TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 1357
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....1, in para 2). During the Assessment Year 2017-18, the year relevant, the assessee deposited its reserve funds with The Nawanshahr Central Co-operative Bank Ltd; Nawanshahr [another cooperative society] in the shape of FDR and Saving Bank Account. The assessee received interest from the Banks during the year under consideration to the tune of Rs. 1,35,63.303/-. The AO had denied deduction of a sum of Rs. 54,00,164/- out of the said interest income claimed by the appellant from Banks under section 80-P(2)(d) of the Income Tax Act, 1961, by applying the provisions of sub- section 4 of section 80-P of Act. That the Ld. Assessing Officer erred in law and facts of the case in making the addition of the said interest income of Rs.54,00,164/- to the returned income of the assessee relying on the case of "Totgar's Co-operative Sale Society Ltd; Vs. Income Tax Officer as reported in (2010) 322 ITR 283. 3. The Ld. CIT(A) has confirmed the finding of the AO. The appellant challenged the action of the CIT(A)/NFAC, Delhi in confirming the action of the Ld.AO is against law and facts of the case. 4. At the outset, the ld. counsel for the assessee submitted that the ld. CIT(A)/NFAC has erre....
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.... gains of business attributable to any one or more of such activities. Since the assessee is a co-operative society engaged in carrying on the business providing credit facilities to its members, it claimed deduction u/s 80P(2)(a)(i) of the Act. However, sec. 80P(4) was inserted by Finance Act 2006 w.e.f. 1.4.2007 and the same reads as under:- "80P(4) The provisions of this section shall not apply in relation to any cooperative bank other than primary agricultural credit society or primary cooperative agricultural and rural development bank. According to Explanation given under sec. 80P(4), the expressions "Cooperative Bank" and "Primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949. The expression "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. 3. The assessing officer, after referring to the provisions of Banking Regulation Act, held that the assessee is a bank and hence it is hit by the provi....
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.... of convenience, I extract below the operation portion of the said order: "9. I heard the parties and perused the record. In my view, the decision rendered by Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd (supra) squarely applies to the facts of the present case. In the case before the Hon'ble Karnataka High Court also, the assessee claimed deduction u/s 80P(2)(a)(i) on the interest income earned from deposits kept with banks on the reasoning that the same shall form part of its business income. The Hon'ble High Court upheld the said view by duly considering the decision rendered by Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd (supra). For the sake of convenience, I extract below the observations made by the Hon'ble Karnataka High Court: "8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sourc....
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....own as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 244 CTR (AP) 86: [2011] 60 DTR (AP) 281: [2011] 336 ITR 516 (AP): [2011] 200 Taxman 220 (AP). In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order:" 7. Consistent with the view taken in the case of M/s Jaoli Taluka ahakari Patpedhi Maryadit (supra), I hold that the interest income is assessable as profit and gains of business in the hands of the asses....
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....the appellant/Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan. However, it is required to be noted that merely giving credit to its members only cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also. There are concurrent findings recorded by CITA, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under Section 80(P)(2) of the Income Tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to ....