2017 (8) TMI 658

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....Act'). 2. Briefly put, the relevant facts are that the assessee before me is a co-operative society and is, inter-alia, engaged in the business of providing credit facilities to its members. For the assessment year under consideration it filed return of income declaring total taxable income at NIL after claiming exemption in terms of Sec. 80P(2)(a)(i) of the Act. In the course of the assessment proceedings, the Assessing Officer noted that the major incomes credited in the Income & Expenditure account was on account of 'interest on members loan' - Rs. 1,04,57,334/- and 'interest on fixed deposit with bank' - Rs. 20,58,272/-. It was also noticed by the Assessing Officer that on the expenditure side, the major expenditure was on account of....

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....t society and not a co-operative bank and, therefore, Sec. 80P(4) of the Act was wrongly invoked by the Assessing Officer. Against such a decision, Revenue is in appeal before the Tribunal. 4. Insofar as the assessee's appeal before the Tribunal is concerned, the same arises from the action of the CIT(A) in holding that the interest income of Rs. 20,58,272/- earned by the assessee was not exempt on the principles of mutuality since it was earned from a third party, i.e. bank. The CIT(A) also negated the plea of the assessee - that the interest income was earned on deposits with other co-operative banks and was, therefore, specifically exempt in terms of Sec. 80P(2)(d) of the Act apart from being subsumed in the income eligible for exempt....

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....nsidered the rival submissions. Quite clearly, Sec. 80P(2)(a)(i) of the Act provides exemption in the case of a co-operative society engaged in the business of banking or providing credit facilities to its members. In the instant, the case made out by the assessee is that it is a co-operative credit society, which is receiving deposits from its members and providing credit facilities to its members and thus not in the business of banking. Thus, the claim of the assessee for exemption u/s 80P(2)(a)(i) of the Act is on account of it being engaged in the business of providing credit facilities to its members, and not the business of banking. Factually speaking, I find no infirmity in the claim of the assessee inasmuch as there is no case made ....