TaxTMI 
TaxTMI 
2015 (5) TMI 1088
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....ct. 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 considered the issue as to whether the assessee is a ....
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....IT(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 : Objects of the Trust: i. To encourage savings among members and to follow Rules & Procedures of the ....
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....rom 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 interest bearing deposits then society shall maintain liquid resources in such form as may be prescribed by the Registrar. The learned counsel drew our attention to section 70 of "The Maharashtra Co-operative Societi....
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.... 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 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....
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....unds 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 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. 9supra) 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....