02-2015, it was noticed that the said co-operative society was claiming only proportionate deduction u/s.80P excluding the transactions with the Non- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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