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TMI Blog2020 (11) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus funds for the time being in anticipation of lending the same to the members. 3. The assessee is in the business of providing credit facilities to its members, charges interest and earns income. The assessee earned interest on F.Ds in different co-operative banks amounting to Rs. 14,80,232 and claimed deduction under Section 80P of the Income Tax Act, 1961 ('the Act'). The lower authorities disallowed the claim of deduction against this income and added to the income of the assessee. The contention of the assessee before lower authorities was that assessee is basically a co-operative society and registered under Karnataka Co- operative Society Act, 1959 and as such the interest income earned from S.B. Account and F.Ds Account which is eligible for deduction under Section 80P(2) of the Act. 3. On the other hand, the contention of the Department is that the assessee is not a purely co-operative society and being so, the CIT (Appeals) relied on the decision of judgemnet of Hon'ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO 322 ITR 283 and confirmed the disallowance order by Assessing Officer. 4. I have heard both the parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of Hon'ble Allahabad High Court rendered in the case of CIT Vs. Hari Nath and Co. (supra) on which reliance was placed by ld. DR of revenue, I find that in this case, it was held by Hon'ble Allahabad High Court that decision of Division Bench given in an earlier case is binding on its subsequent bench of the same High Court. There is no quarrel on this aspect but this is not the case of the SMC bench of the Tribunal as per the subsequent order that the decision of the Division Bench of the Tribunal in the case of M/s. Udaya Souharda Credit Co-operative Society Ltd. (supra) is not binding on the Tribunal whether SMC Bench or Division Bench. As per the subsequent decision of the SMC Bench of the Tribunal, it was held that as per the earlier decision of the Division Bench of the Tribunal, the matter was restored back to the AO for a fresh decision in the light of Karnataka Souharda Sahakari Act, 1997 and this was done by CIT (A) and AO as directed by the tribunal and because of this reason, SMC bench of the Tribunal held that now the issue has to be decided by the Tribunal at its own level instead of again restoring the matter back to the file of AO and after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ;" 7. As can be seen from the aforesaid definition of 'Co-operative society' under the Act, any co-operative society registered under any other law of any State for registration of co-operative society is also regarded as co-operative society under the Act. Souhardas' also operate on the principle of co-operation and adopt the principles of co-operation. Cooperative Societies and Co-opertives are all founded on the principle of cooperation. 8. Since the beginning of mankind the concept of 'co-operation' has been the foundation for harmonious existence In India, the Cooperative Societies Act 1912 regulated formation, management, winding up and other supervision by the Government etc. This Act became the model for the provincial governments to form their own Cooperative Acts. Post-Independence, various state governments framed their own independent Cooperative Acts and the Central Government its Multi-State Cooperative Act. Accordingly, Karnataka State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and matters connected therewith; WHEREAS it is expedient to provide for recognition encouragement and voluntary formation of co-operatives based on self-help, mutual aid, wholly owned, managed and controlled by members as accountable, competitive self-reliant and economic enterprises guided by cooperative principles and for matters connected therewith; BE it enacted by the Karnataka State Legislature in the Forty-eighth Year of Republic of India as follows:- 10. The Souharda Cooperatives enjoy functional autonomy in design and implementation of their Business plans, customer service activities, etc., based on the needs of their members. Unlike other forms of cooperatives in India, the interference of State / Central in day-to-day operations of Souharda Cooperatives is almost minimal. 11. The above discussion would show that souharda co-operatives are also one form of co-operative societies registered under a law in force in the State of Karnataka for registration of co-operative societies. Therefore, the conclusion of the revenue authorities that co-operative societies and co-operatives are different and that co-operative registered as Souharda Sahakari cannot be regarded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n afresh, with a direction to the Assessee to produce a certificate from RBI that it does not possess license from it for doing banking business and further that business carried on by Assessee is not akin to business of a co-operative bank. Further the first part of Sec.80P(2)(a)(i) allows deduction in respect of income derived by a co- operative Society from business of banking. Even the claim of the Assessee for deduction requires to be examined under the first part of Sec.80P(2)(a)(i) of the Act. Hon'ble Supreme Court in case of Citizen Co- operative Society Ltd. (supra) has also held that, it is also important to ascertain as to what is the nature of income which is claimed as exempt and as to how the principle of mutuality is not violated in respect of such income. An examination of - (i)the memorandum of association, the articles of association, (ii) the byelaws and other documents explaining the rules and regulations of the society is necessary, so as to clearly understand the purpose and the nature of business done by it. An examination of the facts in light of discussion cited by Ld.CIT(A) as well as decision of Hon'ble Karnataka High Court in case of Tumkur (Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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