TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 2095
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.... provisions and the Id. CIT A erred in confirming the same. 3. The Ld. AO has erred in taxing interest of Rs. 65,61,102/- earned by assessee from coop banks as income from other source u/s 56 and the Id. CIT A erred in confirming the said treatment of AO. 4. The assessee prays to allow deduction of proportionate expenses u/s 57 if it is ultimately decided to tax the bank interest. 5. The AO and CIT A has erred in not following judgements of appellate forums including high court and supreme court. 6. The reassessment proceedings initiated against the assessee are bad in law since there is no fresh and tangible material before the AO to reopen the case, no satisfaction has been recorded, copy of the reasons recorded was not shared, and due to divergent views on the issue of deduction u/s 80P2d, no income has escaped the tax as per section 147 in our case. 7 The assessee hereby requests for allowing any other relief as available under the law. 8. The assessee craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal." Findings & Analysis : 2. We have heard both the parties and perused the records. ....
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....es. According to Assessing Officer, Assessee's primary object was profiteering. 3.2 However, the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., vs. CIT 431 ITR 1 (SC) has observed that the entity which has got banking license issued by Reserve Bank of India can be held as Bank. In this case, it is not the allegation of the Assessing Officer that Assessee has got Banking License issued by Reserve Bank of India. Rather, Assessee is registered as Co-operative Society under the Co-operative Societies Act, therefore, Assessee is Co-operative Credit Society. The income earned by assessee is from its activity of providing credit facility to its members and nominal members. As per Maharashtra Cooperative Societies Act, Nominal Members are also Members. 3.3 It is also mentioned by the Assessing Officer in the assessment order that assessee has earned interest income from Surplus Funds kept with PDCC Bank. Assessing Officer further observed that PDCC i.e. Pune District Central Co-operative Bank is a Bank and hence interest earned from PDCC will not be eligible for deduction u/s.80P of the Act, as per Explanation to Section 80P(4) of the Act. 4. Hon'ble....
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....rative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the society. It is also found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck....
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....any one or more of its activities. Thus, all amounts as can be attributable to the conduct of the specified businesses by a Co-operative Society will be eligible for the deduction envisaged under the statutory provision. The question that arises therefore is whether, merely because the assessee chooses to deposit its surplus profit in a permitted bank or financial institution, and earns interest on such deposits, such interest would cease to form part of its profits and gains attributable to its business of providing credit facilities to its members? In our view that question must be answered in the negative, since we cannot accept the contention of the Revenue that the interest earned on those deposits loses its character as profits/gains attributable to the main business of the assessee. It is not as though the assessee in the instant case had used the surplus amount [the profit earned by it] for an investment or activity that was unrelated to its main business, and earned additional income by way of interest or gain through such activity. The assessee had only deposited the profit earned by it in the manner mandated under Section 63 of the Multi-State Cooperative Societies Act, ....