TaxTMI 
TaxTMI 
2019 (12) TMI 1481
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....d before the tribunal, this issue is also raised that the learned CIT (A) has erred in not following section 194A (3) (v) of I T Act as per which, if interest is paid by a co operative society to its members, there is no need to make TDS on such interest. 3. Learned AR of the assessee submitted that in para 7 of his order, it is noted by CIT (A) that the assessee has 678 regular members and 1101 associate members. He submitted that it is observed by CIT (A) in the same para that the assessee may be eligible for deduction u/s 80P in respect of interest earned from regular members but not on interest earned from others. He submitted that as per Karnataka Co Operative Societies Act, associate members are also members and restriction on no. ....
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....ers of the lower authorities. I find that the learned CIT (A) is not justified in holding that the assessee is not eligible for deduction u/s 80P in respect of interest earned from associate members because as per Karnataka Co Operative Societies Act, associate members are also members and restriction on no. of associate members up to 15% of total members is by way of a subsequent amendment which is not applicable in the present year. Hence, on this issue, the order of CIT (A) is set aside and I hold that for allowing deduction u/s 80P in respect of interest from members, regular members and associate members are to be considered at par in the present year which is before amendment in Karnataka Co Operative Societies Act, In respect of....
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....ther interest on such deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under s. 28 of the Act ? In our view, such interest income would come in the category of "income from other sources", hence, such interest income would be taxable under s. 56 of the Act, as rightly held by the AO. In this connection, we may analyze s. 80P of the Act. This section comes in Chapter VI-A, which, in turn, deals with "Deductions in respect of certain incomes". The headnote to s. 80P indicates that the said section deals with deductions in respect of income of co-operative societies. Sec. 80P (1), inter alia, states that where the gross total income of a co-operative society includes any income....
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....ssessee(s) for its business purposes and which have been only invested in specified securities as "investment". Further, as stated above, assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this "retained amount" which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities. Such an amount, which was retained by the assesseesociety, was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in s. 80P(2)(a)(i) of the Act or in s. 80P(2)(a)(iii) of the Act. Therefore, looking to the facts and circums....
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....th the direction that he should examine the facts of the present case in the light of these two judgments of Hon'ble apex court rendered in the case of Totgars Co - Operative Sale Society Limited vs. ITO (Supra) and of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. Vs. ITO (Supra) to find out which judgment is applicable in the facts of the present case. If it is found that the judgment of Hon'ble apex court rendered in the case of Totgars Co - Operative Sale Society Limited vs. ITO (Supra) is applicable in the facts of the present case then it should be held that the assessee is not entitled to deduction u/s 80P in respect of interest from bank but if it is found that the judgment of ....