TaxTMI 
TaxTMI 
2008 (9) TMI 112
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....d to its employees from deposit of P.F. and Housing loan is eligible to be exempted under Section 80P (2) (a) (i) of the Act, 1961." 2. The necessary facts are that the assessee is a co-operative society, and carries on banking activities, including providing credit facilities to its members. In the relevant assessment years, certain additions were made by the assessing officer on account of interest, received by the assessee, on loans, given to the staff of the assessee, being PF loans, and House loans. The Assessing officer, denied the claim of exemption of these amounts, under Sec. 80 P(2) (a) (i). Then on appeal, in some matters, learned Commissioner accepted the contention of the assessee, and found it to be exempted, while in another cases, the view taken by the assessing officer, was upheld. The matters were then, carried to the Tribunal, by both the sides, in respect of the orders passed, regarding respective years, and in all the cases, the learned Tribunal has held, that such amount is exempted from tax, under Sec. 80P (2) (a) (i). 3. The learned Tribunal has held that the interest, earned on the loan, given to staff members, whether it be against PF deposit, or f....
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.... case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of the agricultural produce grown by of its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities: Provided that in the case of a co-operative society falling under sub clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:- (1) the individuals who contribute their labour or, as ....
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...., for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order of otherwise; 10. Then chapter part 2 provides for the business of banking companies, and Sec. 6, enumerates the forms of business, for which banking companies may engage. For the present purpose, relevant clause would be, clause (a) and Clause (j) thereof, which read as under:- "(a) the borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scripts and other instruments and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, traveler's cheques and circular notes; the buying, selling and dealing in bullion and specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures....
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....uch activities provides, it is provided with specific constrains. In that regard, we may come to clause (j),which permits, establishing and supporting or aiding in the establishment and support of associations, institutions, funds, trust and companies calculated to benefit the employees or ex-employees of the company, or the dependents, or connections, of such persons; granting pensions and allowances, and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent objects. Again these activities are not intended to be qua the public, but it is intended to be, for the purpose of employees, or ex- employees of the companies or the dependents of such persons. Thus, where the activity was permitted to be undertaken by the Bank, as a form of business, in which it may engage, qua the employees, it was specifically provided in Sec. 6 (j). 13. With this background, we may refer to some of the cases, cited on the side of the assessee, or coming to our notice. At this place, we may observe that we are mindful of the fact, that advancing loans is inherently one of the banking activity, and interest earned thereon, would inherently be pro....
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....ees of the assessee bank, who happened to be bank, as an employer to the employees, and one of the facility is available, only to the confirmed permanent employee of the assessee. Thirdly the Registrar, as such, is not concerned with any banking activity of the assessee society. The Registrar as such has control over the assessee, being a cooperative society, under the provisions of Rajasthan Co-operative Society Act only, and the Registrar has not given any directions to the assessee Society, in the matter of undertaking banking activity, rather the scheme has been approved only for providing facilities to the employees by the employer, the assessee, who happens to be the Bank. 17. In other words, the activity of the bank, in advancing loans to be house building loans, or the PF loans, was not the advancement to the customers of the bank, as such, who may have happened to be the employees, as well; but the advances are to the employees only. In one of the orders, learned Commissioner, has cataloged the object of the society being, to carry on banking activities, and providing credit facilities to its members. At this place, we may also ob....
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....; judge of the Allahabad High court relied upon the judgment of the Bombay High court in CIT Vs. Ahmednagar District Central Co-operative Bank Ltd., where the commission earned by the co-operative bank from Maharashtra State Electricity Board for collecting electricity bills from the public on their behalf is attributed to the business of banking, likewise, reliance was also placed on a judgment of Karnataka High Court in CIT Vs. Grain Merchants Co-operative Bank Ltd where rent received form the Co-operative bank from letting out portions of building was exempt. 21. In our view, this judgment does not help the case of the assessee. So far as the judgment in Grain Merchants case is concerned, income considered therein is covered by different clauses of Sec. 80P, and therefore that is of no relevance. While in Ahmednagar District Central Co-operative Bank's case there was no doubt, that the amounts came to the assessee in its functioning, as a bank only, and not in its functioning in any other capacity. Thus, nothing turns in favour of the assessee, on the basis of this judgment either. 22. Then, the learned counsel for the assessee has invited our attention to a ....