TMI Blog2016 (5) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sr.DR For The Respondent : Shri H. V. Doshi, AR ORDER PER Manish Borad, Accountant Member . This appeal by Revenue and the Cross Objection by the assessee are directed against the order of ld. CIT(A), Gandhinagar, Ahmedabad, dated 11.5.2012 in appeal no.CIT(A)/GNR/158/2011-12. Assessment was framed u/s 143(3) of the IT Act, 1961 (in short the Act) for Asst. Year 2009-10 on 18/11/2011 by ITO, Patan Ward-3, Mehsana. Revenue has raised following grounds of appeal :- 1. The learned CIT (Appeals) has erred in law and on facts in deleting the disallowance of ₹ 35(90,300 made by the AO u/s.80P(2)(a)(i) of the Act. 2. On the facts and circumstances of the case the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. It is therefore prayed that the order of the learned ClT(Appeals) may be set aside and that of the A.O. be restored to the above extent. 2. Grounds raised by assessee in its Cross Objection are as under :- 1. The learned CIT(A) has erred in law facts in disallowing deduction u/s. 80-P to the extent of ₹ 63190/- by treating the income from interest on bank deposits as taxable u/s, 56 of I.T. Act. 2. The Appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) allowing deduction u/s 80P(2)(a)(i) of the Act and assessee has also filed Cross Objection for the addition of ₹ 63,190/- made by ld. CIT(A). 6. First we will take up revenue s appeal in ITA No.1723 /Ahd2012. 7. Ld. DR supported the order of Assessing Officer and the ld. AR relied on the order of ld. CIT(A) in regard to his decision in relation to deduction u/s 80P(2)(a)(i) of the Act. 8. We have heard the rival contentions and perused the material on record. The only issue raised by Revenue is against the action of ld. CIT(A) deleting the disallowance of ₹ 35,90,300/- made u/s 80P(2)(a)(i) of the Act. From perusal of the record, we observe that assessee is a co-op. credit society which confines its business only to its members and objects of the assessee society depicts the picture of the working of the society wherein the object relates to collecting funds and deposits from its members and to give funds for its business and other needs to its members. Further from going through the order of ld. CIT(A) we find that the issue has been dealt in elaborately by observing as under :- 6. I have gone through the facts of the case, the assessment order and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACSJ, a cooperative credit society is defined as a cooperative society, the primary object of which is to provide financial accommodation to its members and includes a cooperative land mortgage bank. This type of institutions are thrift societies. The distinction between a primary credit society and a cooperative credit society is with reference to their nature of business. The primary object or principal business of a primary credit society is the transaction of banking business. When its paid up capital and reserves attain the level of Rs.l lakh, a primary credit society automatically becomes a primary cooperative bank. However, even after a primary credit society becomes a cooperative bank, it has to apply to RBI for a license to carry on banking business. But it can carry on banking business until it is granted a license or notified that a license cannot be granted to it. The above report clearly defines the circumstances in which a credit society can be allowed to carry on banking business. These include 'Primary Credit Society', when its paid up capital and reserve attain the level of ₹ 1 lac, which can carry on business of banking until it is granted a lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 80P(2)(a)(i) of the Act and also facts were clearly distinguished with the facts which were there before Hon. Supreme Court in the case of Totgars co-op. Sale Society Ltd. vs. ITO(supra). 13. Ld. DR supported the order of ld. CIT(A). 14. We have heard the rival contentions and perused the material on record. Solitary grievance raised by the assessee in its Cross Objection is arising out of the decision of ld. CIT(A) who has held that interest income on bank deposits at ₹ 63,190/- is taxable as income from other sources u/s 56 of the Act and is not eligible for deduction u/s 80P(2)(a)(i) of the Act as it has not earned the same through the regular activities relate to its members as enumerated in the objects of the assessee co-op. credit society. 15. We find that ld. AR has referred and relied on the decision of the co-ordinate bench in the case of ITO vs. M/s Jafari Momin Vikas Co-op. Credit Society Ltd.(supra) wherein similar issue came up before the Bench as that of the present assessee. We further observe that co-ordinate bench in its decision (referred above) has clearly distinguished the facts before it vis- -vis the facts before Hon. Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the category of income from other sources , hence, such interest income would be taxable under section 56 of the Act, as rightly held by the assessing officer 19.1 However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon ble Supreme Court (On page 286) 7 Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 and not under section 56 of the Act and, consequently, the 14 assessee(s) was entitled to deduction under section 80P(2)(a)(i) of the Act. The argument was rejected by the assessing officer as also by the Tribunal and the High Court, hence, these civil appeals have been filed by the assessee(s). 19.2 From the above, it emerg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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