TaxTMI 
TaxTMI 
2024 (10) TMI 469
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....ive appearing for the assessee and the averments made in the affidavit, we are of the opinion that the assessee is prevented in filing the appeal belatedly and we are satisfied that the delay in filing the appeal is due to reasonable cause. Balance of convenience is also in favour of the assessee. Consequently, we condone the delay of 22 days in filing the present appeal and admit the same for adjudication on merit. 4. In its appeal, the assessee has raised following grounds:- "1. Whether the Ld. AO and CIT(A) is correct in disallowing a sum of Rs. 3,27,687/- from deduction claimed under Sec 80P as interest income on deposit nationalized bank. 2. The appellant craves leave to add/alter/amend and/or rescind any of the ground/grounds before or at the time of hearing. Any other additional/further ground/grounds of appeal may be given at the time of hearing." 5. Facts in Brief:- The assessee is a Co-operative Society engaged in accepting deposits and providing credit facilities to its members. The members of the society consist of teaching and non-teaching employees of Maharashtra Government Middle Schools of Arvi Taluka (Semi Govt). The assessee filed its retur....
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....ed Banks which is not so. He was further of the view that since the assessee is the custodian of the hard-earned money of its numerous members, it has the responsibility to park the excess funds in safe hands which may include banks in co-operative and public sector wherein they have trust as the funds would be safe. However, the Assessing Officer held that the only issue is that the income earned by way of interest on such deposits kept with banks does not qualify for claiming as deduction under Chapter-VIA (80P). In view of the above, the deduction claimed under Chapter-VIA (80P) of the Act was restricted by excluding the amount of interest earned on deposits with Bank. Aggrieved, the assessee carried the matter before the first appellate authority. 7. The learned CIT(A) confirmed the order passed by the Assessing Officer and dismissed the assessee's appeal by observing as follows:- "4.4 On perusal of the findings of the AO as well as written submission filed by the appellant, it is found that the contention of the appellant is not acceptable as the case of the appellant is not falling under the provisions of section 80P of the IT Act, 1961. As per the provision of Se....
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....imilar issue came up for adjudication before the Tribunal, Nagpur Bench, wherein the very same Bench was a party to that order rendered in The Ismailia Urban Co-operative Society v/s ITO, ITA no.122/ Nag./2023, order dated 18/06/2024, (the very same Bench is a party to this order) wherein the Tribunal has considered this issue in detail and held that interest income earned by the assessee trust is eligible for deduction under Chapter VIA (80P) of the Act. The relevant portion of the order reproduced below:- "9. Upon hearing both the counsel and perusing the record, we find that the issue involved is covered in favour of the assessee by a catena of decisions from ITAT as well as a decision of jurisdictional High Court. In this regard we may gainfully refer the Hon'ble Jurisdictional High Court decision in the case of CIT vs. Solapur Nagri Audyogik Sahakari Bank Ltd. 182 Taxman 231 wherein the following question was raised. "Whether the interest income received by a Co-operative Bank from investments made in Kisan Vikas Patra ("KVP" for short) and Indira Vikas Patra ("IVP" for short) out of voluntary reserves is income from banking business exempt under Section 80P(....
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....o-operative Society is maintaining "operations funds" and to meet any eventuality towards repayment of deposit, the Co-operative society is maintaining some liquidated funds as a short term deposit with the banks. This issue was thoroughly discussed by the ITAT "B" Bench Ahmedabad in the case of The Income Tax Officer vs. M/s.Jafari Momin Vikas Co-op Credit Society Ltd., bearing ITA No. 1491/Ahd/2012 (for A.Y. 2009-10) and CO No. 138/Ahd/2012 (by Assessee) order dated 31/10/2012. The relevant portion is reproduced below :- "19. The issue dealt with by the Hon'ble Supreme Court in the case of Totgars (supra) is extracted, for appreciation of facts as under : What is sought to be taxed under section 56 of the Act is interest income arising on the surplus invested in short term deposits and securities, which surplus was not required for business purposes? The assesse(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. The question ....
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.... (1) in the case of assessee, the entire funds were utilized for the purposes of business and that there were no surplus funds:- - in the case of Totgars, it had surplus funds, as admitted before the AO, out of retained amounts on marketing of agricultural produce of its members; (2) in the case of present assessee, it had not carry out any activity except in providing credit facilities to its members and that the funds were of operational funds. The only fund available with the assessee was deposits from its members and, thus, there was no surplus funds as such; - in the case of Totgars, the Hon'ble Supreme Court had not spelt out anything with regard to operational funds; 19.5 Considering the above facts, we find that there is force in the argument of the assessee that the assessee not a co-operative bank, but its nature of business was coupled with banking with its members, as it accepts deposits from and lends the same to its members. To meet any eventuality, the assessee was required to maintain some liquid funds. That was why, it was submitted by the assessee that it had invested in short-term deposits. Furthermore, the assessee had ma....