TaxTMI 
TaxTMI 
2017 (5) TMI 722
X X X X Extracts X X X X
X X X X Extracts X X X X
....has raised following grounds of appeal:- "[1] The learned Deputy Commissioner of Income-tax erred in confirming the addition of Rs. 13,88,824/- considering such interest as interest received on Fixed Deposit under the head: IFOS U/s.56 of the Income-tax Act, 1961 and has denied the deduction U/s. 80P of the Income-tax Act. It is submitted that on facts and circumstances of the case that such income is not taxable U/S.56P and so the appellant society is entitled to have the deduction U/s.80P(2)of the Income-tax Act. It is submitted that the same be allowed now. [2] Without prejudice to the above, it is submitted that even if such interest income of Rs. 13,88,824/- is taxable U/s.56, then, expenditure incurred for earning such income must ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of M/s. Jafari Momin Vikash Co- Op Credit Society Ltd vs. ITO, Patan -2 in ITA No.902/Ahd/2012; relied upon by the appellant. 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 banking activities as defined in the sec 5(b) of Banking Regulation Act would qualify to be a cooperative bank. I agree that taking depo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts and securities included in the total income of this society which has been claimed by them as exempt. The issue was decided by the Hon'ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd Vs ITO, Karnataka. In the aforementioned judgement, the issue for determination was whether interest income on the short term bank deposits and securities would be qualified as business income u/s. s 80P(2)(a)(i) of the IT Act, 1961. The Hon'ble Supreme Court had decided the issue as under: "At the outset an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduction u/s. 80P(2)(a)(i) of the Income tax Act is not the interest received from the members for providing the credit fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and will not qualify for deduction u/s SOP. 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 not a co-operative bank. Therefore, it is not excluded from the benefit of deduction u/s 80P(2)(a)(i) of the IT Act as it does not fall under the exceptions as provided u/s 80P(4). The Hon'ble Jurisdictional IT AT, Ahmedabad XB' Bench in ITA No.l491/ahd/2012 A.Y. 2009-10 in the case of M/s. Jafari Momin Vikas Co- Op Credit Society Ltd vs. ITO, Patan -2, relied upon by the appellant has on identical facts has held that the provisions of section 80P(4) of the I. T. Act, 1961 are not applicable to Co- Operative Credit Society and Co-Oper....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d deposit. We find that ld. CIT(A) held that this interest income earned from keeping the surplus funds in banks or other investment would be taxable and will not qualify for deduction u/s. 80P of the act. In this connection, we have perused the judicial pronouncement of the Hon'ble Supreme Court in the cases of Totgors Co-operative society Ltd. Vs. ITO Karnataka (2010) 188 Taxman 282 in which it was held that interest income earned on investing in short term deposits would fall in the category of "other income" to be taxed u/s. 56 of the I.T. act. This judicial pronouncement has already been elaborated by the ld. CIT(A) in his findings as supra in this order. Therefore, we find no merit in the contentions of the ld. counsel for considering....