TaxTMI 
TaxTMI 
2016 (1) TMI 409
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....r claiming its entire income as deduction under section 80P of the Income Tax Act. According to the Assessing Officer, the assessee, being covered either in the category of primary agricultural credit society or a primary agricultural cooperative and rural development Bank, was not eligible for deduction under section 80P. He, therefore, disallowed the claim of the assessee for deduction under section 80P holding that the claim of the assessee for such deduction was not tenable as per the provisions of section 80P(4) of the Act. 4. The disallowance made by the Assessing Officer on account of its claim for deduction under section 80P was challenged by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of the appellate proceedings before the ld. CIT(Appeals), it was submitted that the assessee is a Cooperative Society, which is distinguished from a Cooperative Bank and, therefore, the provision of section 80P(4) invoked by the Assessing Officer to deny its claim for deduct ion under section 80P was not correct. Reliance in support of this contention was placed by the assessee on the decision of the Bangalore Bench of ITAT in the case of Bangalore Commerc....
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....ing the decision of the Tribunal cited by the assessee before him in support of its claim. 6. We have heard the arguments of both the sides and also perused the material available on record. As found by the ld. CIT(Appeals), from the perusal of the objects of the assessee-Society as extracted by him in the impugned order from the Bye-Laws, the assessee-Society is not allowed to accept deposits of money from Public for the purpose of lending or investment. As further found by him, the entire transactions of accepting deposits and giving loans have been done by the assessee-Society with its members only and there are no such transactions done by it with nonmembers. He has also found that the assessee-Society was not registered under the Banking Regulation Act, 1949 and it was registered under the West Bengal Cooperative Societies Act , 1983. On the basis of al l these findings of fact recorded by him, the ld. CIT(Appeals) has held, by following the decision of the Tribunal cited on behalf of the assessee before him, that the assessee-Society is not a Cooperative Bank, which is covered by section 80P(4) and it is, therefore, eligible for deduction under section 80P(2)(a)(i). At the t....
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.... further seen that as pointed out by the appellant that the objects of the society is to create funds for the lending of money to it s members and therefore it is clear that it was the business of the society to make investment in order to generate funds for the utilization of the members of the society and this was being done by investments on which the interest income referred to above has been earned. Therefore, it is clear that this income is rightly been shown as business income by the appellant whereas the AO has taken the same as income from other sources without any basis The computation done by the AO is therefore found to be not correct. The issue of deduction u/s 80P has already been decided in respect of Ground of appeal no. 1. This ground of appeal of the appellant is accordingly allowed". 9. Ld. D.R. contended that this issue involved in the appeal of the Revenue is squarely covered in favour of the Revenue by the decision of the Hon'ble Supreme Court in the case of Totgar's Cooperative Sale Society Limited -vs. - ITO reported in [2010] 322 ITR 283, wherein it was held that interest income arising to a Cooperative Society carrying on the business of providing credit....
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....edit facilities to its members was also marketing its agricultural produce. The sale proceed of such agricultural produce, which was payable to its members, in many cases, was retained by the assessee-Society and the same was invested in short -term deposits/securities. In these facts and circumstances of the case, interest income received on short- term deposits/securities was held to be chargeable to tax under the head ' income from other sources' by the Hon'ble Supreme Court observing that the amount invested by the assessee was a liability payable to its members, and, therefore, the interest income could not be said to be attributable to the activity mentioned in section 80P(2)(a)(i). In the case of Tumkur Merchants Souharda Credit Cooperative Limited (supra) cited by the ld. Counsel for the assessee, the amount, which was invested in Bank to earn interest, was not an amount due to any member and which was not the liability shown in their accounts. In fact, the said amount, which was in the nature of prof it and gains, was not immediately required by the assessee for lending money to the members as there were no takers and the same, therefore, had been deposited in a Bank so as....