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The Income Tax Officer, Ward-3, Shivamogga Versus M/s. Malnadu Credit Co-operative Society Ltd.,

2017 (3) TMI 260 - ITAT BANGALORE

Additions made u/s. 80P(2)(a)(i) - Held that:- As per sec. 2(19) of the Act, a co-operative society means a co-operative society registered under the co-operative societies Act 1912 or under any law for the time being in force in any state for the registration of co-operative societies. The provisions of the IT Act 1961 either in sec. 2(19) or u/ s. 80P do not make any discrimination between the co-operative societies carrying on banking business and other co-operative societies. Co-operative ba .....

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gible for deduction u/ s. 80P(2) (d) of the Act. - Thus held that the interest income earned on deposits made with other co-operative banks/society are fully deductible u/s. 80P(2)(a)(i) from the income liable to tax though the assessee has claimed the same as exempt u/ s. 80P(2) (d) and the same is also exempt u/ s. 80P(2)(d) as stated above. - Decided in favour of assessee - ITA Nos. 786 to 788/Bang/2016 - Dated:- 3-3-2017 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, AC .....

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Commissioner of Income Tax (Appeals), Davangere, erred in deleting the additions made u/s. 80P(2)(a)(i) by deciding the Co-operative Societies are distinct from Co-operative Banks and deduction U/s 80P(2)(a)(i) is applicable to Co-operative Societies as well as deduction U/s 80P(2)(d). On similar issues, SLP filed in Supreme Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot and also in the case of M/s. Honnali Urban Co-operative Society, Honnali. 3. For thes .....

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of jurisdictional High Court in the case of CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot, 369 ITR 86 (Kar) and Tumkur Merchants Souharda Credit Co-operative Ltd. v ITO (ITA No.307 of 2014 dated 28.10.2014). This issue is also covered by the following orders of the Tribunal of Bangalore Bench:- 1. Menasi Group Gramagala Seva Sahakari Sangha Nyt v. CIT (ITA Nos. 609 & 610/Bang/2014 2. The Jamkhandi Minority Credit Co-op. Society Ltd. v. ITO (ITA No.958/Bang/2014) 3. .....

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ts members. It claimed gross income as deduction u/s. 80P under Chapter VIA and declared Nil income The Assessing Officer was of the opinion that the assessee was not entitled for deduction u/s. 80P in view of amendments to Banking Regulation Act, according to which, co-operative societies engaged in providing credit facilities to its members will come under the purview of RBI and therefore are akin to co-operative banks, hence all the provisions of section 80P(4) of the Act apply to them also. .....

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ources. 5. The assessee preferred appeal before the CIT(Appeals) and relied upon the various judgments of different High Courts and the Tribunal. The CIT(Appeals) re-examined the issue in the light of judgments referred to before him and following his earlier order, has allowed the deduction and deleted the addition. The relevant observations of the CIT(Appeals) is extracted hereunder for the sake of reference:- 5. I have gone through the assessment orders, grounds of appeal for all the three as .....

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s. 80P(2) (a) (i) of the Act, keeping in view the provisions of sec. 80(P)(4) of the Act. I have gone through all the arguments of the AO. My predecessor in his order ITA No.CIT(A)No. 276/HBL/2010-11 dated. 25/01/2011 in the case of Bhavasara Kshatriya Co-operative credit society Ltd., has clearly held that Sec. 80P( 4) will not be applicable to Cooperative societies and they enjoy complete exemption of income u/ s. 80P(2)(a)(i). He has also made clear distinction between a Co-operative Society .....

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interest is attributable to the business of providing credit facilities to its members is the question that requires to be decided or whether the interest earned on deposits kept with other banks is deductible u/s. 80P(2)(d). 8. For this purpose it is necessary to go through the provisions of sec. 80P which are short listed as below. 8OP (2) (d) ..... In the case of co-operative society engaged in, I. Carrying on business of banking or providing credit facilities to its members or. II. - or III .....

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nded to meet any unforeseen losses. 2. The amount that is eligible for deduction under this section is the amount of profit attributable to the activity mentioned in sec. 80P(2)(d) and the activity of the assessee falls under sub-clause (i) viz, providing credit facilities to members. 3. It is the activity that is the condition precedent for claiming deduction u/ s. 80(P) of the Act and once it is proved beyond doubt that a particular income is "attributable" to only the activities men .....

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inextricable to and inextricably linked with the activity of providing credit to its members and consequently the interest thereon can't be considered as a source of income having distinct identity for itself. 7. The word "attributable to" is much wider than the word "derived from" and as such the legislature used this word to cover receipts from sources other than the actual conduct of the business, as held by the Supreme Court in the case of Cambay Electric Supply Indu .....

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her co-operative society, the whole of such income is eligible for deduction. 10. As per sec. 2(19) of the Act, a co-operative society means a co-operative society registered under the co-operative societies Act 1912 or under any law for the time being in force in any state for the registration of co-operative societies. The provisions of the IT Act 1961 either in sec. 2(19) or u/ s. 80P do not make any discrimination between the co-operative societies carrying on banking business and other co-o .....

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