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The Arbuda Credit Co-op. Society Ltd. Versus ACIT, Banaskantha Circle, Palanpur

2016 (4) TMI 854 - ITAT AHMEDABAD

Denial of deduction u/s 80P(2)(a)(i) - Held that:- Assessee is eligible for deduction u/s 80P(20(a)(i) of the Act for the interest income earned on unutilized idle funds kept for business purposes of the society being deposited with Banas bank . In the result, the impugned additions of the appeals of assessee are deleted. See TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED Versus THE INCOME TAX OFFICER, WARD-1, TUMKUR [2015 (2) TMI 995 - KARNATAKA HIGH COURT] - Decided in favour of assessee .....

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.2015 for Asst. Years 2011-12 & 2012-13 respectively. The assessee has raised various grounds of appeal for both the years but the solitary issue in all these grounds is regarding denial of deduction u/s 80P(2)(a)(i) of the Act at ₹ 55,731/- for Asst. Year 2011-12 and ₹ 69,486/- for Asst. Year 2012-13 for interest income earned from short term deposits with banks out of liquid funds with the assessee. 2. Briefly stated facts of the case are that the assessee is a credit co-op. so .....

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(a)(i) and ₹ 55,731/- u/s 80P(2)(d) of the Act whereas in Asst. Year 2012-13 addition was on account of disallowance of interest u/s 80P(2)(i) of the Act. 3. In both the Asst. Years assessee has claimed deduction for income from interest from Banaskantha Dist. Co-op. Bank and the same was denied by the Assessing Officer. Aggrieved, assessee went in appeal before ld. CIT(A) and for Asst. Year 2011-12 ld. CIT(A) deleted addition of ₹ 33,11,115/- and confirmed the addition of ₹ 55 .....

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even if it is held that Banas bank is not a credit co-op. society and not eligible for deduction u/s 80P(2)(d) but alternatively deduction u/s 80P(2)(a)(i) is also available on such interest income earned through short term deposits with banks and, therefore, ld. CIT(A) was not correct in denying the benefits to the assessee. In support of his contention ld. AR relied on the decision of Hon. Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO in ITA No.307 of .....

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asst. years 2011-12 and 2012-13 respectively for interest income earned from deposits with the bank. Let us first go through the facts of the objects of assessee. From going through the bye-laws of the co-operative society, we find that assessee society has got following objects and rules about funds :- (2) OBJECTS (1) To increase the sense of thrift, savings and mutual cooperation among the members and encourage it. (2) To collect funds, deposits from the members. (3) To take on hand the differ .....

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Funds will be raised from the following ways :-share obtain funds. A. By share B. To obtain funds I. From Members. k. By taking amount on loan. d. By gift. e. by entrance fee. : (4) To collect fund by selling shares should not be more than ₹ 50 00 000/- The value of: each share will remain ₹ 100/-' (5) The deposits and loans for fixed deposit in current or savings account can be taken at the rate of interest and amount as decided by the managing committee. But the total amount of .....

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f registrar. 7. From the above we find that the assessee s main object is to take deposits from its members and to provide loan to the needy members for various business and personal purposes and as regards of funds it is also mentioned in the bye-laws that in order to give optimum return to the members unutilized funds may be invested for earning interest income by deposits with banks or other co-op. society. 8. We further find that the interest income of ₹ 55,731 and ₹ 69,486/- for .....

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from its members. We find that Hon. Karnataka High Court has dealt with similar issue in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO (supra) wherein it has been held as under :- 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 assess .....

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. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order. 9. We also find that similar issue was dealt by the Tribunal, Delhi Bench in ITA No.2607/Del/2012 for Asst. Year 2008-09 in the case of ACIT vs. M/s Jawala Co-operative Urban .....

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der Maharashtra Cooperative Societies Act and we further find that the said society has been assessed u/s 143(3) as a cooperative society and its income was allowed to be exempt u/s 80P(2)(i) as held by Mumbai Tribunal in I.T.A. No. 4128 and 4129 vide its order dated 30.11.2005, for Assessment Year 1990-91 and 1991-92 and further by Mumbai Tribunal vide order dated 07.09.2011 in I.T.A. No. 5292 for Assessment Year 1997-98. Therefore it is held that fixed deposits placed with Bombay Mercantile Ba .....

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