TaxTMI 
TaxTMI 
2021 (11) TMI 1008
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....nts while making addition and re-determining the Gross Total Income and Total Income of the appellant : (a) in so far as bifurcating the 'Interest on Investments' derived by the appellant from the Business Income for considering the same separately u/s. 56 of the Act; (b) in so far as segregating the 'Godown rental income' received by the appellant which is a part of its Business Income for considering it u/s. 22 of the Act as 'Income from House Property'; and (c) in disallowing deduction u/s. 80 P of the Act and arriving at the Total Income by misinterpreting the statute and extending tax by implication. The impugned order passed by the Respondent is against the settled position of law, devoid of any merits and liable to be set-aside. 3) It is submitted that only the Co-operative banks other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank have lost exemption available under Sec. Sec. 80P(2) by virtue of the new provision Sec. 80 P (4) brought by the Finance Act, 2006 from Assessment Year 2007-08. The Appellant whose area of operation is less than a talu....
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....e grossly erred in not accepting the returned income of the Appellant which is doing the business of providing of credit facilities to its members and the interest on investments earned by the appellant together form part of its Business income and the provision contained in section 80 P (2) (a) (i) of the Act warrants deduction of 'whole of the amount of profit and gains of business attributable to any one or more of such activities'. Therefore, bifurcating the interest on investments derived by the appellant for taxing it under "Income from Other Sources" u/s. 56 of the Act is incorrect and without authority of law. The said interest income happen to be an integral part of appellant's business income and qualifies for deduction u/s. 80 P of the Act as held in - ITA 29/2015 - Guttigedarara Credit co-op. Society Ltd. Mysore Vs. ITO, Mysore. 6) The Respondent was at fault in relying on the decision of the Hon'ble Apex Court in The Citizen Co-operative Society Ltd. Hyderabad Vs. ACIT, Circle-9(1), Hyderabad in Civil Appeal No. 10245 of 2017 dated 08.08.2017 for taxing the appellant on the ground that the appellant was transacting with associate members and nominal me....
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....;ble High Court of Judicature at Madras also held a similar view in its judgement dated in TCA No. 259/2016 - The Commissioner of Income Tax vs. Ammapet Primary Agricultural Co-operative Bank Ltd. in a case alike involving the issue of "Class B' associate members. Therefore, the transactions with nominal or associate members can not in anyway forbid the appellant from claiming the benefit of exemption u/s. 80P of the Act and as such the impugned orders are liable to be set-aside, it is submitted. 8) The Respondent was not correct in segregating the rental income of Rs. 48,000/-earned by the appellant for considering it separately u/s. 22 of the Act as 'Income from House Property' and consequently taxing the same. The Respondent lost sight of the met that the said income was received by the appellant from letting of godown and the entire income is exempt u/s. 80P (2) (e) of the Act. 9) Both the below authorities have failed to observe that there is no condition precedent as to the fulfillment of 'concept of mutuality' for allowing deduction under Sec. 80P of the Act to co-operative societies. The judgement of the Hon'ble Apex Court in 'C....
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....see and therefore denied the deduction in view of the decision of Hon'ble Supreme Court in case of Citizen Co-operative Society Ltd. in Civil Appeal No.10245/2017 dated 08.08.2017, on following grounds: i) interest/dividend income was held to be income from other sources and excluded from the deduction under section 80P(2)(a)(i). For the deduction under section 80P(2)(d) was also denied relying on the decision of Hon'ble Karnataka High Court in case of M/s Totgars Co-operative so sale society Ltd. by order dated 16/06/2017. ii) The principles of majority were violated relying on the decision of Hon'ble Supreme Court in case of M/s Citizen Co-operative Society Ltd., Hyderabad dated 08/09/2017. Aggrieved by the order of Ld.AO, assessee preferred appeal before the Ld. CIT(A). 6. The Ld. CIT(A) came to the conclusion that as per the decision of Hon'ble Supreme Court in the case of Citizens Co-op Society (Supra), if the principle of mutuality is not satisfied, then the assessee is not entitled to deduction u/s 80P(2)(a)(i) of the Act. 6.1. In respect of members, the Ld. CIT(A) observed that the assessee admitted excess nominal/associate members which is more t....
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....sel placed reliance on the decision of Hon'ble Karnataka High Court in case of Totgars co-operative sale society Ltd. vs ITO reported in (2015) 58 Taxmann.com 35. We have perused plethora of decisions on this issue by Hon'ble Karnataka High Court and the ratio laid down by Hon'ble Supreme Court. Hon'ble Supreme Court in the case of the Totgars Co-operative Sale Society Ltd. Vs. ITO reported in 322 ITR 283 held that, Income from utilisation of surplus funds was taxable under the head income from other sources, and therefore not eligible for deduction u/s 80P. Hon'ble Karnataka High Court in case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO reported in 230 Taxman 309, dealt with an issue where deduction u/s.80P(2)(a)(i) of the Act was claimed on interest from the deposits made in a nationalized bank which was used for providing credit facilities to its members. The Assessee therein claimed that the said interest amount is attributable to the credit facility provided by the assessee and forms part of profits and gains of business. Hon'ble Karnataka High Court after considering the decision by Hon'ble Supreme Court in case of Totgars(supra) held that, ....
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....re confining the said judgment to the facts of that case. Similar view taken in case of Guttigedarara Credit Co-operative Society Ltd. vs. ITO reported in (2015) 377 ITR 464 by Hon'ble Karnataka High Court. In a subsequent decision of Pr.CIT And Anrs. vs. Totagars Co-Operative Sale Society reported in 392 ITR 74 in the context of deduction u/s.80P(2)(d) of the Act, it was held by Hon'ble Karnataka High Court that deduction in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income is available under sec.80P(2)(d) of the Act. Hon'ble Karnataka High Court held that, decision by Hon'ble Supreme Court in case of Totgars (supra), was not on the deduction claimed u/s.80P(2)(d) of the Act, but was rendered in respect of deduction claimed under Section 80P(2)(a)(i) of the Act. Hon'ble Karnataka High Court in the case of Pr.CIT Anr. vs. Totgars Co-Operative Sale Society reported in 395 ITR 611 took a different view and held that interest income earned on deposits whether with any other bank will be in the nature of income from other sources and not income fr....