TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 1494
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....ixed deposit and Savings Bank Account - Rs. 3,59,28,438/-: The interest earned on fixed deposit and savings bank account is incidental to the main object of providing credit facilities to the members and it is embedded with the main income of the society and hence the interest of Rs. 3,59,28,438/-. earned on the fixed deposit and savings bank account is eligible for deduction under section 80P of the income Tax Act. The assessee shall be permitted to furnish any further grounds of appeal during the course of hearing. The Appellant prays that the appeal be allowed. The appellant also prays to bring forth further grounds or additional grounds at the time of the hearing." 2. M/s. The Govt. Telecommunication Employees Co-operative Society Ltd., the assessee, is a Multi State Co-operative Society governed by the Multi State Co-operative Act. While making the assessment for AY 2015- 16, the Assessing Officer (AO) disallowed the interest income earned on staff advance at Rs. 1,01,03,351/- and the interest earned on fixed deposit and Savings Bank Account at Rs. 3,59,28,438/- both u/s. 80P of the Income Tax Act, 1961. Aggrieved against that order, the assessee filed an appeal before CI....
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....rding to him, such interest only went to reduce interest cost of borrowings. Ld. Authorised Representative referring to provisions of Sec. 64 of Multi Society Cooperative Society Act, 2002 submitted that the conditions set-out therein were complied while making such deposits. As per the ld. Authorised Representative loans were given to its members from the deposits in such savings bank account as well. According to him, ld. Commissioner of Income Tax (Appeals) had erroneously treated the interest on fixed deposits and interest on savings bank account in the same vein. As per the ld. Authorised Representative, assessee was eligible for claiming deduction u/s.80P(2)(a)(i) of the Act for such interest also. Reliance was placed on the decision of Bangalore Bench of the Tribunal in the case of ITO vs. M/s. KPTC & Hescom Employees Co-Op Credit Society Ltd (ITA No.666/Bang/2015, dated 01.10.2015). 4. Per contra, ld. Departmental Representative strongly supporting the orders of the authorities below submitted that assessee was given deduction u/s.80P(2)(a) (i) of the Act on the profits and gains attributable to its activities of providing credit facilities to its members. According to hi....
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...., in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:-- (a) in the case of a co-operative society engaged in-- (i) carrying on the business of banking or providing credit facilities to its members''. As noted by the Hon'ble Apex Court in the case of The Citizen Co-operative Society Ltd (supra), there are two classes of businesses mentioned in the above clause. First class is those Co-operative societies carrying on business of banking and second class is Co-operative societies providing credit facilities to its members. Assessee falls in the second class. While holding that liberal interpretation has to be given for Sec.80P(2)(a)(i) of the Act, since said Section was enacted for encouraging its Co-operative Sector, their lordships took a view that interest earned by a Co-operative Societies providing credit facilities to its Associate Members wo....
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....th of cooperative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a cooperative society is exempt from tax what has to be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption..." 21) In the case of Commissioner of Income Tax v. Punjab State Cooperative Bank Ltd.6, while dealing with an identical issue, the High Court of Punjab and Haryana held as follows: "8. The provisions of section 80P were introduced with a view to encouraging and promoting the growth of the co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The different heads of exemption enumerated in the section are separate and distinc....
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....rve Bank of India, which the appellant does not possess. Not only this, as noticed above, the Reserve Bank of India has itself clarified that the business of the appellant does not amount to that of a co-operative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80P. 25) So far so good. However, it is significant to point out that the main reason for dis entitling the appellant from getting the deduction provided under Section 80P of the Act is not sub-section (4) thereof. What has been noticed by the Assessing Officer, after discussing in detail the activities of the appellant, is that the activities of the appellant are in violations of the provisions of the MACSA under which it is formed. It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people. The first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of 'nominal members'. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, the....
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....mber in referred as members may not be the member of the society as such the AOP body by the society is not covered by concept of mutuality at all." 27) These are the findings of fact which have remained unshaken till the stage of the High Court. Once we keep the aforesaid aspects in mind, the conclusion is obvious, namely, the appellant cannot be treated as a cooperative society meant only for its members and providing credit facilities to its members. We are afraid such a society cannot claim the benefit of Section 80P of the Act''. Considering the view taken by Hon'ble Apex Court on the extent of applicability Sec. 80P(2)(a)(i) of the Act, on a Co-operative Society providing credit facilities to its members, the decision of Jaipur Bench of the Tribunal in the case of Jalwar Sahkari Bhoomi Vikas Bank Ltd (supra) relied on by the ld. Authorised Representative, in my opinion pales into insignificance. 7. Coming to the question of availability of such deduction on interest earned from deposits with savings bank account, contention of the ld. Authorised Representative is that interest income received from savings bank account should be treated differently since deposits therein....