TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 194
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.... eligible for deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. That the appellant craves his right to add, annul, amend, alter, withdraw and/or substitute any/or all of the grounds of appeal before the finalization of the appeal." 3. Succinctly, the fact as culled out from the records is that return of income for the assessment year 2010-11 was E-filed by the assessee on 14.10.2010 in the Office of Income Tax Officer, Ward 2(1), Jaipur vide Acknowledgement No. 171249720141010 in the status of trust declaring total income Nil. The case was picked up for the scrutiny. Notice u/s 143(2) was issued on 24.08.2011. Ld. AO noted that the details in response to query letter/order sheet notings have been filed which was placed on record by him. Books of account were produced during the course of proceedings which have been examined on test check basis with reference to the details filed as noted by the ld. AO. Ld. AO while examining the details noted that the assessee is a co-operative society and is availing deduction u/s 80P of the Act. During the year under consideration the assessee has shown income from business of providing credit facilities to its members. The ....
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....ant finding of the ld. CIT(A) is reiterated here in below: "5.1 Ground No. 1: Disallowance of deduction claimed u/s 80P of the Act: 5.1.1 On perusal of the case it is observed that the Appellant, namely M/s The Bank of Rajasthan Employees Credit & Thrift Society Limited, is a co-operative Society and registered under with the Registrar of Co-operative Societies, Rajasthan, Jaipur incorporated on date 30/03/1968 vide registration No. 2427L. The Appellant is not a bank but is providing credit facilities to its members and in the instant case it is observed that the Appellant's income is mainly from two sources one is interest received on loan given to members and the other is interest received on term deposits. 5.1.2 The Appellant filed the return for the year showing total income at Rs. NIL, and claiming a deduction u/s 80P to the tune of Rs. 12,91,250/-. The Appellant has contested that the FDRs were not idle funds of the society and the same was being utilized in the business activities of providing credit facility to its members. During the Appellate Proceedings the Appellant was asked to furnish the following details: You have claimed that interest on FDR is eligible....
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....ng notice. Therefore, the appeal is decided based on the materials available on record. On perusal of the case, it is observed that the appellant has earned interest income from term deposits in ICIC Bank Ltd. The relevant excerpt of Form 26AS of the Appellant showing interest received from the said banks is reproduced herein under:- 5.1.4 The AO in the assessment order has stated that the Appellant had claimed the interest received as deduction under section 57 of the Income tax Act, 1961 which it is not eligible to do since it falls under the provisions of 80P(2)(a)(i) of the Act. The Appellant on the other hand has contended that interest on FDR is eligible for deduction under section 80P(2)(a)(i) of the Act by virtue of the fact that the Appellant is a cooperative society. 5.1.5 The contentions of the Appellant have been duly considered. There is no disputing the fact that the Appellant is a cooperative society and is eligible to claim deduction under section 80P of the Act. However, the provisions of section 80P categorically disallows claim of deduction by the cooperative societies on interest earned from Nationalised bank as per the provisions of section 80P(2)(d) of the....
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....ghts to the following classes of its members, namely:- (1) The individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities, (2) The co-operative credit societies which provide financial assistance to the society (3) The State Government:] [(b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits, or raised or grown by its members to- (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be, or (ii) the Government or a local authority, or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), The whole of the amount of profits and gains of such business] (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of or in addition to, all or any of the activities so specified), so much of its profits and gains attributa....
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....perative bank" and "primary agricultural credit society" shall have 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 that in a case of a Co-operative Society there shall be a deduction as provided in sub-section (2) of Section 80P of the Act." 5.1.7 From the plain reading of section 80P(2)(a)(i) it is apparent that if the Co- Operative Society is engaged in carrying of business of banking or providing credit facilities to its members, the Co-Operative society is entitled for deduction on whole of the income relating to anyone or more of such business. As per provisions of Section 80P(2)(d) of the Act, any income by way of interest or dividends derived by the Co-operative Society from its investments with any other co-operative society shall be allowable as deduction. 5.1.8 From the reading of section 80P(4) it is apparent that this section denies deducti....
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.... nationalized banks not from other co-operative societies. 5.1.10 Further, deposits with the banks are not the core activity of the society, therefore, interest received on it is liable to be taxed. Therefore, the interest income earned by the Appellant is a taxable income and no deduction can be allowed under section 80P(2)(d) of the Act. 5.1.11 The issue of claim of deduction u/s 80P(2)(a)(i)/(ii) of the Act on interest income earned from Nationalised banks is squarely covered against the Appellant by the following decisions of the Hon'ble Apex Court and the Gujarat High Court: i) Totgars Cooperative Sales Society Ltd. Vs. ITO, (2010) 188 Taxman 282 (SC); ii) State Bank of India (SBI) Vs. CIT (2016) 72 com64 (Guj) 5.1.12 In Gujarat State Co-op Agriculture and Rural Development Bank Ltd Vs ITO (ITAT Ahmedabad) Appeal Number: ITA No. 462/Ahd/2018 ITAT Ahmedabad held that deduction under Section 80P of Income Tax Act, 1961 is not allowable on interest income earned from the nationalized banks. 5.1.13 In Nagapura Credit Co-operative Society ITA No. 223 226/Bang/2024, ITAT Bangalore has held as under: As far as the interest income earned by the assessee on the invest....
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....tilised in the business activities of providing credit facility to its members. 5. The Funds which were kept in FDRs are not idle funds and the same were used in business activities, thus income from Term deposits cannot be considered income from other sources. These funds were deposited in business and income from these funds from part of profit and gains of business and therefore eligible for deduction 80P(2)(a)(i) of the Income Tax Act,1961. 6. The Assessee filed it return of income Vide E Filling Acknowledgement No 171249720141010 on dated 14/10/2023, declaring a total income of Rs. Nil after claiming a deduction of Rs. 12,91,250/- under the provision of section 80P(2)(i) of ITA 1961 7. The Ld AO considered interest received on FDRs as income income from other sources and he did not consider interest on FDR as income from business or professional activities with the view that it is not attributable to the activities of providing credit activities to the members. Hence, interest income from FDRs is ineligible for deduction u/s 80P(2)(i) of the ITA. Thus, he has bifurcated interest income in the ratio of interest on loans to members and interest on term deposits and disallo....
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.... AO Order).... Fourth paragraph , interest on term deposit is not eligible for deduction u/s 80P, gross total income will be bifurcated in the ratio of interest on loan to members s and interest on term deposit. According, gross total income from interest on loan to members will come to Rs.16,22,420/- which is eligible for deduction u/s 80P. Similarly, gross total income from interest on term deposit will come to Rs. 7,84,876/- which is not eligible for deduction u/s 80P. 10. The AO did not accept the claim of the assesse and disallowed the claim under section 80P(2)(a)(i) in respect of the disallowed earned FDR interest on average bases of the total interest earned for the year and thus disallowed of Rs. 784,876/- considering that it is not eligible for deduction u/s 80P. 11. On appeal, the ld. CIT (A) has confirmed the disallowance/addition made by the AO with the findings of at para no 5.1.15 page no 23 of the order ...., the denial pf claim of deduction of interest income earned from nationalised banks under section 80P amounting to Rs 784876/- is hereby confirmed relying upon the provisions of section 80P(2) of the Act. Submission before Hon'ble ITAT 1. The Asses....
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....electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor- General, it has used the expression "derived from", as, for instance, in section 80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.' 10. Therefore, the word "attributable to" is certainly wider in import than the....
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....T(A), which are 9.1 The Hon'ble ITAT, Jaipur for the Assessment year 20213-2024 .....(PB page No 20-33) Considered the case of Royal Credit Co-operative Society Ltd., in ITA no. 221/JP/2023 and the relevant finding in that case is also reiterated in the order at page no 8 to 12 and followed the judgement at page no 14 held that Hence, taking the consistent view on the matter, we find that the issue raised by the assessee is squarely covered as per the judicial precedent discussed hereinabove. Thus, the appeal of the assessee is allowed. 9.2 The LD CIT(A), Jaipur for the Assessment year 2008-2009 and 2009-2010 .....(PB page No 34-40 and 41-43) In the said, the AO has disallowed Interest received form term deposits and considered as income from other Sources. The Ld CIT in the case of AY 2008- 2009 ... para 4.3 ..page no 6 and 7 of order (PB .. Pg No 39-40) held that .... "I have considered the AO's order and submission made by the AR. I find that the AO has treated the interest income form FDRs as income from other sources on the presumption that the applicant has idle funds which were invested in FDRs . However from the submission of appellant it is apparent that the d....
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.... the activities mentioned in section 80P(2)(a)(i) or under section 80P(2)(a)(iii) of the Act. In the case in hand, the interest income received by the assessee is on its own funds and not on the funds which is a liability towards the members. Further, this interest income is earned from the savings bank which is maintained for day to day activity of the assessee society for providing credit facilities to its members. Therefore, following the order of the Hon'ble Karnataka High Court in the case of Guttigedarara Credit Cooperative Society Ltd. vs. ITO (supra), we hold that the said interest income earned by the assessee from savings bank account is eligible for deduction under section 80P(2)(a)(i) of the Act." 6.2 Pune Bench ITAT ITO Ward-1(4), Nashik Vs. Niphad Nagari Sahakari Patsanstha Ltd., Ugaon Road, Niphad, Nashik, ITA No. 1336/PN/2011, Asstt.Year : 2008-09 Hon' ble Court held as under ... Para No 11.3 page No 14 of the order, " In the instant case there is no dispute to the fact that the society is a credit cooperative society authorised by the registrar of cooperative societies for accepting deposits and lending money to its members as per license granted by the....
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....erative Society is meant for the benefit of members of society and accepts deposits and provides credit facilities solely to its members. 2. The assessee society primarily works for the mutual benefit of the said members by accepting deposits from members and giving credit to needy members on interest. The Co-operative Society does not carry out any other activities from the inception of registration. 3. The funds that were usually deposited into current accounts of the society were deposited in FDRs and same were pledged against O/D limit. The O/D account is being used for the day-to-day transactions of the Society. Thus, the FDRs were not idle funds of the society. The same is being utilised in the business activities of providing credit facilities to its members. 4. The assessee Co-operative Society has not invested any idle money as kept in bank account with the underlying FDRs and as and when the amount was required the deposited amount were liquidated and utilised for the purpose of object of assessee society. 5. The Funds that were kept in FDRs are not idle funds and the same were used in business activities, these funds were deposited in business and income from the....
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.... is entitled to the benefits provided under section 80P(2)(a)(i) of the Income Tax Act concerning such income Thus, based on the aforementioned facts concerning the assessee, it submits that the facts of SBI Vs CIT (2016) are different from the assessee's case, and thus the appeals of the assessee deserve to be granted in favor of the assessee. 7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S. No Page No. 1 Copy of Certificate of incorporation and with Bye Laws 1-10 2. Copy of Audited Balance Sheet & Income and Expenditure Account FY 2010-2011 11-17 3 Copy of ITR along with the computation of total income for AY 2010-2011 18-19 The Assessee own cases Hon' ble ITATs Jaipur 4 ITA No 416/JP/2023 dated 13/12/2023 for the Assessment Year 2013-2014 20-33 Hon'ble CIT(A) 5 CIT(A), Alwar, ITA No 718/JPR/10-11 dated 11/02/2013 for the Assessment year 2008-2009 34-40 6 CIT(A), Jaipur, ITA No 382/11-12 dated 23/12/2013 for the Assessment year 2009-2010 41-43 Copies of the case Law in case of : &nbs....
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....n of section 80P(2)(d) of the Act and since the interest is not received from the co-operative bank deduction was not allowed by him. Before us the ld. AR of the assessee submitted that the deduction u/s. 80P(2)(a)(i) cannot be equated with the deduction u/s. 80P(2)(d) of the Act. The issue raised in this appeal is squarely covered with the decision of the co-ordinate bench in ITA no. 416/JP/2023 wherein the co-ordinate bench has held that ; 2.5 We have heard both the parties and perused the materials available on record including the case laws cited in the orders. Brief facts of the case are that the Assessee is an Employees Co-Operative Society. It is incorporated for the Employees of Bank of Rajasthan, vide registration No 2427L dated 30/03/1968. The Society is registered with the Registrar of Co-operative Societies, Jaipur, Rajasthan. The Assessee is accepting the deposits from the members and also providing credits to the members as per their needs at a reasonable interest rate. Except those activities, The society is not carried out any other activities. The Assessee filed it return of income Vide E Filling Acknowledgement No 807308150300913 on dated 30/09/2013, declaring ....
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....y both the parties to drive home to their respective contentions. The main issue in this case is the denial of deduction u/s.80(P)(2)(a)(i) of I.T. Act, to the assessee to the extent of net profit of Rs. 31,70,144/- earned by the assessee from carrying on business as Co-operative Society and the assessee claimed said amount as eligible for deduction u/s.80(P) of I.T. Act. It was also stated that the assessee's source of income is interest income arising while providing credit facilities to its members and as such it is entitled for deduction u/s 80P(2)(a)(i) of I.T. Act which was claimed in the return of income filed by the assessee. 10.1 We shall first advert to the assessee's grievance that the lower authorities had erred in declining its claim for deduction u/s. 80P(2)(a)(i) of the Act, i.e, as regards the interest income that was earned on the surplus funds which were deposited by it with Malviya Urban Co-operative Bank Ltd., i.e, a co-operative bank. After deliberating at length on the issue in hand, we find that the aforesaid claim of the assessee hinges around the aspect that as to whether or not the interest income earned by it on its surplus funds which were park....
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....y eligible for deduction under the aforesaid statutory provision, i.e., sec. 80P(2)(a)(i) of the Act. We may herein observe, that though the assessee-society is engaged in providing credit facilities to its members. It is neither the case of the revenue nor a fact discernible from the record that the funds deposited by the assessee-society with the bank, viz.Malavia Urban Co-operative Bank Limited (supra) were the amounts that were payable by the society to its members, and the same having being retained were for the time being invested as a short-term deposit/security with the bank. If that would have been so, then, the interest income earned on such short-term deposit/security with the bank would not have been eligible for deduction u/s.80P(2)(a)(i) of the Act. But then, as the amount deposited by the assessee-society with the bank, viz. Malavia Urban Co-operative Bank Limited (supra) was simpliciter surplus or idle funds of the assessee society, for which there were no takers for the time being in course of its business of providing credit facilities to its members. Therefore, depositing of the same by way of short-term deposits with the aforesaid bank, as stated by the ld. A.R,....
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....me 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 subsection (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 gains of business attributable to any one or more of such activities." 7. The word 'attributable used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT, Gujarat-II reported in ITR Vol.113 (1978) Page 842 at Page 93 as under: As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business ....
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....d is liable to be deducted from the gross total income under section 80P of the Act. 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd, on which reliance is placed, the Supreme Court was dealing with a case where the assessee co-operative society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee-society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in section 80P(2)(a)(i) of the Act or under section 80P(2)(a)(iii) of the Act. Therefore, in the facts of the said case, the Apex Court held the Assessing Officer was right in taxing the interest income indicated above under section 56 of th....
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....on 80(P)(2) of the Income Tax Act, 1961. Ms. Aakansha Kaul, learned counsel appearing on behalf of 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 t....