TMI Blog2017 (10) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax(Appeals)-Gandhinagar, Ahmedabad, dated 13/06/2014, in the matter of assessment under section 143(3) of the Income tax Act, 1961 ( the Act hereinafter ), for the Assessment Year (AY) 2010-11, on the following Grounds: i. The CIT(A) has erred in directing the AO to tax the whole interest income received by the appellant from fixed deposit of Sardar Sarovar Nigam Limited of ₹ 2,88,815/- under the head: Income from other sources u/s.56 of the Income Tax Act, 1961. ii. Without Prejudice to above it is submitted that even if such interest income of ₹ 2,88,815/- is taxable u/s.56 of the Act, the expenditure incurred for earning such income must be allowed u/s.57 of the Act and Pro-rata interest income received from fixed deposit of Sardar Sarovar Nigam Limited only can be taxed. It is submitted that the same be allowed now. 2. The relevant facts as culled out from the materials on record are as under:- The appellant had filed return of income declaring total income at Rs. Nil after claiming deduction of ₹ 13,14,930/- u/s.80P(2)(a)(i) of the Act. The return was processed u/s.143(1) of the Act at the income of ₹ 13,93,850/- aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sub section- co-operative bank and Primary Agricultural Credit Society shall have the meanings respectively assigned for them in part V of the Banking Regulation Act 1949. In Banking Regulation Act, 1949, Part V the definition of Primary Agricultural Credit Society is given as that society- 1). The primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of corps); and 2). The bye-lows of which do not permit admission of any other cooperative society as a member. 3.8 In the present case, verification of the Audit Report of the society does not reflect that society is meant to provide loans to members for agriculture purpose. Business of the society as per Audit Report is providing credit facilities to members. Perusal of loan applications furnished with the submission shows that the loans were granted for the purpose other than agriculture i.e. for social and housing purpose. Decision of Jafri Momin Vikas Co-op Credit Society Ltd relied upon by assessee has not been accepted by the department. In the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Societies under the Act. The Appellant has a status of Co. Operative-Society as per its constitution and the objectives of the societies are to help the members only by way of finance in need and undertake other activities for their promotion and development. Also the Assessee is a Co-Operative Society registered under Registrar of Co.Op. Society, Mehsana, Gujarat State. The copies of registration Certificate of Society and the Bye Laws stating the objectives of the society are enclosed herewith as per Page no.l to 28, which clearly indicate that the Appellant does not fall into criteria laid down by the amendment in the Finance 2006 to restrict the deduction by insertion of Sec.80P(4) by the amendment in the Finance 2006. It is respectfully submitted that the above matter is already covered and decided in favor of assessee by Hon'ble CIT in its own case in Appeal No.CIT(A)/GNR/li9/2011-12 for A.Y.2009-10. The copies of which are enclosed herewith vide Page No.29 to 44. Against Order of CIT, Revenue made an appeal before ITAT on 13/06/2012 But Same is dismissed by the ITAT by stating on Page No.2 3 CIT(A) has recorded a finding that the assessee has been claiming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has got a much restricted meaning and, the relationship between a society and a public has to be understood in a much larger sense. The copy of the same is also enclosed herewith vide Page no. 73 to 85. The Appellant also relies on the order given by the Hon ble High Court of Gujarat in the case of CIT Vs. Jafari Momin Vikash Co-op. Credit Society Ltd, where in the Hon ble High Court has clearly stated on Page 5 6 of the order Sub Section (4) of Section 80P will not apply to an assessee which is not a co-operative bank and assessee is admittedly not a credit co-operative bank but a credit cooperative society The copy of order passed by the Hon ble Gujarat High Court is also enclosed herewith vide page no.86 to 90. Further the Appellant relies on following decisions, wherein the consistent view have been taken by the Hon ble Apex Court and other Authorities on the same issue: ( i) M/s. The Totgars' Co. operative Sale Society Ltd V/s I.T.O., Karnataka [Civil Appeal No.1622 of 2010 (S.C.)] [Refer Page no.91 to 104] ( ii) Mehsana District Central Co-Operative Bank Ltd. V/s I.T.O. [119 Taxman 785 (S.C.)] (Refer Page no. 105 106] ( iii) ACIT Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from its members. The business of a credit society like that of the assessee was limited to providing credit to its members and the income that was earned by providing such credit facilities to its members was deductible under section 80P(2)(a)(i). The character of interest was different from the income attributable to the business of the assessee-society providing credit facilities to its members. The interest income derived from investing surplus funds with the bank must be closely linked with the business of providing credit facilities for it to be held attributable to the business of the assessee. Therefore, the profits and gains could be said to be directly attributable to the business of providing credit facilities to its members if there was a direct and proximate connection between the profits and gains and the business of the assessee. There was no obligation on the assessee to invest its surplus funds with the bank. Investing surplus funds in a bank was no part of the business of the assessee providing credit facilities to its members and hence it could not be said that the interest derived from depositing its surplus funds with the bank was profits and gains of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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