TaxTMI 
TaxTMI 
2015 (5) TMI 1088
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..... 36,69,599/- under section 80P of the I.T. Act. The Assessing Officer noted that as per section 80P(4) provisions of above section will not apply in relation to any cooperative banking other than a "primary agricultural credit society" or "primary agricultural credit society" or "a primary agricultural credit cooperative agricultural and rural development bank. Assessee's counsel replied that they are not cooperative bank but cooperative credit society. Hence the provisions of section 80P(4) were not applicable to them. The Assessing Officer referred to the provisions of section 80P. He observed as under : " It is apparent from the above text that as per the provisions of subsection 4 of section 80P deduction under section 80P is available only to Primary Agricultural Credit Society and Primary Co-operative Agricultural and Rural Development banks. In the instant case the assessee is neither a Primary Agricultural Credit Society as defined in section 56(vviv) in part V of Banking Regulation Act, 1949 which has b een referred to in context of the Explanation to Sec. 80P nor a Primary Co-operative Agricultural and Rural Development Bank." Thereafter the Assessing Officer....
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.... 4. Against the above order, assessee appealed before the learned CIT(Appeals). The learned CIT(Appeals) held that the assessee cannot be said to be a cooperative bank. However, as regards the treatment of interest income from fixed deposit, learned CIT(Appeals) was of the opinion that interest income earned was taxable as income from other sources. In this regard, learned CIT(Appeals) referred to the decision of Hon'ble Apex Court in the case of Totgars Cooperative Sales Society Ltd. v/s. ITO 322 ITR 283 (SC). The learned CIT(Appeals) concluded as under : "Hence additions made by A.O. are confirmed and also appellant's income i.e. interest income received from government banks and NDC Bank is not eligible for deduction u/s 80P(2)(d) and entire amount of Rs. 29,99,520/- is to be treated income from "other sources" and taxed accordingly. In the result, income as determined by A.O. is enhanced by an amount of Rs. 10,26,715/-. Against the above order the assessee is in appeal before us. 5. The learned counsel of the assessee submitted that assessee is a cooperative society providing credit facilities to its members. The objects of the society were enumerated as under : ....
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....from members ploughed back in to the business. Therefore, these deposits are parked in a ventures where it can be converted in to a cash at go and also certain interest incomer yields from these funds. The learned counsel of the assessee further submitted that the Cooperative Credit Societies generally prefer to invest their working capital in short term deposits with Nationalised banks and other Co-operative banks. As an when urgent funds are required these deposits are either redeemed or an overdraft facility can be availed from said banks against these deposits." 8. The learned counsel pointed out that as per Rule 41 of the Maharashtra State Co-operative Societies Rule, 1961, "Every Society which obtains any portion of its working capital by deposits shall- 1. maintain such liquid resources and in such form as may be prescribed from time to time by registrar, and 2. utilize only such portion of its working capital in lending business and distribute its assets in accordance with such standards as may be specified from time to time by the Registrar. Therefore, these Rules prescribes that if portion of society's working capital is obtained by int....
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....ssue was thoroughly discussed by the ITAT "B" Bench Ahmedabad in the case of The Income Tax Officer vs. M/s.Jafari Momin Vikas Co-op.Credit Society Ltd. bearing ITA No.1491/Ahd/2012 (for A.Y. 2009-10) and CO No.138/Ahd/2012 (by Assessee) order dated 31/10/2012. T he relevant portion is reproduced below:- "19. The issue dealt with by the Hon'ble Supreme Court in the case of Totgars (supra) is extracted, for appreciation of facts, as under: "What is sought to be taxed under section 56 of the Act is the interest income arising on the surplus invested in short term deposits and securities which surplus was not required for business purposes? The assessee(s) markets the produce of its members whose sale proceeds at times were 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 in....
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....tted before the AO, out of retained amounts on marketing of agricultural produce of its members; (2) in the case of present assessee, it did not carry out any activity except in providing credit facilities to its members and that the funds were of operational funds. The only fund available with the assessee was deposits from its members and, thus, there was no surplus funds as such; - in the case of Totgars, the Hon'ble Supreme Court had not spelt out anything with regard to operational funds; 19.5. Considering the above facts, we find that the re is force in the argument of the assessee that the assessee not a co-operative Bank, but its nature of business was coupled with banking with its members, as it accepts deposits from and lends the same to its members. To meet any eventuality, the assessee was required to maintain some liquid funds. That was why, it was submitted by the assessee that it had invested in shortterm 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....