TaxTMI 
TaxTMI 
2017 (9) TMI 470
X X X X Extracts X X X X
X X X X Extracts X X X X
.... deduction u/s. 80P(2)(d) with respect to dividend income of Rs. 1,01,581/- without appreciating the fact that the assessee is not a co-operative credit society, but a co-operative bank, as the assessee is involved in the activities of money lending and earning interest and dividend, which is nothing but a normal banking activity on commercial basis to benefit commercially. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in allowing deduction u/s. 80P(2)(a)(i) and u/s. 80P(2)(d) to the assessee without appreciating the fact that the issue of allowability of deductions under u/s. 80P(2)(a)(i) and u/s. 80P(2)(d) have not reached its finality as the Department has not accepted the decision of the Hon'ble Bombay High Court in the case of Quepem Urban Co-op. Credit Society (2015)(58 Taxmann.com 113 (BOM) and SLP before the Hon'ble Apex Court has been filed which is pending for final orders." 4. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in allowing deduction u/s. 80P(2)(a)(i) and u/s. 80P(2)(d) to the assessee without appreciating the fact that the Department has not accepte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9;ble Supreme Court in the case of The Citizen Co-operative Society Limited vs. ACIT, Circle-9(1), Hyderabad (supra) in Civil Appeal No.10245 of 2017 in which Hon'ble Supreme Court vide its order dated 08/08/2017 while dealing with the similar issue has held as under: "17. We have considered the submissions of the counsel for the parties with reference to the record of this case. 18. We may mention at the outset that there cannot be any dispute to which is enacted by the Parliament in order to encourage and promote. Growth of co-operative sector in the economic life of the country. It was done pursuant to declared policy of the Government. Therefore, such a provision has to be read liberally, reasonably and in favour of the assessee (See - Bajaj Tempo Limited, Bombay v. Commissioner of Income Tax, Bombay City-11}, Bombay}. It is also trite that such a provision has to be construed as to effectuate the object of the Legislature and not to defeat it (See - Commissioner of Income Tax, Bombay & Ors. v. Mahindraand Mahindra Limited & Qrs.). Therefore, it hardly needs to be emphasized that all those co-operative societies which fall within the purview of Section SOP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her any particular category of an income of a co-operative society is exempt from tax, then it has to be seen whether such income fell within any of the several heads of exemption. If it fell within any one head of exemption, It means that a co-operative society engaged in carrying on the business of banking and a cooperative society providing credit facilities to its members will be entitled for exemption under this sub clause. The carrying on the business of banking by a cooperative society or providing credit facilities to its' members are two different types of activities which are covered under this sub-clause. xx xx xx  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....80P. 25. So far so good. However, it is significant to point out that the main reason for disentitling the appellant from getting the deduction provided under Section SOP of the Act is not sub-section (4) thereof. What has been noticed by the Assessing Officer, after discussing in detail the activities of the appellant, is that the activities of the appellant are in violations of the provisions of the MACS A under which it is formed. It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people, the first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of 'nominal members'. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in real sense. Most of the business of the appellant was with this second category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of these deposits is utilized to advance gold loans, etc. to the members....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt. Once we keep the aforesaid aspects in mind, the conclusion is obvious, namely, the appellant cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members. We are afraid such a society cannot claim the benefit of Section 80P of the Act. 5. We noted that in this decision Hon'ble Supreme Court has clearly laid down that The Citizen Co-operative Society Limited was catering to two distinct categories of people. The first category is that of resident members or ordinary members and the other category is termed as nominal member. The nominal members were making deposit with the assessee for the purpose of obtaining loan etc. and they were not members in real sense. Most of the business of the assessee was with nominal members who have been giving deposits for Fixed Deposits to earn maximum returns while these deposits are utilized to advance gold loans, etc. to the resident members or ordinary members. As a matter of fact, in this case it was found that the depositors and borrowers are quiet distinct and in reality, the activity of the assessee was that of finance business and therefore, took the view that it cannot be t....