2008 (4) TMI 348

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....for the exemption, should be confined to the members of the co-operative society and since the banking business was carried on in relation to both members and non-members of the assessee society, the income earned therefrom was not eligible for the exemption. In fact, the AO took the view that since the aforesaid statutory provision referred to members of the assessee society while giving exemption to the income earned from providing credit facilities, the same qualification should also be read into the business of banking and inasmuch as the said business was carried on both with the members and non-members the income was not eligible for the exemption. In the alternative, he held that the assessee cannot be considered to be carrying on th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ct. The same was added back and the taxable income was determined at Rs. 66,44,630. The assessment having been confirmed by the CIT(A) on substantially the same grounds, the assessee is in further appeal before the Tribunal. 2. We have carefully considered the rival contentions in the light of the facts. We are unable to accept the stand of the Departmental authorities that the business of banking should be confined to the members of the co-operative society in order to be eligible for the deduction under s. 80P(2)(a)(i). The condition that the business should be confined to the members of the co-operative society is attached only to the business of providing credit facilities and does not extend to the business of banking. This is as a ma....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....td. (2005) 198 CTR (Guj) 1 : (2006) 280 ITR 282 (Guj) fully supports this interpretation of the section. This judgment has been followed by the Hyderabad Bench of the Tribunal in Mali Co-operative Urban Bank Ltd. vs. ITO (2007) 109 TTJ (Hyd) 116 : (2007) 106 ITD 151 (Hyd). Thus, the view taken by the Departmental authorities to the contrary is not legally correct. 3. The assessee has put forth its claim on the footing that the income arises from the carrying on of the business of banking. The AO has stated that the assessee is not carrying on the business of banking. He has referred to s. 61 (1) of the UP Co-operative Societies Act, 1965 which says that a co-operative society shall not make a loan to any person other than a member. However....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ng or advancing of money either with or without security, etc. These provisions show that the lending of monies by a banking company can be to the members of the public which means that it need not be confined to the members of the co-operative society. The assessee bank functions under the supervision and control of the RBI and carries on banking business. The decision of the IT authorities to the contrary cannot be accepted. 4. Even if the assessee is held not to carry on the business of banking and to be carrying on only the business of providing credit facility, the income from such activity cannot be denied the deduction because the interest arises and is received only from the members of the assessee society. In para 7 of the assessm....