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Income Tax Officer, Ward-46 (4) , Kolkata Versus The Baksara Cooperative Credit Society Ltd

2016 (1) TMI 409 - ITAT KOLKATA

Claim for deduction under section 80(P)(2)(a)(i) - Held that:- As found by the ld. CIT(Appeals), from the perusal of the objects of the assessee-Society as extracted by him in the impugned order from the Bye-Laws, the assessee-Society is not allowed to accept deposits of money from Public for the purpose of lending or investment. As further found by him, the entire transactions of accepting deposits and giving loans have been done by the assessee-Society with its members only and there are no su .....

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fore us, ld. D.R. has not been able to rebut or controvert any of the findings of facts recorded by the ld. CIT(Appeals). He has also not been able to cite any authority where a different or contrary view is taken on this issue, which is in favour of the Revenue. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for deduction under section 80P(2)(a)(i) - Decided against revenue

Direction to treat t .....

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rores respectively. The major amount appearing on the liability side of the balance-sheet as on 31.03.2009 was deposit and other account aggregating to ₹ 28.89 crores, which comprised of various funds and deposits. Keeping in view these facts and figures, we are of the view that the issue as to whether the relevant investment is made by the assessee out of its own surplus funds or out of the amount payable to its members, which represent its liability, requires verification in order to det .....

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thra Ravi , Judicial Member For The Department : Shri S.M. Sarfarazut Tauheed, JCIT, Sr. D.R. , For The Assessee : Shri A.K. Tibrewal , FCA, and Shri Ami t Agarwal , Advocate ORDER Per Shri P.M. Jagtap:- This appeal filed by the Revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-XXX, Kolkata dated 30.08.2012 for the assessment year 2009-10. 2. In Ground No. 1 raised in this appeal , the Revenue has challenged the action of the ld. CIT(Appeals) in deleting the disal .....

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essing Officer, the assessee, being covered either in the category of primary agricultural credit society or a primary agricultural cooperative and rural development Bank, was not eligible for deduction under section 80P. He, therefore, disallowed the claim of the assessee for deduction under section 80P holding that the claim of the assessee for such deduction was not tenable as per the provisions of section 80P(4) of the Act. 4. The disallowance made by the Assessing Officer on account of its .....

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by the assessee on the decision of the Bangalore Bench of ITAT in the case of Bangalore Commercial Transport Credit Cooperative Society Limited (ITA No. 1069/Bang./2010 dated 08.04.2011), wherein it was held that there is a clear distinction between a Cooperative Bank and a Cooperative Society and that while the provisions of section 80P(4) are applicable only to Cooperative Banks, Credit Cooperative Societies are entitled for deduction under section 80P(2)(a)(i) of the Act. Reliance was also p .....

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eld that the assessee-Society thus was entitled for deduction under section 80P(2)(a)(i). After taking into consideration the ratio of this Tribunal s decision cited on behalf of the assessee, the ld. CIT(Appeals) found that the same was squarely applicable in the case of the assessee, inasmuch as, none of the objects of the assessee-Society allowed it to accept deposits of money from public for the purpose of lending or investment and accordingly following the same, he held that the case of the .....

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the Assessing Officer to disallow the claim of the assessee for deduction are not applicable in the case of the assessee as rightly held by the ld. CIT(Appeals) since the assessee is not a Cooperative Bank. He submitted that the assessee has accepted deposits only from the members and has also given loans only to the members and there being no transaction with non-members, the deduction claimed by the assessee under section 80P(2)(a)(i) is rightly allowed by the ld. CIT(Appeals) by following th .....

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ns of accepting deposits and giving loans have been done by the assessee-Society with its members only and there are no such transactions done by it with nonmembers. He has also found that the assessee-Society was not registered under the Banking Regulation Act, 1949 and it was registered under the West Bengal Cooperative Societies Act , 1983. On the basis of al l these findings of fact recorded by him, the ld. CIT(Appeals) has held, by following the decision of the Tribunal cited on behalf of t .....

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tifiable reason to interfere with the impugned order of the ld. CIT(Appeals) al lowing the claim of the assessee for deduction under section 80P(2)(a)(i) and upholding his impugned order on this issue, we dismiss Ground No. 1 of the Revenue s appeal . 7. In Ground No. 2, the Revenue has challenged the act ion of the ld. CIT(Appeals) in directing the Assessing Officer to treat the interest income of ₹ 2,06,49,203/- earned by the assessee on its investment as business income eligible for ded .....

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e ld. CIT(Appeals), it was submitted that its surplus funds and statutory funds were invested by the assessee society in fixed deposit with Banks as well as in other investments for attainment of its objects of granting credit facilities of its members. It was contended that the said investments were made in accordance with the objects of the assessee-Society and, therefore, the income arising from them constituted its business prof it , which was entitled for deduction under section 80P(2)(a)(i .....

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the income from F.D. etc. at ₹ 2,06,49,203/- under the head income from other sources. It is further seen that as pointed out by the appellant that the objects of the society is to create funds for the lending of money to it s members and therefore it is clear that it was the business of the society to make investment in order to generate funds for the utilization of the members of the society and this was being done by investments on which the interest income referred to above has been ea .....

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covered in favour of the Revenue by the decision of the Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Limited -vs. - ITO reported in [2010] 322 ITR 283, wherein it was held that interest income arising to a Cooperative Society carrying on the business of providing credit facilities to its members or marketing of agricultural produce of its members, on the surplus, which is not required immediately for business purposes, from investment in short-term deposits and securiti .....

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uishable on facts. He submitted that such distinction, in fact, has been highlighted by the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Limited -vs. - ITO reported in [2015] 55 taxmann.com 447 (Kar.) by pointing out that the amount invested by the assessee-Society in the case of Totgar s Cooperative Sale Society Limited was payable to its members from whom produce was bought and in these facts of that case, it was held by the Hon ble Apex Court that t .....

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)(i) is available for the same. Without prejudice to this main contention and as an alternative, ld. Counsel for the assessee contended that if all the interest in question is treated as assessable to tax under the head income from other sources , corresponding deduction on account of expenses attributable to the earning of such income should be allowed. 11. We have considered the rival submissions and careful ly perused the relevant material available on record. In the case of Totgar s Cooperat .....

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e case, interest income received on short- term deposits/securities was held to be chargeable to tax under the head income from other sources by the Hon ble Supreme Court observing that the amount invested by the assessee was a liability payable to its members, and, therefore, the interest income could not be said to be attributable to the activity mentioned in section 80P(2)(a)(i). In the case of Tumkur Merchants Souharda Credit Cooperative Limited (supra) cited by the ld. Counsel for the asses .....

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harda Credit Cooperative Limited (supra), the decision of the Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Limited was found to be distinguishable on facts by the Hon ble Karnataka High Court and the interest income received by the assessee- Society on Bank deposits was held to be its business income being attributable to carrying on the business of banking eligible for deduction under section 80P(2)(a)(i) of the Act. 12. Keeping in view the decision of the Hon ble Supr .....

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nts Souharda Credit Cooperative Limited (supra) or the same is made out of the amount payable by the assessee-Society to its members, which represent its liability as was the case in Totgar s Cooperative Sale Society Limited. In this regard, it is observed that this aspect has not been specifically considered either by the Assessing Officer or by the ld. CIT(Appeals) in their respective orders and, therefore, there is no finding specifically given by them on this relevant aspect . In this regard .....

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