TaxTMI 
TaxTMI 
2018 (5) TMI 2158
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.... that such income attributable to the activity of banking thus would be eligible for deduction under section 80P of the I.T. Act 1961, such income could riot be said to attributable to the activities of the society, therefore would not fall within the meaning of the expression 'profit and gains of business'. 3. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. Briefly stated, the facts of the case are that the assessee which is a cooperative society engaged in the business of providing credit facilities to its members had e-filed its return of income for A.Y. 2010-11 on 09.10.2010, declaring total income of Rs. nil. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. The case of the assessee was thereafter taken up for scrutiny assessment under Sec. 143(2). 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee which had declared net profit of Rs.1,35,51,336/- had claimed hundred percent deduction in....
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....o-operative society it had sought deduction of the interest earned on fixed deposits with the nationalized banks under Sec.80P(2)(a)(i) of the Act, as the whole of such amount was attributable to its activities of providing credit facilities to its members. Still further, it was submitted by the assessee that the interest and dividend income earned from the Mumbai District Co-operative Bank Ltd was also eligible for deduction under Sec. 80P(2)(d) of the Act. The assessee in order to fortify its claim that the interest income earned on investments in fixed deposits was its business income, submitted that the Bye-law No. F.1.8.22 of the society laid down that the investments of the funds of the society were to be made in accordance with the provisions of MCS Act, 1960. It was the claim of the assessee that investment of funds was the main activity of the society to maintain liquidity as well as to optimize yield on the funds of the society. Still further, it was submitted that the interest income earned in the course of the business activity would not change its character even if the A.O assessed the same as income from other sources, as its entitlement towards claim of deduction und....
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....o the assessee and brought the balance interest income of Rs.33,27,858/- earned by the assessee on the deposits held with the nationalized banks to tax. The A.O also brought the dividend income of Rs.85,855/- earned by the assessee on the investments in shares of co-operative bank to tax under the head "income from other sources", but observing that the dividend income was earned on the shares of a co-operative bank, allowed a deduction of Rs.85,855/- under Sec.80P(2)(d) of the Act. 6. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee in the backdrop of the facts of the case observed ,that a bare perusal of Sec.80P (2)(a)(i) revealed that in the case of a co-operative society carrying on the business of banking or providing credit facilities to its members, whole of the profits or gains attributable to such activities were eligible for deduction. It was specifically observed by the CIT(A), that the deduction contemplated under the aforesaid statutory provision, viz. 80P(2)(a)(i) was available to the society in respect of the profit and gains "attributable to" specified activities of the....
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....the business of banking, as was the case of assessee before him. The CIT(A) was thus of the view that the Hon'ble Apex Court in its aforesaid case had not considered the cases of the co-operative societies which were carrying on banking activities. The CIT(A) concluded that in the case of the assessee society before him, lending as well as making of deposits with the other banks was an integral part of the banking activity carried on by the assessee, from which the interest income was earned by it. The CIT(A) on the basis of his aforesaid observations concluded that the interest income earned on such deposits with other banks, being directly attributable to the activity of banking of the assessee co-operative society and represented the profits and gains from its banking business activities, hence the same was eligible for deduction under Sec. 80P(2)(a)(i) of the Act. The CIT(A) thus deleted the addition of Rs.65,88,008/- made by the A.O as the income of the assessee from other sources. 7. We find that despite the fact that the assessee respondent was duly intimated as regards the date of hearing of the appeal, however he had neither put up an appearance, nor any application seeki....
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.... From the facts of the instant case, it is quite clear that the appellant has limited himself to his own members. The appellant has not provided banking facilities either to the general public at large or even to the members of the society. Even the bye laws of the appellant does not provide for banking activities. Therefore facts of this case are not identical with any of the case laws relied upon by the AO. On the other hand the facts of instant case are almost similar to the decisions of the ITAT Nagpur & Panaji Benches in the cases of (i) ACIT Vs. Buldana Urban Coop Credit Soc. Ltd 32 Taxman 69 ITAT Nagpur and (II) DCIT Vs. Jayalaxnmi Mahila Vividodeshagala Souharda Sahakart, Ltd. by ITA T Panaji Bench 23 Taxman 313 where the activities of the assessee were limited to the members of a specific group and the area of operations was also limited to the acceptance of deposits of members and providing credit facilities to only members, which have been held as not falling under banking activities as defined in the Banking Regulation Act. I also find persuasive value in the opinion of the RBI issued vide letter dated 1st Feb 2012 whereby the RBI states that where a banking license has....