TaxTMI 
TaxTMI 
2019 (1) TMI 212
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.... 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 as exempt u/s.80P is not correct and disallowe....
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....ieties 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 facility to its members or the assessee earned income out of deposits of other activities or deposited surplus funds with ....
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....n 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 Hon'ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd v. ITO (supra). The issue before the Hon'ble Court for determination was whether interest income on short ter....
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....s 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 the AO, out of retained amounts on marketing of agricultural produce of its members; (2) in the case of present assessee, it did not carry out any activity except in providing credit facilities to its members and that the funds were of operational funds. The only fun....
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....(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 decision of Hon'ble Patna High Court in the case of Bihar Rajya Sahkari Bhoomi Bikash Co-op. Bank Ltd. vs. CIT relied upon by the ld. CIT(A) are not applicable to the facts of the case. Accordingly the ld. Counsel of the assessee contended that the issue may be decided in favour of the assessee as in the preceding and subsequent y....
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....(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 income was not business profit of the assessee society but was income from other sources. The Ld. Tribunal has also held that income from investment in banks and other financial institutions is the business income of the assessee society and it is eligible to get deduction under Section 80P(2)(a)(i). The Tribunal has overruled the decisions rendered against the assessee in relation to a....
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....cision 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'ble Apex Court had held that interest earned would come in category of 'Income from other sources' taxable u/s 56 of the Act and would not qualify for deduction as business income u/s 80P(2)(a)(i). From the above it is amply evident in the present case the assessee has not retained any amount due to its members and instead of paying the same had invested the same and earned interest. Thus this case law is not appl....