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TMI Blog2025 (5) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... 14/- has been disclosed by claiming deduction of Rs. 1,66,52,914/- u/Section 80P of Income Tax Act, 1961 ('Act' for short). On perusal of the data, the A.O. noticed that the Assessee has earned interest income/dividend income of Rs. 1,00,12,059/- and dividend income of Rs. 2,577/- in total Rs. 1,00,12,059/-. As per the A.O., the Assessee is not eligible for deduction u/s 80P (2)(d) of the Act and interest received on FDR and dividend are not allowable deduction u/s 80P of the Act. Accordingly, a notice u/s 148 of the Act has been issued on 30/03/2021. In response to the notice the Assessee field its return of income disclosing the same income as per original return. However, the return was invalid, a notice u/s 142(1) of the Act has been issued. During the assessment proceedings, the A.O. observed that the Assessee had claimed exemption of Rs. 1,00,12,059/- u/s 80(P)(2) (a)(i)/80P(2)(d) of the Act and further observed that the Assessee is engaged in the business of providing credit facilities only to is members and accepting deposit only from its member and the surplus fund deposited with the cooperative banks and the interest received thereon amounting to Rs. 1,00,12,059/- is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel relying on the order of the Co-ordinate Bench of the Tribunal in the case of Bharat Co-operative Thrift and Credit Society vs. ITO in ITA No. 4104/Del/2014 r.w. M.A No. 412/Del/2023 sought for allowing the Appeal. 6. Per contra, the Ld. Departmental Representative vehemently submitted that the Assessee being a Co-operative Thrift and Credit Society Ltd. registered with Co-operative Societies NCT of New Delhi, engaged in the business of 'providing credit facilities to its members' and the Ld. Departmental Representative further submitted that any interest income arising from deposit /investment of funds in banks and from other sources not related to 'business activities of the Assessee' and the same is in the nature of income from 'other sources' taxable u/s 56 of the Act. Any interest income arising from deposit /investment of funds in banks cannot be categorized as income from profit and gains of business of the Assessee. Since, the deduction under Section 80P of the Act is available only for the 'profit and gain of the business' of the Assessee providing credit facilities to the members, the said deduction is not available to the interest income which is in the nature of oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, depositing the funds which was collected from the members of the society and making investment /deposits in a bank cannot be held to be business of the Assessee and the interest earned thereupon cannot be treated as operational income of the society 'for providing credit facilities to its members'. 9. The Hon'ble Supreme Court in the case of Pr. Commissioner of Income Tax Vs. Totagar Co-operative (supra) held as under:- "13. What Section 80P(2)(d) of the Act, which was though not specifically argued and canvassed before the Hon'ble Supreme Court, envisages is that such interest or dividend earned by an assessee co-operative society should be out of the investments with any other co-operative society. The words 'Co-operative Banks' are missing in clause (d) of subsection (2) of Section 80P of the Act. Even though a co- operative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the Primary Agricultural Credit Societies with their limited work of providing credit facility to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king business and its objects did not contemplate investment of surplus funds received 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 Date of Judgment: 16.06.2017 ITA No.100066/2016 & Connected cases The Pr. Commissioner of Income Tax, C R Building, Navanagar, Hubballi. & Anr. Vs. The Totagars Co-Operative Sale Society, Sirsi. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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