TaxTMI 
TaxTMI 
2016 (4) TMI 27
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.... 1. The order passed u/s 250 on 8.8.2012 for AY 2008-09 by CIT(A)-GNR, Ahmedabad upholding the disallowance of deduction u/s 80P(2)(a)(i) of the Act to the extent of Rs. 1,42,963 is wholly illegal, unlawful and against the principles of natural justice. 2. The ld. AO has grievously erred in law and or on facts in restricting the deduction u/s 80P(2)(a)(i) to R.2,23,877 on the ground that interest income earned on surplus funds did not constitute the operational income. Since the AO had not made any such disallowance on this ground, the action on part of CIT(A) was illegal and unlawful. 3.1 The ld. CIT(A) has erred in law and or on facts in holding that the interest income was earned from keeping the surplus funds in banks so that i....
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....ssee. To arrive at this conclusion ld. CIT(A) has observed as under :- "6. All the grounds are related to the disallowance of claim of deduction of income u/s 80P(2)(a)(i). I have gone through the facts of the case, the assessment order and the submissions. As per the definition of banking as per sec.5(b) of Banking Regulation Act, "Banking" means the accepting for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. The definition is basic law to be considered to decide whether a credit society is a co-operative bank or not. Only, those credit societies which are allowed to take deposits of money from the public and do other banki....
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....erstand the issue better, I went through the RBI webside and found that it has been explained in a report of a high level committee appointed by the Reserve Bank of India in May, 1999 under the Chairmanship of Shri Madhava Rao, Ex-Chief Secretary, Govt. of Andhra Pradesh to review the performance of Urban Cooperative Banks (UCBs) and suggest necessary measures to strengthen this sector. The report was published on 14/01/2000 and in para 7.1. & 7.2 of the report, the following has been narrated : "7.1 Cooperative credit structure in India is characterized by a plethora of institutional segments. Leaving aside the agricultural cooperative credit institutions, in the urban cooperative credit fold itself, there are 3 types of institutions re....
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....it society becomes a cooperative bank, it has to apply to RBI for a license to carry on banking business. But it can carry on banking business until it is granted a license or notified that a license cannot be granted to it." The above report clearly defines the circumstances in which a credit society can be allowed to carry on banking business. These are primary credit society, which can carry on business of banking until it is granted a license or notified that a license cannot be granted to it. These credit societies would not get the benefit of the deduction u/s *)P(2)(a)(i). Considering the above facts, it is clear that the appellant is not allowed to do banking business as defined under Banking Regulation Act and therefore, is n....
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....y. After going through the finding of ld. CIT(A) we find that for a co-op. society to be covered u/s 80P(4) of the Act, it is necessary that assessee needs to obtain license from Reserve Bank of India (RBI) for running the activities as co-op. bank as per Banking Regulation Act, 1949. From going through the submissions of ld. AR we find that assessee society is duly registered under the Gujarat Co-op. Societies Act and is providing credit facilities only to its members and the aims and objectives of the society as enumerated in the Rules and Regulations are - (1) As members may be encouraged to do thrift and mutual cooperation and (2) As members of society may collect fund so that loan may be provided at general rate of interest, henc....