TaxTMI 
TaxTMI 
2023 (1) TMI 612
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....ances of the case the ld. CIT(A) was justified in deleting the addition of Rs. 7,49,50,575/- since the earning of interest income was outside the principle of mutuality. 3. The appellant craves to leave, add, amend, alter, substitute or delete the grounds urged herein above as and when found necessary.‖ 3. Opening the arguments for and on behalf of the assessee-respondent; the ld. CIT-DR relying on the assessment order, it was submitted by Sh. Purohit, the ld. senior counsel, that the assessee is a cooperative society registered under the Madhya Pradesh Cooperative Societies Act, 1960 (MPCSA), formed for encouraging thrift amongst it's Members, being the employees or ex-employees of Madhya Pradesh Rashtriya Koyla Khadaan Ltd., who subscribe thereto by way of monthly deductions from their salaries. The corpus so formed, and arising, is deployed toward meeting their defined credit needs by lending thereto. Thus, on one hand, it promotes saving among it's Members and, on another, it funds their genuine needs at a nominal cost. There is no question of the assessee, which does not accept deposits from the members of the public, being in the business of banking, as defined u/s. ....
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....would qualify for deduction u/s. 80P(1), and not the entire income of the assessee-society. Accordingly, while the interest income on loans to members and investment with cooperative banks was deductible, interest from treasury, which was in the nature of interest from non-members, was held as not. 4. We have heard the parties, and perused the material on record. 4.1 We may begin by reproducing section 80-P of the Act, which deals with computation of income of co-operative societies, reads as under in its relevant part: 80P. Deduction in respect of income of co-operative societies.- (1) Where, 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, or (ii) to (vii), the whole of the amount of profits and....
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....ve the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities." Section 80P provides for a deduction in computing the total income of a non-excluded co-operative society in respect of incomes referred to, and to the extent mentioned, therein. Sub-section (1) provides the deduction on the income specified in, including its extent, sub-section (2). Sub-section (3) provides for nonoverlapping of deduction with other specified deductions u/s. VI-A, and subsection (4) specifies the excluded entities. Sub-section (2), as shall be seen, is divided into six parts, categorised as clauses (a), (b), (c), (d) (e) and (f). Each one of these clauses deals with different types of co-operative societies engaged in different types of activities. The benefit made available to each one of them is also different. The deduction available under clauses (a) to (c) is activity-based. The deduction available under....
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.... The BR Act, being in the public domain, it was considered only proper under the circumstances to proceed with the hearing, securing a copy thereof for the purpose, rather than keeping the same on hold indefinitely, or making it subject to production thereof. The Apex Court in Mavilayi Service Cooperative Bank Ltd. (supra) clarified that cooperative banks, which therefore require a licence from the Reserve Bank of India (RBI) for banking business, would, w.e.f. AY 2007-08, stand excluded for the benefit u/s. 80P(1). We have perused the stated sections, falling under Part V of the said Act, inserted on the statute w.e.f. 01/3/1966, and shall, where applicable, override anything (to the contrary) in the said Act (s. 56 of the BRA). None of them, however, is applicable inasmuch as all of them, perused by us, provide as a condition for their application the cooperative society to be in the business of banking - a term defined u/s. 5(b), the essential ingredient of which is the acceptance of deposits from the public, missing in the instant case. Our finding as to the non-application of the relevant provisions of the said Act follows our said perusal thereof, and is not in the least in ....
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....y pleadings toward the same made during hearing and, per contra, not responded to by the assessee. The same is directed for deletion. 4.4 Coming to the aspect of disallowance of the deduction claimed, i.e., rs. 13.76 lacs, the question before us is if the assessee is entitled thereto at the full amount, i.e., as claimed by it, or at a lower sum. This lower sum could be nil, as the Revenue claims, only if the income on the qualifying activity is nil or in a negative sum, qua which, a matter of fact, there is in fact no claim by it. Section 80P(2)(a) restricts of allowance of deduction 80P(1) to the income arising from the activities specified thereunder. The answer to the question posed thus lies in determining the income from the activity of providing credit facility/s by the assessee-society to it's members. On the Bench so observing during hearing, Sh. Purohit would submit that the income from the interest on Bank Deposits is integral to that of provision of credit facilities to its members. The funds with the assessee, and which are placed with Bank/s, including in FDRs, are for the reason of subscriptions being received unabated by the assessee from its members, thereby inculc....
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....tion u/s. 80P(1). This, as explained therein, is so as it is not permissible for the Revenue to change the status of the appellant-society from that of PACS, which is sole prerogative of the Registrar of Co-operative Societies, who alone could examine if the assessee-society is, or continues to be, a PACS, or not. As such, as long as it is classified and registered as a PACS, not excluded u/s. 80P(4), income on the provision of credit to its members, falling u/s. 80P(2)(a)(i), would be eligible for deduction u/s. 80P(1) in full. The question arising in the instant case, on the contrary, is the extent of income arising to the assessee-society on the provision of credit to it's members, the sole qualifying activity u/s. 80P(2). The same cannot be stretched to the income on placement of investible surplus with the assessee, i.e., not required for the said eligible activity for the time being, in other investment avenues deemed by law, concerned as it is with the safety of public funds, as low risk and, thus, 'safe'. And which would be so independent and irrespective of the nature of activity being pursued. This is as the same would, for that reason, not be liable to be deemed as inves....