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2015 (9) TMI 603 - ITAT BANGALORE

2015 (9) TMI 603 - ITAT BANGALORE - TMI - Disallowance of deduction u/s 80P in respect of interest receivable on standard asset - Held that:- Assessee had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act.

If the interest amount of ₹ 19,06,609/- on the standard assets representing the loan given to the members of the .....

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Souharda Credit Co-operative Ltd. Case [2015 (2) TMI 995 - KARNATAKA HIGH COURT] - Decided in favour of assessee. - ITA No. 903(Bang) 2014 - Dated:- 26-6-2015 - Vijay Pal Rao, JM And Jason P Boaz, AM, JJ. For the Appellant : Shri S Ranganath, CA For the Respondent : Dr P K Srihari, Addl. CIT ORDER Per Vijaya Pal Rao, JM. This appeal by the assessee is directed against the order dated 01-04-2014 of CIT(A) for the assessment year 2010-11. The assessee has raised the following grounds; "1. The .....

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Vs ITO, which is not applicable to facts of the case. 4. The L.A.A erred in not granting deduction on account u/s 80P(2)(a)(i) on excess depreciation amounting to ₹ 41.578/- 5. The L.A.A. erred in not granting deduction on account u/s 80P(2)(a)(i) on provision towards gratuity amounting to ₹ 1,10,000/-". 2. Ground no.1 is general in nature and does not require any specific finding, as the assessee has not advanced any argument except on the merits of the case. 3. Ground no.2 re .....

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e assessee to furnish the details of the interest receivable on non-performing assets as well as on standard assets which has not been accounted by the assessee. The Secretary of the Society appeared before the AO and submitted that there is no concept of NPA in the Co-operative Society, as it is in the case of Bank as well as nonfinancial banking business however, the details of interest receivable on standard assets were provided by the assessee. The AO disallowed the deduction u/s 80P in resp .....

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espect of the interest receivable on the standard assets. Thus, the CIT(A) has granted part relief to the assessee. 4. Before us, learned AR of the assessee submitted that the assessee is a Co-operative Society registered under Karnataka State Co-operative Societies Act, 1959. The assessee is following cash method of accounting and recognize the income only on the receipt and therefore, the interest receivable on the loans to the members has not been accounted by the assessee. The AO treated the .....

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eceived by the assessee on the loans given to the members cannot be brought to tax by denying deduction u/s 80-P of the IT Act, 1961. In support of his contention he has relied upon the following decisions; "1. ACIT Vs M/s Bangalore Commercial Transport Credit Co-operative Society Ltd. ITA No.1069(B)/2010 dated 08/04/2011 (ITAT, Bench'B' Bangalore. 2. ITO Vs M/s Jankalyan Nagri Sahakari Pat Sanstha Ltd (2012) 24 Taxman.com 129(Pune-Trib.) dated 26/06/2012). 3. DCIT Vs Jayalakshmi Ma .....

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ve Ltd Vs ITO (2015) 55 Taxman.com 447. 7. On the other hand, learned DR submitted that the assessee has not furnished the details of the loans given to the members and therefore, it is not clear from the record whether the interest receivable on the standard asset is in respect of the loan given to the members of the assesee society. He has further submitted that in the case of Merchants Souharda Credit Co-operative Ltd Vs ITO, (Supra), the Hon'ble High Court has distinguished the judgment .....

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e learned DR has submitted that the decision relied upon by the learned AR is not applicable in the facts of the present case. He has relied upon the orders of the authorities below. 8. We have considered the rival submissions and perused the material on record. There is no dispute regarding the fact that the assessee society is registered under the Karnataka State Co-operative Societies Act and the CIT(A) has accepted the claim of the assessee u/s 80P of the IT Act, that the assessee is not a b .....

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uring the year. Once CIT(A) has accepted the assessee society as a co-operative society and engaged in providing credit facility to its members than the interest earned by the assessee on the loans to its members cannot be given a different colour than the income of interest received by the assessee on the other loans given to the members. Further, merely because, the assessee has not accounted the said interest due on the loan given to the members because of the reason that it was outstanding, .....

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Niyamitha, supra which was followed in the cases of General Insurance Employees Co-operative Credit Society Ltd. and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamitha, ITA No.505/2013 dated 27/06/2014, supra, has clearly held that a co-operative society registered as co-operative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(1)(i) of the IT Act. The operative part of the .....

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d not want to deny the said benefits to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e the purpose of this amendment. Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does no possess a licence from Reserve Bank of India to carry on business, it is not a co-operativ .....

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-operative bank, the order passed by the Assessing authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act is correct". 8.2 The fact that the appellant is a co-operative society registered under the Karnataka Co-operative Societies Act, 1959 engaged in providing credit facilities to its members has been clearly mentio0ned by the AO in para-3 of his aforesaid assessment order. It is also not the case of the AO that the assessee is registered wit .....

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decisions of the jurisdictional High Court of Karnataka in the cases of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, supra which was followed in the case of General Insurance Employees Co-operative Credit Society Ltd, and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamitha ITA NO.505/2013 dated 7-06-2014, supra. Therefore, in view of the foregoing discussion and respectfully following the aforesaid decisions of the jurisdictional High Court o .....

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gars Co-operative Sale Society Ltd. on which reliance is placed, the Supreme Court was dealing with a case where the assessee Co-operative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce to its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested i .....

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56 of the IT Act. Further, they made it clear that they are confining the said judgment to the facts of that case. Therefore, it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending mo .....

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