TaxTMI 
TaxTMI 
2025 (2) TMI 1537
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....ulatory guidelines. 3. Without prejudice, the assessee was also eligible for claim of deduction in respect of interest of Rs. 48,77,959 under section 80P(2)(d) of the Act. 4. The learned AO erred in levying interest u/s. 234A, 234B and 234C. Without prejudice, interest levied is excessive. 5. The assessee craves leave to add, alter or withdraw any of the grounds of appeal." 3. Facts in Brief:- In this case, the main object of the business of the society is to promote saving habits of its members through accepting deposits from members and to provide personal, mortgage, gold and housing loan to its members only. Basically society is doing banking business for its members only by opening their Saving accounts, R.D. accounts and Fixed deposits account and also providing personal loans, mortgage loans, gold loans and housing loans to its members only. The society run its banking business as per RBI guideline and have to follow RBI norms of NPA for loans provided, maintenance of Fixed deposit with other national and cooperative banks of specific percentage of deposits accepted from its members as Reserve Deposits. (i) As the assessee is a co-operative socie....
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....e parties agree before me that the issue in hand is covered by the decision of the Co-ordinate Bench of the Tribunal (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, wherein the Tribunal has considered this issue in detail and held that interest income earned by the assessee trust is eligible for deduction under section 80P(2)(a)(i) / 80P2(d) 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 ....
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....he Co-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 assessee(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 que....
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....ly: (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 assesse....