TaxTMI 
TaxTMI 
2015 (2) TMI 5
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....the interest received from the SBI to the extent of Rs. 30,84,097/- as well as saving bank interest of Rs. 32,077/- from Sindhudurg District Central Co-operative Bank Ltd. (SDCCL). In the opinion of the Assessing Officer the interest income received by the assessee cannot be treated as a part of its business activities within the meaning of Sec. 80P(2(a)(i) of the Income-tax Act. The Assessing Officer relied on the decision of the Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Vs. ITO 322 ITR 283 (SC) and held that the interest earned by the assessee Co-operative Society cannot be treated as a part of its business activity of providing the credit facilities to the members and therefore, the said interest income has to be taxed under the head income from other sources. In consequence the assessee lost the benefit of Sec. 80P(2)(a)(i) of the Act as the entire amount was treated as not qualify for the said deduction. The assessee challenged the action of the Assessing Officer before the Ld. CIT(A) but without successes. The assessee placed his reliance on the following decisions: i. CIT Vs. Navneshwar Central Co-operative Bank Ltd. 289 ITR 6 (SC). ii....
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....der: 11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case there is no dispute to the fact that the assessee is a cooperative society engaged in the business activity of credit cooperative society, i.e. providing credit facility to its members. According to the Revenue the income of the society on account of interest from banks other than cooperative banks, interest on mutual funds, long term and short term capital gain on sale of mutual funds etc. are not covered by the activity of providing credit facilities to its members and hence not eligible for deduction u/s.80P(2)(a)(i) of the Income Tax Act in view of the decision of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra). We find the Ld. CIT(A) allowed the claim of the assessee on the ground that the assessee is entitled to deduction u/s.80P(2)(a)(i) on account of interest from banks other than cooperative banks, interest on mutual funds long term and short term capital gain on mut....
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....re retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is-whether interest on such deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under section 28 of the Act? in our view, such interest income would come in the category of 'income from other sources', hence, such interest income would be taxable under section 56 of the Act, as rightly held by the assessing officer..." 19.1 However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon'ble Supreme Court - "(On page 286) 7 Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds were not required immediately for business purposes and,....
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....ee was required to maintain some liquid funds. That was why, it was submitted by the assessee that it had invested in short-term deposits. Furthermore, the assessee had maintained overdraft facility with Dena Bank and the balance as at 31.3.2009 was Rs. 13,69,955/- [source: Balance Sheet of the assessee available on record] 19.6 In overall consideration of all the aspects, we are of the considered view that the ratio laid down by the Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd (supra) cannot in any way come to the rescue of either the Ld. CIT (A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT (A) was not justified in coming to a conclusion that the sum of Rs. 9,40,639/- was to be taxed u/s 56 of the Act. It is ordered accordingly. 19.7 Before parting with, we would, with due regards, like to record that the ruling of the Hon'ble jurisdictional High Court in the case of CIT v. Manekbang Co-op Housing Society Ltd reported in (2012) 22 Taxmann.com 220(Guj) has been kept in view while deciding the issue." 11.2 We find the Cochin Bench of the Tribunal in the case of Muttom Service Cooperative Aplappuzha Bank Lt....
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....ing money to its members as per license granted by the registrar of cooperative societies and the main object of the society is to provide credit facility to members who can be any person of the society. We find the Pune Bench of the Tribunal in the case of Mahavir Nagari Sahakari Pat Sanstha Ltd. reported in 74 TTJ 793 (Pune) has held that the credit society which is carrying on the business of banking activity and providing credit facility to its members is eligible for deduction u/s.80P(2)(a)(i). In view of the above discussion and following the decisions of the Ahmedabad Bench of the Tribunal and Cochin Bench of the Tribunal which in turn have considered the decision of the Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) we find no infirmity in the order of the Ld.CIT(A). Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed. 5. We find that in the case of Niphad Nagari Sahakari Patshanshta Ltd., Nashik (supra) the Tribunal has followed the decision of the ITAT, Ahmedabad in the case of ITO Vs. M/s. Jafari Momin Vikas Co-op. Credit Society Ltd. ITA No. 1491/Ahd/2012 and CO No. 138/Ahd/2012 order dated 3....