TMI Blog2020 (11) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... enses expended out of this donation will be deducted from the said donation by not charging the same into Income Expenditure Account. Therefore we direct the Assessing Officer to redo the assessment accordingly. Being so, in our opinion, the said contribution is received by the assessee cannot be treated as income of the assessee. This ground of the appeal of the assessee is partly allowed. Denial of exemption u/s 10(23C)(iiiab) - Whether assessee satisfying the twin conditions i.e. existing solely for educational purposes and not for profit and substantially financed by the Government ?- HELD THAT:- Following the Tribunal order in assessee's own case for A.Ys. 2006-07 2005-06 we set aside the order of CIT (Appeals) on this issue and restore the order of Assessing Officer in this regard. This ground of appeal is dismissed. Disallowing deduction claimed u/s 80P(2)(d) - interest earned from savings bank account kept with the co-operative banks on the ground of investments are made in co-operative societies - HELD THAT:- To avail deduction Under Section 80P(2)(d)(i) of the Act, if the assessee carries on business of the banking or providing credit facilities to its m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,052; ₹ 13,25,27,459 and ₹ 16,57,07,934 for the Assessment Years 2013-14, 2014-15 2015-16 respectively towards co-operative education fund as income of the assessee. The assessee made plea before the CIT (Appeals) that the said amount was collected from various co-operative societies towards education and training as per the requirement of provisions of Karnataka Co-operative Societies Act, 1959. The utilization of the said amount is defined in the said provisions of the Act and prior approval of Advisory Board constituted for the purpose as prescribed. The assessee does not have any right or power over the funds and it is required to spend the amount only as provided in the statute. It has to be utilized as directed by the Advisory Board for the purpose of imparting education to the members, directors and members of co-operative societies and general public and training to the employees of the co-operative societies. The assessee shall utilize such funds for the activities of Federation for the purpose specified. It was collected by the assessee only because of its statutory requirement and therefore amount collected for co-operative education fund was not considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived for specified purpose, it should be considered as diverted at source by over-riding title. He relied on the orders of the lower authorities. 6. We have heard both the parties and perused the material on record. The assessee is a registered co-operative society under Karnataka Societies Act, 1959 Under Section 57(2A) of Co-operative Societies Act, every co-operative society shall contribute 2% of its net profits to co-operative education fund to be administered by the assessee i.e. Karnataka State Co-operative Federation Ltd. As per Section 57A of the Karnataka Societies Act, 1959, the said amount has to be expended in such manner as may be prescribed. We reproduce the relevant provisions of Section 57(2A) and 57A of the Karnataka Societies Act, 1959 as under : 57A - Co-operative Education and Training 1) The co-operative education fund shall be utilised for the purpose of promotion of the co-operative movement in the State and for providing education to the members, directors and co-operators of the co-operative societies and the general public and training to employees of the co-operative societies. 2) Every co-operative society shall pay its contribution to the K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooperative Milk Federation Ltd., Karnataka State Cooperative Urban Banks Federation Ltd., and Karnataka State Credit Cooperative Societies Federation Ltd., Member are the members. (c) The Director, Regional Institute of Co-operative Management, Bangalore. Member (d) The Registrar of Cooperative Societies or his Nominee Member (e) The chief executive officer of the State co-operative Federation. Member Secretary (3) The quorum for a meeting of the advisory committee shall' be five. The advisory committee shall be convened at least once in three months. (3A) No decision shall be taken by the Board of the Karnataka State Co-operative Federation Limited which contravenes the decision of the advisory committee, (4) The Karnataka State Cooperative Federation shall maintain this fund in a separate account and all income by way of interest or otherwise accruing from the contribution towards this fund shall be credited to this fund. (5) No expenditure out Of the co-operative education fund shall be. incurred without the approval of this advisory committee. The auditor Of the State Co-operative Federation shall verify the utilization of the fund and certify the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative, the above provisions show that Federation does not have control over the funds and is required to spend the amount only as provided in the statute. S.57A mandates that the co-operative fund shall be utilized for the purpose of promotion of co-operative movement and providing education to members and others. It also requires that the amount contributed under Section 57(2A) should be credited to a fund account and the fund shall be administered as prescribed in the Rules. It also states that no expenditure can be incurred without the approval of the advisory board. Rule 20(4) states that the Federation must maintain a separate account and all income by way of interest or otherwise that accrue from the contribution towards education fund shall be credited to this fund account. This means that the Federation cannot utilize the education fund (both the principal and interest) as if it is its own funds. It is also mandatory to spend the education fund only towards the purposes mentioned in Rule 20(6). Under Rule 20(6), the funds have to be utilized for education of members, human resource development, development of co-operative societies, activity building and business man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in it was held that the amount collected from customers by way of Dharmada which was charged in invoice is not income as it came with an obligation to spend the money so collected for charitable purposes. 6.2 In the present case, the contribution received by the assessee from co-operative societies towards specific purpose and the assessee has not discretion to spend the amount and utilize above fund is decided by the Advisory Board consists of different persons as per the direction of the Government of Karnataka. The donations received by the assessee were for specific purpose. The donations whch are for specific purposes do not belong to the assessee. Such donation do not form its income of the assessee. This donation is for specific purposes would only mean that the assessee, as agreed to act as a trustee for this amount received from various co-operative societies and it cannot be treated as assessee's normal income. In this case, the assessee is acting as an independent trustee for that donation received from various societies as per the provisions of Section 57A r.w.s. 57(2A) of Karnataka Societies Act, 1959 and it cannot be considered for taxing the same. However, we obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety. 7. Undisputedly, the assessee is a State Co-operative Federation of co-operative societies and its members are District Co-operative Unions, Apex Federal Co-operative Society, Co-operative Spinning Mills, Cooperative Sugar Factories, Co-operative Societies whose area of operation s more than districts but extends upto State and Co-operative Societies registered under Multi State Co-operative Societies and whose Had Office is located in the State of Karnataka. The main objects of the assessee are to function as the accredited representative of the co-operative movement in Karnataka State with a view to further its progress and to safeguard its interest and also to impart training to the employees of Co-op. Societies, Dept. of Co-operation and Dept. of Co-op. Audit, Govt. of Karnataka. For the sake of reference, we extract the objects of the assessee society as under:- (i) To function as the accredited representative of the cooperative movement in Karnataka State with a view to further its progress and to safeguard its interest in such a way that the benefits of the co-operative movement shall be open to all irrespective of caste, creed and religion; (ii) To propagate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... help the coordinated functioning of the co-operative movement in various sectors; (xiii) To conduct State Level / National Level Co-operative Conferences, Seminars, Meetings, Workshops, Exhibitions and competitions in Essay writing, Debates etc. among students of High Schools, Colleges and Universities; (xiv) To acquire, purchase, own or dispose of the immovable property by way of sale, lease, exchange or otherwise for the furtherance of the objects of the Federation with approval of the general body; (xv) To promote study and research on problems connected with rural development in general and cooperation in particular and to conduct socio-economic surveys of rural and urban areas and to take up consultancy work, valuation etc., (xvi) To establish printing press for printing of books, journals, periodicals and newspapers, including text books, magazines. other books and other requirements of cooperatives; (xvii) To raise funds including corpus fund and administer the funds so raised according to these bye-laws and subsidiary rules framed by the board from time to time; (xviii) To advise the Government on matters relating to cooperative movement from time to time; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deduction under Section 80P(2)(d) of the Act. The learned Authorised Representative relied on the decision of Bangalore Bench of Tribunal in the case of Menasi Seemaya Group Gramangala Seva Sanghe Niyamita Vs. DCIT in ITA Nos.609 610/Bang/2014. However, the D.R. is of the opinion that the interest received on savings bank account is not in accordance with above judgments. In our opinion, as per the Section 80P(2)(d) of the Act, the only condition for availing the deduction under this provision is any income by way of interest or dividend derived by the co-operative society from its investment with any other co-operative society, the whole of such income is allowable as a deduction. Therefore there is no condition for the assessee society to invest in Fixed Deposits only. As regards the co-operative bank shall be treated as co-operative society for the purpose of interest income on investment in such co-operative bank Under Section 80P(2)(d) of the Act. It was decided by the Hon'ble Supreme Court in the Totgara Co-operative Sales Society Ltd. cited supra that while interpreting the Section 80P(2)(a) of the Act, the surplus fund not immediately require for the business and in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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