TMI Blog2016 (2) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... s under :- 2.1 The assessee a co-operative society, engaged in providing credit facilities to its members, filed its return of income for assessment year 2010-11 on 13/08/2010 declaring Nil income, after claiming deduction u/s.80P(a)(i) of the Act. Under section 80P(2)(a)(i) of the IT Act, 1961 (in short the Act) where the gross total income of a co-operative society includes income from carrying on the business of banking or providing credit facilities to its members, the same is allowed as deduction upto the assessment year 2007-08. By Finance act, 2006, w.e.f. 1/4/2007, sub section (4) was inserted in section 80P which provides as follows- (4) The provisions of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation- For the purposes of this sub-section,- -(a) co-operative bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949) ; (b) primary co-operative agricultural and rural development bank means a society hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded the assessment u/s. 143(3) vide order dated 28/3/2013 determining the assessee s income at ₹ 1,52,65,030/-. 4. Aggrieved, by the order of the assessment for assessment year 2010- 11 dated 28/3/2013 denying it the deduction claimed u/s. 80P(2)(a)(i) of the Act, the assessee preferred an appeal before the CIT(A)-33, Mumbai. The ld. Commissioner of Income tax(Appeals) vide order dated 31/3/2014 disposed off the assessee s appeal, allowing it partial relief .The ld. Commissioner of Income tax(Appeals) following the decision of the Gujarat High Court in Jafari Momin Vikas Co op. Credit Society Ltd.(2004) (362 ITR 331) (Guj.) held that the assessee is entitled to deduction u/s. 80P(2)(a)(i) of the Act claimed by it in respect of the profits of its business of providing credit facilities to its members. However, with respect to interest of ₹ 5,63,180/- received on Secured Redeemable Non-convertible Debentures of Maharashtra Co op. Development Corporation Ltd. and interest of ₹ 1,49,500/- earned from Government Security Bonds, the ld. Commissioner of Income tax(Appeals) following the decision of the Hon ble Apex Court in the case of Totgar s Co operative S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of providing credit facilities to its members, is in order and is supported by judicial precedents laid down by the various High courts and Tribunals. In support of this proposition, the ld. AR placed reliance on the following judicial pronouncements:- (i) CIT vs. Jafari Momin Vikas Co op. Credit Society Ltd.(2004) (362 ITR 331) (Guj.); (ii) CIT vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot [2014] 369 ITR 86 (Kar); (iii) Shree Laxmananda Multipurpose Co-op. Society Ltd. (2014) 34 ITR (Tribunal) 472(Bang.Trib.); 7.3.1 We have heard the rival contentions and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon . From the material on record, it is seen that the ld. CIT(A) while disposing off the appeal for assessment year 2007-08 in the case on hand, which order has been followed by the ld. CIT(A)in the impugned order for the assessment year 2010-11, has observed that there is no dispute that the assessee accepts deposits only from its members and advances loans only to its members and does not have any banking licence. It was also observed that all the deposits on the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent- assessee not being a bank, exclusion provided in sub-section (4) of section 80P would not apply. This, irrespective of the fact that the respondent would not fall within the expression primary agricultural credit society . 6. Had this been the plain statutory provisions under consideration in isolation, in our opinion, the question of law could be stated to have arisen. When, as contended by the assessee, by virtue of sub-section (4) only co- operative banks other than those mentioned therein were meant to be excluded for the purpose of deduction under section 80P, a question would arise why then the Legislature specified primary agricultural credit societies along with primary cooperative agricultural and rural development banks for exclusion from such exclusion and, in other words, continued to hold such entity as eligible for deduction. However, the issue has been considerably simplified by virtue of the Central Board of Direct Taxes Circular No. 133 of 2007, dated May 9, 2007. Circular provides as under : Subject : Clarification regarding admissibility of deduction under section 80P of the Income-tax Act, 1961. 1. Please refer to your letter No. DC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Hon ble Gujarat High Court in the case of CIT vs. Jafari Momin Vikas Co op. Credit Society Ltd.(2004) (362 ITR 331) (Guj.), we uphold the finding of the ld.CIT(A) that the assessee is a credit co-operative society with no banking licence , accepting deposits and advancing loans only to its members, and is, therefore, entitled to deduction u/s. 80P(2)(a)(i) of the Act. We find there is no merit in the grounds of appeal raised by the revenue and accordingly dismiss Grounds raised at Sl. No.1 and 2. 8. The Ground at Sl.No.3 and 4 being general in nature, no adjudication is called for thereon. 9. In the result, Revenue s appeal for assessment year 2010-11 is dismissed. Assessee s appeal in ITA No.3477/Mum/2014 10. In this appeal for assessment year 2010-11, the assessee has raised the following grounds :- 1. On the facts and in the circumstances of the case, and also ill law, the learned CIT(A) erred in treating interest of ₹ 1,49,500/ - received by the appellant on Govt. Securities income from other sources, and, therefore, also erred in not allowing deduction u/s.8OP(2)(a)(i for the same. Your appellant, therefore, prays that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention of the Bench to the to the decision of the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd., (2015) (230 Taxman 309), submitting that the Hon ble Karnataka High Court has discussed and considered the decision of the Hon ble Apex Court (supra) at para-9 of their order and held that the finding therein has been rendered in the facts of that case and that therefore, the Hon ble Apex Court was not laying lying down any law. It is submitted that the Hon ble Karnataka High Court observed that the provisions of Section 80P(2)(a)(i) of the Act provides for deduction of the whole profits and gains of business attributable to the activity carried on by the assessee and, therefore, following decision rendered by the Hon ble Apex Court in the case of Cambay Electric Supply Industrial Company Ltd.(1978) (113 ITR 84), held that the interest earned by the from deposits kept in banks in attributable to the profits and gains of business of providing credit facilities to its members. The Ld. Representative for the assessee in support of this proposition also placed reliance on the decision of the Co-ordinate bench of the ITAT, Mumbai in the case of Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, 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, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members 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 assessee-Cooperative 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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