TaxTMI 
TaxTMI 
2019 (7) TMI 127
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIT(A) erred in fact and in law in confirming the action of the AO in not allowing deduction u/s. 80P of the Act of Rs. 1,51,81,968/-. 3. The learned CIT(A) erred in fact and in law in taxing the gross amount instead the net amount. 4. The learned CIT(A) erred in fact and in law in confirming the action of AO in charging interest 234B of the Act. 5. The learned CIT(A) erred in fact and in law in confirming the action of AO in charging interest 234C of the Act. 6. Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal." 2. Ground No.1, 2 and 3 relates to the order passed by the Learned CIT(A) confirming the order in treated Rs. 1,51,81,968/- as Income from other sources instead of Business Income. Taxing of gross amount instead of the net income has also been questioned before us. 3. The assessee, a registered Co-operative Society under the Gujarat Cooperative Society Act, 1960, engaged in accepting deposits and providing credit facilities to its members. During the course of assessment proceeding, from verification of the details filed by the assessee, it is seen that the assessee earned interest ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....risdictional High Court in the case of State Bank of India vs. CIT (2016) 72 taxman.com 64 (Guj.) and a number of judicial pronouncements of the Co-ordinate Benches of the ITAT. We have noticed that on 29.08.2018 the Coordinate Bench of the ITAT in a combined order in respect of following cases:- Sl. No. ITA No. A.Y. Assessee Revenue 1 1992/Ahd/2017 2014-15 The Narsanda Mercantile Co.Op. Credit Society Ltd. DCIT, Nadidad 2 1313/Ahd/2018 2015-16 The Sant Taluka Teachers Co-op. Credit Society Ltd. ACIT, Panchm ahal Circl e, Godhra 3 1314/Ahd/2018 2015-16 The Satyaprakash Co-op. Credit Society Ltd ACIT, Panchm ahal Circl e, Godhra 4 1295/Ahd/2018 2015-16 Shri Friends Coop. Credit Society Ltd ITO, Ward3(1)(2), Vadodara 5 1296/Ahd/2018 2015-16 Shri Shramjivi Nagrik Sahakari Mandli Ltd ITO, Wd3(1)(2), Vadodara On identical issues and facts has held as under:- "7. We have heard both the sides and perused the material on record carefully. The assessee is engaged in the business of providing credit facilities to its members. The assessing officer has noticed that in addition to the interest income earned on loan and advances to its m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are assessment years 2007-08 to 2011-12. The bone of contention is that the deduction under section 80P(2) is now claimed by the assessee under section 80P(2)(d) and not under section 80P(2)(a) of the Act. The reason is that now the investments and deposits after the Supreme Court's decision against the assessee in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC), the assessee herein has shifted the deposits and investments from Schedule Banks to Co-operative Bank and such Co-operative Bank is essentially a Cooperative Society also and clause (d) allows deduction of income by way of interest or dividends derived by the assessee co-operative Society from its investments with any other co-operative Society. [Para 11] The sheet anchor of the contention of the assessee misses two essential points required for claiming the deduction from gross total income for a co-operative society; (i) that the character or nature of income, namely interest on investments or deposits, does not change irrespective of the fact whether it is earned or received from a Schedule Bank or Co-operative Bank, (ii) that What the Supreme Court held in the case of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... I.T.A No. 108/Ahd/2017 A.Y. 2013-14 Page No The Government Servants Co-op. Credit Society Ltd. vs. ITO 5 Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural credit society. [Para 14] The amendment of section 194A(3)(v) excluding the Co-operative Banks from the definition of 'Cooperative Society' by Finance Act, 2015 and requiring them to deduct tax at source under section 194A also makes the legislative intent clear that the co-operative banks are not that specie of genus co-operative society, which would be entitled to exemption or deduction under the special provisions of chapter VIA in the form of section 80P of the Act. [Para 15] If the legislative intent is so clear, then it cannot be contended that the omission to amend clause (d) of section 80P(2) of the Act at the same time is fatal to the contention raised by the revenue before this Court and sub silentio, the deduction should continue in respect of interest income earned from the cooperatve bank, even though the Supreme Court's decision in the case of assessee itself is otherwise. [Para 16] As stated above, it is the character and nature of income which det....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the circumstances of the present case. The assessee has earned interest income on surplus funds deposited with nationalized bank and the cooperative Bank and the same is not attributable to business operation of the assessee co-operative society as interest earned on the fund invested with the commercial bank is not operational income from providing credit facilities to its members. We consider that earning of such interest income either from nationalized or cooperative bank will not change nature and character of the income. On perusal of the provision of section we observe such deduction is pertinent to the operational income earned by the co-operative society from the activities in which it is engaged and not the other income which accrues to the society in the form of interest from investment of surplus funds with the cooperative bank. After considering the facts and legal finding, we do not find any merit in the appeal of the assessee, therefore, the same is dismissed. However as decided in the various decision of the Co-ordinate Benches of ITAT Ahmedabad we direct the assessing officer to allow pro rata expenses in respect of interest earned from deposit held with nation....