TaxTMI 
TaxTMI 
2018 (10) TMI 1918
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....puty Commissioner of Income Tax, Circle-2(2), Surat(in short "the AO") dated 02.02.2015 under section 143(3) of Income Tax Act, 1961 (in short 'the Act'). 2. Ground No.I (1) states that on the facts and circumstances of the case and as per law, the learned Commissioner of Income-tax (Appeals) erred in holding that the appellant co-operative credit society is not entitled to deduction u/s.80P(2)(a)(i) of the Act. 3. Briefly stated facts of the case are that the assessee is a cooperative society engaged in the business of providing credit facility to its members. The perusal of the Profit and Loss Account reflected that the assessee has credited interest income of Rs. 56,01,880/- which inter-alia included interest of Rs. 15,00,820/- fro....
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....ot immediately required for business purpose cannot fall within the meaning of the expression profit and gains of the business. Such interest income cannot be said also to be attributable to the activities of the society, namely carrying on the business of providing credit facilities to its member or marketing of the agriculture produce of its members. In view of these facts, the AO disallowed interest income of Rs. 18,79,050/- u/s.80(P)(2) of the Act. 4. Being aggrieved, the assessee carried the matter before the CIT(A) wherein the CIT(A) observed that the appellant has tried to distinguish the facts of Totgars CSS Ltd. [2010] 188 taxmann 282 (SC) by saying that the said society was doing business of providing credit facilities to its m....
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....ee society is carrying on business from providing credit facilities to its members. The society is governed by the Gujarat Co-operative Societies Act and the by-laws of the society as per the Gujarat Co-operative Society Act. The AO has disallowed interest income of FD's with nationalized bank of Rs. 18,79,050/-. It was submitted that the maintenance of the deposit with nationalized bank is not an investment for getting interest, but it is completion as per the by-laws of the society as approved by the Registrar of Co-operatives. Hence, such interest on such deposit are part and parcel of the activities of the society, namely, carrying on the business of providing credit facilities to its members and same shall be falling within the ambit o....
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....e was Co-operative Society apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount was payable to its members from whom produce was bought, was invested in a short term deposit / security. Such an amount which was retained by the assessee society 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 to the activity mentioned in the section 80P(2)(a)(i) of the Act or u/s.80P(2)(a)(iii) of the Act. Therefore, in the facts of....
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....eting of agricultural produce of its members whereas in the present case of the assessee it did not carried out any activity except in providing credit facility to its members and that the funds were of operational funds. Therefore, we are of the considered opinion that the judgment of Apex Court in Totgars CCS Ltd.is not applicable in respect of the Co-operative Society whose business is banking. The ld.Counsel has placed reliance on the decision of Hon'ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT (supra) wherein it was held that the assessee Co-operative Society was eligible for deduction u/s.80P(2)(d) in repsect of gross profit received from Co-operative Bank without adjusting interest paid to said ....
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....s specified in section 20 of Indian Trust Act 1882, without there being any upper limit as to the amount that can be invested, once the statutory requirement of reserve fund as stipulated in section 67(2) of the Gujarat Cooperative Societies Act is satisfied. Therefore, it was held that the assessee would be eligible for deduction in terms of section 80P(2)(a)(i) of the Act. 8. In the light of above facts and circumstances, we are of the view that interest earned on FD's placed with SBI is eligible for deduction u/s.80P(2)(a)(i) of the Act, accordingly we direct the AO to allow the same by respectfully following the aforesaid decision of various Hon'ble High Courts and various Co-ordinate Benches, accordingly Ground No.I (1) of the a....