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The Income-tax Officer Versus Sant Amardas Urban Credit Co-op. Society Ltd.

Nature of income - interest income treated as business income - Held that:- Considering the submissions of the assessee’s counsel is that the assessee society is maintaining operational funds and to meet any eventuality towards repayment of deposit the cooperative society is maintaining some liquidated funds as short term deposits with banks. Hence adhering to the doctrin stair desises, we hold that the assessee should be granted benefit of deduction under section 80P(2)(a)(i). Accordingly, the .....

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, Nagpur dated 22-08-2014 and pertains to assessment year 2010-11. The grounds of appeal read as under : 1. On the facts and circumstances of the case, the Ld. CIT (Appeals) has erred in treating the interest income of ₹ 39,38,620/- as business income since the same is not attributable to the assessee's business of providing credit facility to its members. 2. On the facts and circumstances of the case, the Ld. CIT (Appeals) erred in not appreciating the assessing officer's decision .....

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qarely applicable to the facts in assessee's case. 4. Whether the fact & in the circumstances of the case and in law, Learned CIT(A) erred in deleting the addition of ₹ 29,361/- made u/s 80P of the I. T. Act-1961 on account of Godown rent of ₹ 3,43,616/-, DD Commission of ₹ 1,02,789/- and RTO Licence Fees of ₹ 1,200/- without appreciating the fact that such income is not attributable to the banking activities carried out by the assessee and without considering the .....

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esent case. 2. Ground Nos. 1,2&3: Treatment of interest income on deposits with cooperative society. Upon hearing the learned counsel of the assessee and perusing the records, we find that the above issue is covered in favour of the assessee by the decision of this ITAT, referred by the Ld. CIT(A) in his appellate order. The distinction mentioned in the Grounds of appeal is not at all sustainable. We further find that this Tribunal again in the case of Chattisgarh Urban Sahakari Sanstha Mary .....

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ned that the Co-operative Society is maintaining operations funds and to meet any eventuality towards re-payment of deposit, the Co-operative Society is maintaining some liquidated funds as a short term deposit with the banks. This issue was thoroughly discussed by the ITAT B Bench Ahmedabad in the case of The Income Tax Officer vs. M/s.Jafari Momin Vikas Co-op. Credit Society Ltd. bearing ITA No.1491/Ahd/2012 (for A.Y.2009-10) and CO No.138/Ahd/2012 (by Assessee) order dated 31/10/2012. The rel .....

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rned with the tax treatment of such amount. Since the fund created by such by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is whether interest on such deposits/securities, which strictly speaking accrues to the members account, could be taxed as business income under section 28 of the Act? In our view, such interest income would come in the category of income from other sources , hence, such interest income w .....

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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 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 Tribuna .....

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) acceptance of deposit and lending by way of deposits to the members; and (ii) marketing the agricultural produce; and (d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3. In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4. While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities .....

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assessee was deposits from its members and, thus, there was no surplus funds as such; - in the case of Totgars, the Hon ble Supreme Court had not spelt out anything with regard to operational funds; 19.5. Considering the above facts, we find that there is force in the argument of the assessee that the assessee not a co-operative Bank, but its nature of business was coupled with banking with its members, as it accepts deposits from and lends the same to its members. To meet any eventuality, the .....

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. Sale Society Ltd. 9supra) cannot in any way come to the rescue of either the Ld.CIT(A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT(A) was not justified in coming to a conclusion that the sum of ₹ 9,40,639/- was to be taxed u/s.56 of the Act. It is ordered accordingly. 5. Respectfully following the above decision of the Co-ordinate Bench, we hereby hold that the benefit of deduction u/s.80P(2)(a)(i) was rightly granted by ld.CIT(A), however, he .....

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