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TMI Blog2015 (9) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on account u/s 80P(2)(a)(i) on excess depreciation amounting to Rs. 41.578/- 5. The L.A.A. erred in not granting deduction on account u/s 80P(2)(a)(i) on provision towards gratuity amounting to Rs. 1,10,000/-". 2. Ground no.1 is general in nature and does not require any specific finding, as the assessee has not advanced any argument except on the merits of the case. 3. Ground no.2 regarding disallowance of deduction u/s 80P in respect of interest receivable on standard asset. The assessee is a Cooperative Society registered under the Karnataka State Co-operative Act, 1959. The assessee provides credit facility and financial services to its members. The assessee filed its return of income for the year under consideration on 26-09-2010 declaring NIL income, after claiming deduction u/s 80P of the IT Act, 1961. The AO in the course of assessment proceedings u/s 143(3) asked the assessee to furnish the details of the interest receivable on non-performing assets as well as on standard assets which has not been accounted by the assessee. The Secretary of the Society appeared before the AO and submitted that there is no concept of NPA in the Co-operative Society, as it is in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of Karnataka. 5. CIT Vs Nomin Vikas Co-operative Society Ltd. In Tax Appeal No.442 of 2013 of the Hon'ble High Court of Gujarat. 6. The learned AR also relied upon the latest decision of the Hon'ble jurisdictional High Court in the case of Tumkur Merchants Souharda Credit Co-operative Ltd Vs ITO (2015) 55 Taxman.com 447. 7. On the other hand, learned DR submitted that the assessee has not furnished the details of the loans given to the members and therefore, it is not clear from the record whether the interest receivable on the standard asset is in respect of the loan given to the members of the assesee society. He has further submitted that in the case of Merchants Souharda Credit Co-operative Ltd Vs ITO, (Supra), the Hon'ble High Court has distinguished the judgment of the Hon'ble Supreme Court in case of Totgars Co-operative Sale, Society Ltd Vs ITO(2010) 322 ITR 283 by noting the fact that the interest income derived by the society on the short term deposit of the income or capital not immediately required to be lend to the members. Further, the society in the said case, shown the said interest income on the short term deposit as a liability in the bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered as co-operative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(1)(i) of the IT Act. The operative part of the judgment reads as follows; "Therefore, the intention of the legislature is clear, if a co-operative bank is exclusively carrying on banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A co-operative bank as defined under the Banking regulation Act includes the primary agricultural credit society or a primary cooperative agricultural and rural development bank. The legislature did not want to deny the said benefits to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e the purpose of this amendment. Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does no possess a licence from Reserve Bank of India to carry on business, it is not a co-operative ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to 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 AO was right in taxing the interest income indicated above under section 56 of the IT Act. Further, they made it clear that they are confining the said judgment to the facts of that case. Therefore, it is clear, Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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