TaxTMI 
TaxTMI 
2019 (1) TMI 212
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....es Act, 2002. During the course of assessment proceedings in the case of the assessee for the AYs 2010-11, 2011-12 and 2014-15, the Assessing Officer has noticed that the assessee has made deposits with non-cooperative banks, besides, it was maintaining SB accounts also with these banks. The assessee has claimed interest incomes from the above investments as well as from the SB accounts as deduction u/s.80P of the Act along with its profits from the business of banking or providing facilities to its members. It was also noticed that the assessee did not file any return prior to AY 2012-13. As the above interest incomes are not covered by either Sec.80P(2)(a)(1) or Sec.80P(2)(d) of the Income Tax Act, a notice u/s.148 was issued on 30.03.2015 calling for return of income for the AY 2010-11. In response the Notice issued u/s.148, the assessee filed its return of income on 26.06.2015 for the AY 2010-11 admitting 'Nil' income. After considering the submissions of the assessee and following the various decisions, the AO has held that as the interest income on deposits and in the SB Accounts with non-cooperative banks is not covered by Sec.80P of the Act, the claim made by the assessee a....
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....te: As per section 2(19), "co-operative society" means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies]. 6.2 The Hon'ble Supreme Court in case of The Totgars' Cooperative Sale Society Ltd. v. ITO, [322 ITR 283 (SC)] held that, the words "the whole of the amount of profits and gains of business" in section 80P(2)(a) emphasizes that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Society. Accordingly, it was held that interest earned by appellant cooperative society on surplus funds invested in short-term deposits with banks and in govt. securities is not eligible for deduction under section 80P of the Act. However, in the present case, admittedly, the assessee is a cooperative credit society and the only activity of the assessee society was providing credit facility to its members and nowhere the Assessing Officer has disputed in the assessment order that the assessee society has engaged in any other activity other than providing credit f....
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....the present case. 6.5 By considering the above clinching dissimilarities, the Ahmedabad Benches of the Tribunal has categorically held in the case of Jafari Momin Vikas Co-op Credit Society Ltd., vs. ITO in ITA No.1491/Ahd/2012 for A.Y. 2009-10 that the ratio laid down by the Hon'ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd (supra) cannot be applied to the facts of the credit society and accordingly deduction under section 80P of the Act has been allowed against interest income from deposits with nationalized banksby observing as under: "17. We have carefully considered the submissions of the either party, perused the relevant records and also the case law on which the learned AR had reservation in it's applicably in the circumstances of the assessee's case. 18. It was the stand of the learned CIT (A) that the entire income was not exempt and that it was to be examined as to whether there was any interest income on the short term bank deposits and securities included in the total income of this society which has been claimed as exempt. According to the CIT (A), a similar issue to that of the present one was dealt with by the Ho....
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.... 19.2 From the above, it emerges that - (a) that assessee (issue before the Supreme Court) had admitted before the AO that it had invested surplus funds, which were not immediately required for the purpose of its business, in short term deposits; (b) that the surplus funds arose out of the amount retained from marketing the agricultural produce of the members; (c) that assessee carried on two activities, namely, (i) acceptance of deposit and lending by way of deposits to the members; and (ii) marketing the agricultural produce; and (d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3 In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4 While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities emerge, namely: (1) in the case of the assessee, the entire funds were utilized for the purposes of business and that there were no surplus funds; - in the case of Totgars, it had surplus funds, as admitted before t....
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....preme Court in the case of Totgars Co-operative Sale Society Ltd. v. ITO (supra), the Kolkata Benches of the Tribunal has observed and held as under: "5. We have heard both the counsel and perused the records. The ld. Counsel of the assessee submitted that the assessee has been continuously granted exemption u/s 80P(2)(a)(i) of the Act in the preceding assessment years. The ITAT, Kolkata Benches has decided this issue in favour of the assessee as well as the Hon'ble Jurisdictional High Court. In this view of the matter the ld. Counsel of the assessee claimed that on the basis of the principle of consistency the revenue cannot be permitted to take a different stand for the current year. The ld. Counsel of the assessee further submitted that in the subsequent year the AO has himself accepted the assessee's plea that the income from bank deposits has to be seen in the light of the cost the assessee has to incur in getting those funds which are in the shape of interest which the Society pays to its members. The ld. Counsel of the assessee further submitted that the Apex Court's decision in the case of Totgars Co-operative Sale Society Ltd. vs. ITO and the ....
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....Jurisdictional High Court which is as under:- "We have gone through the impugned judgment and order of the Learned Tribunal. It appears that the point involved .is whether interest earned out of the investment earned by the assessee cooperative can be treated to be the income arising out of business activity or from other sources in order to apply the provision of Section 80P(2)(a)(i) of the I.T.Act. It is an undisputed factual position that similar issue arose before the Commissioner of Income Tax (Appeal) in relation to the assessment year 1998-99 to 2002-2003 as also for the assessment year 1995-96 and 1996-97. Then again in relation to the assessment years 2003-04 and 2004-05 a similar point arose. The Learned Tribunal in relation to the assessment years 1998-99 to 2002-2003 by order dated 10.11.2006 in ITA Nos. 840 to 844/Kol/2006 and again by order dated 29.12.2006 in relation to assessment years 2003-04 and 2004-05 has deleted the disallowance made in those assessment years and it was held that the interest earned by the assessee cooperative society from its short term and fixed deposits with the bans and other institutions were disallowed on the ground that this in....
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....ace reliance upon the decision of the Hon'ble Apex Court in the case of CIT vs. Excel Industries 358 ITR 295 wherein the principle of consistency has been reiterated. Hence when the issue has been decided by the Jurisdictional High Court no convincing reason has been pointed to take a different view, any deviation is not permitted. 7.3. Now we come to the case laws relied upon by the ld. CIT(A). As regards the decision of the Hon'ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. (supra) we find that the said decision is not applicable in the facts of the case. We find that the Hon'ble Apex Court in the said decision in para 11 has itself mentioned that "We are confining the judgment to the facts of the present case." The facts of the case were that assessee's business was to provide credit facilities to its members and to market their agricultural produce. In many cases assessee retained sale proceeds of members whose produce was marketed by it and since funds created by such retention were not required immediately for business purposes, it invested same in specified securities and earned interest income. In these circumstances the Hon....