TaxTMI 
TaxTMI 
2018 (8) TMI 1919
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.... against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short 'the Act'). 2. Brief facts of the case are that the appellant/assessee a cooperative credit society engaged in providing credit facilities to its members, filed its return of income for the assessment year under consideration declaring Nil income after claiming deduction of Rs. 2,29,20,225/- u/s 80P(2) of the Act. It was noticed that the assessee has been collecting membership fees accepting deposits and providing credit facilities to the members. The assessee had kept fixed deposit with Mumbai District Central Co-operative (MDCC) Bank. Accordingly, the AO asked the assessee to show cause as to why the disallowance claimed u/s 80P should not be disallowed....
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....p and the area of operations was also limited to the acceptance of deposits of members and providing credit facilities to only members, which have been held as not falling under banking activities as defined in the Banking Regulation Act. I also find persuasive value in the opinion of the RBI* issued vide letter dated 1st Feb 2012 whereby the RBI states that where a banking license has not been issued to the cooperative credit society, the same cannot be considered as an Urban Cooperative Bank under the Banking Regulation act 1949. Therefore respectfully following the aforesaid decisions of ITAT Nagpur & Panaji, the appellant cannot be held as a cooperative bank, hence deduction claimed u/s 80P(2)(a)(i) cannot be denied to it. I find that t....
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....lus reserve funds deposited with the cooperative societies/banks. Since the assessee has invested its statutory reserve funds in fixed deposits with scheduled banks and cooperative banks, the assessee is not entitled for deduction u/s 80P of the Act in respect of income earned from such deposits. The reserve funds of the assessee are surplus funds or the funds which cannot be utilized for its day to day activities including granting loans to the members. Therefore, the same has to be invested only for the restricted purpose mentioned in the bye laws. Since, the assessee has invested the statutory reserve funds in the banks in FDs, interest received by the assessee from investment of its surplus funds is assessable under the head "income fro....
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....m the A.Y. 2007-08 by inserting sub-section(4) of section 80P of the Act. 7. We further notice that in the case of ITO vs. M/s Ashirwad Co.op. Credit Society Ltd. ITA No. 5069/Mum/2017 the SMC Bench of the Tribunal has dealt with the identical issue. The SMC Bench has decided this issue in favour of the assessee relying on the judgment of the Hon'ble Bombay High Court in the case of Quepem Urban Co-operative Credit Society Ltd. vs. Asst CIT [2015] 58 taxmann.com 113 (Bom) and the ratio laid down by the Hon'ble Supreme Court in the case of the Citizen co-operative Society Ltd. vs. ACIT Civil Appeal No 10245 of 2017. The relevant portion of the order of the Tribunal reads as under:- "6. I have heard both the counsel and perused th....