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2013 (12) TMI 237 - AT - Income TaxNature of assessee - Whether the assessee is a credit co-operative society or a co-operative bank The assessee has income from banking and non-banking activities - Held that - The aims and objects does not allows the assessee-co-operative society to accept deposits of money from the public for the purpose of lending or investment - the prime object or principal business of the assessee is not the banking business - The assessee cannot be regarded to be a primary co-operative bank - It cannot be termed as a co-operative bank as defined under Part V of the Banking Regulation Act 1949 - The assessee is eligible for the deduction under section 80P(2)(a)(i) - Following Deputy CIT v. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd 2012 (8) TMI 185 - ITAT PANAJI - Decided against Revenue. Deduction u/s 80P(2)(a)(i) - Income from investment made in joint venture - Held that - The provisions of section 80P(2)(a)(i) restricts the deduction only to the income which has been earned on providing credit facilities by the society to its member - Article 4(ii)(h) of the bye laws of the co-operative society permits the membership of the co-operative society to the AOP if it has been approved by the Central Registrar The issue restored to AO for fresh examination. Deduction u/s 80P(2) (a)(i) - Locker rent Held that - the assessee is not carrying on the business of banking. It is carrying on the business of providing credit facilities to its members. This income in our opinion cannot be regarded to be the profits and gains of business attributable to providing credit facilities to its member The provision of safe deposit vaults is part of ordinary banking business Decided against assessee. Deduction u/s 80P(2)(a)(i) - Purchase of vehicle fund - Provision for investment fluctuation reserve Held that - The investment fluctuation reserve is directly linked with the income from investment business - The deduction is allowed when the provision is made out of such investment income - If the provision for purchase of vehicle fund is made out of the income earned by the assessee from the business of providing credit facilities to members on which the assessee is entitled for deduction under section 80(2)(a)(i), the assessee will be entitled for deduction otherwise not The issue set aside for fresh decision. Addition u/s 2(24)(x) Employer s contribution in provident fund or S.F. Held that - All the payments of provident fund contribution were made within the accounting year Decided in favour of assessee. Addition as cash receipt The Assessing Officer noted that seized document No. A21 page 47 has noting of cash transaction/payment amounting to ₹ 8,98,420 - Held that - If the assessee has filed a plausible explanation, the onus get shifted on the Assessing Officer as to how he did not agree with the explanation of the assessee No corroborative evidence was found to show that the explanation given by the assessee is wrong The AO also did not prove anything contrary Decided in favour of assessee. Addition u/s 68 - Unidentified deposit - During the course of search a document (a) A29 was seized page 1 of the said document consists of handwritten notings regarding deposits and receipts of various dates Held that - The onus is on the assessee to prove to the satisfaction of the Assessing Officer the nature and source of the cash credit - The assessee failed to comply with the KYC norms. Deposits to be business income or income from other sources Held that - The assessee is engaged in the business of providing credit facilities to its members - The credit facilities cannot be provided until and unless the assessee receive the deposits - The deposits have been received during the course of business of the assessee Decided against assessee. Deduction u/s 80P(2)(a)(i) Held that - Following Shri Mahavir Nagari Sahakari Pat Sanstha Ltd. v. Deputy CIT 2000 (2) TMI 234 - ITAT PUNE The assessee satisfied the conditions laid down under section 80P(2)(a)(i) The assessee was entitled to deduction cash credit, even if taxed, would be considered as income from the same business - Decided in favour of assessee.
Issues Involved:
1. Whether the assessee is a credit co-operative society or a co-operative bank. 2. Deduction under section 80P(2)(a)(i) for income from investment in joint ventures. 3. Deduction under section 80P(2)(a)(i) for locker rent. 4. Deduction under section 80P(2)(a)(i) for various provisions (NPA, vehicle fund, investment fluctuation reserve). 5. Deduction under section 80P(2)(e) for godown rent. 6. Addition under section 68 for unidentified deposits and whether it qualifies for deduction under section 80P(2)(a)(i). 7. Addition under section 2(24)(x) for delayed deposit of provident fund contributions. 8. Addition for cash receipts found during the search. 9. Other miscellaneous additions and deductions. Issue-wise Detailed Analysis: 1. Whether the assessee is a credit co-operative society or a co-operative bank: The primary issue was whether the assessee qualifies as a credit co-operative society or a co-operative bank. The Tribunal held that the assessee is a credit co-operative society and not a co-operative bank. The distinction was made based on the definitions provided in the Banking Regulation Act, 1949, and the fact that the assessee did not possess an RBI license required for a co-operative bank. Therefore, the assessee was entitled to deductions under section 80P(2)(a)(i). 2. Deduction under section 80P(2)(a)(i) for income from investment in joint ventures: The Tribunal noted that the deduction for income from investment in joint ventures could only be allowed if the joint venture was a member of the assessee co-operative society. This issue was remanded to the Assessing Officer for verification of the membership status of the joint venture. 3. Deduction under section 80P(2)(a)(i) for locker rent: The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) that income from locker rent does not qualify for deduction under section 80P(2)(a)(i) since the assessee is not engaged in the banking business. The decision of the Madhya Pradesh High Court in CIT v. Jila Sahakari Kendriya Bank Maryadit was considered but found not applicable as it was overruled by the Supreme Court in Mehsana District Central Co-operative Bank Ltd. v. ITO. 4. Deduction under section 80P(2)(a)(i) for various provisions (NPA, vehicle fund, investment fluctuation reserve): The Tribunal remanded the issue to the Assessing Officer to verify if these provisions were reduced while computing the income from providing credit facilities to members. If so, the disallowance of these provisions would increase the income eligible for deduction under section 80P(2)(a)(i). 5. Deduction under section 80P(2)(e) for godown rent: This ground was dismissed as not pressed by the assessee since the Commissioner of Income-tax (Appeals) had already allowed the deduction under section 80P(2)(a)(i). 6. Addition under section 68 for unidentified deposits and whether it qualifies for deduction under section 80P(2)(a)(i): The Tribunal confirmed the addition under section 68 due to the failure of the assessee to comply with KYC norms and prove the nature and source of the deposits. However, it held that the income added under section 68 should be treated as profits and gains from business, thus qualifying for deduction under section 80P(2)(a)(i) as it was attributable to the business of providing credit facilities to members. 7. Addition under section 2(24)(x) for delayed deposit of provident fund contributions: The Tribunal deleted the addition, noting that all payments of provident fund contributions were made within the accounting year, thus complying with the law. 8. Addition for cash receipts found during the search: The Tribunal deleted the addition of Rs. 8,98,420, accepting the assessee's explanation that the documents containing the cash transactions did not belong to it and were not in the handwriting of any of its employees. 9. Other miscellaneous additions and deductions: Several other grounds related to various provisions and deductions were either dismissed as not pressed or remanded for further verification by the Assessing Officer. Conclusion: In the result, the appeals filed by the Revenue were dismissed, while the appeals filed by the assessee were partly allowed. The Tribunal provided detailed directions for the Assessing Officer to verify specific facts and allowed certain deductions based on compliance with the statutory provisions.
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