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Income-Tax Officer, Ward-1 (4) , Hubli Versus M/s KPTC & HESCOM Employees Co-Op Credit Society Ltd.

2015 (10) TMI 941 - ITAT BANGALORE

Entitlement to deduction u/s.80P(2)(a)(i) - AO was of the opinion that assessee, a Credit Cooperative Society under the Karnataka Cooperative Societies Act was hit by Section 80P(4) of the Act as in the business of giving credits and should be considered as a cooperative bank, hence disallowed the claim.- CIT(A) allowed the claim - whether assessee fell within the limitation specified in Section 80P(4)? - Held that:- It is an admitted position that assessee was bound to give interest to its memb .....

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ited in banks for earning interest, such interest income would be attributable to the business of banking carried out by the assessee. Natural corollary is that Section 80P(4) of the Act is not attracted unless the cooperative society is recognised by RBI as a cooperative bank as per the rules made under Reserve Bank of India Act. We, therefore, hold that assessee was eligible for claiming deduction u/s.80P(2)(a)(i) of the Act. We do not find it necessary to interfere with the order of the CIT ( .....

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coordinate bench in the case of ACIT v. M/s. Bangalore Commercial Transport Credit Coop Society and ITO v. M/s. Yeshwanthpur Credit Co-op. Society Ltd. 2. Ld. DR submitted that assessee had claimed deduction u/s.80P(2)(a)(i) of the Act on the interest earned by it. Assessee is registered as a Credit Cooperative Society under the Karnataka Cooperative Societies Act. AO was of the opinion that assessee was hit by Section 80P(4) of the Act. As per the AO it was in the business of giving credits an .....

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ed study of the Banking Regulations Act, 1949, and came to a conclusion that assessee was hit by definition of 'business of banking' as per Reserve Bank Regulations. 5. Per contra, Ld. AR supported the order of CIT (A). 6. We have perused the orders and heard the rival contentions. There is no dispute that one of the main object of assessee society was providing credit facility to its members. AO himself has mentioned that this was the primary object for which assessee was incorporated. .....

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, was to place it in banks for earning interest. After the judgment in Sri Biluru Gurubasava Pattin Sahakari Sangh Niyamit (supra), Hon'ble jurisdictional High Court had in the case of CIT v. Tumkur Merchants Souharda Credit Cooperative Ltd (ITA.307 of 2014, dt.28.10.2014), held as under in relation to a cooperative society having as its object, business of providing business credits to its members, at paras 3 to 10 of the judgement dt.28.10.2014 : "4. The learned counsel for the assess .....

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enefit in terms of Sub-sec.(2) of Section 80P of the Act. In support of his contentions, he relied on several judgments and pointed out that the Apex Court in the aforesaid judgment has not laid down any law. 5. Per contra, learned counsel for the Revenue strongly relied on the said judgment of the Supreme Court and submitted, the case is covered by that judgment of the Apex Court and no case for interference is made out. 6. From the aforesaid facts and rival contentions, the undisputed facts wh .....

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edit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law ie., Section 80P(2)(a)(i): "Deduction in respect of income of co-operative societies: 80P (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub- section (2), in computi .....

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portance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME-TAX, GUJARAT-II reported in ITR VOL. 113 (1978) PAGE 842 at page 93 as under: "As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the busine .....

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have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General, it has used the expression "derived from", as, for instance, in section 80J. In our .....

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expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, t .....

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s by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act. 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the 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 receive .....

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ct or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the 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 w .....

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