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TMI Blog2017 (6) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... allow the set off brought forward business loss of earlier years against income. See Morvi Mercantile Bank Limited. (In Liquidation) Versus Commissioner Of Income-Tax, Gujarat [1975 (8) TMI 31 - GUJARAT High Court] - Decided in favour of assessee. - I.T.A. No.2731/Ahd/2013 - - - Dated:- 29-5-2017 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER For The Appellant : Shri M.G. Patel, AR For The Respondent : Ms. Richha Rastogi, Sr. DR ORDER PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This appeal by the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-IV, Baroda, dated 27/09/2013 for the Assessment Year (AY) 2010-11. 2. Assessee has been taken following Grounds of appeals: (i) The learned Commissioner of Income Tax (Appeals)-IV, Baroda has erred in law and on facts of the case by treating the income of ₹ 36,76,825/- as income from other sources instead of income from business. (ii) The learned Commissioner of Income Tax (Appeals)-IV, Baroda has erred in law and on facts of the case by not allowing set off brought forward business loss of earlier years against income of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 has furnished its written submission. It was contented that the assessee is a co-operative credit society carrying on business of providing credit facilities to members and earning income from it. The income consists of interest earned on advance to members and investment. The expenses consist of interest payable on deposits and borrowings. In order to speed up the recovery of advances and earn interest on non-performing assets the Registrar of Co-operative Societies, Gandhinagar has deputed officer to look after and monitor the credit society with a onetime settlement scheme announce from time to time announced from time to time. It is planned improve the liquidity in the business by early recovery for smooth and efficient functioning of the credit business. The advances and investment of credit society made out of deposits, borrowing and reserve. The credit society is registered on 05/04/1965 and since then it regularly and perpetually carrying credit facilities to members as provided u/s. 80P (2)(a)(i) of the Act. 3.5 It was further stated that our society is a co-operative society carrying on business of providing credit facility to the members. Prior to July, 2003, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State. The purpose of this Scheme was to recover dues from the borrowers, to return deposits to deposit-holders and moreover to keep co-operative sector intact and to make the confidence of the people sustain in the co-operative sector. There was provision in the scheme passed under the above resolution not to give benefit of this scheme in the cases of willful defaulter, fraud and malfeasance. Because of lack of awareness of above scheme amongst the borrowers, not allowing benefit of the scheme in the cases of willful defaulter, fraud and malfeasance and provisions of charging interest as much as at 8%, 10% and 12%, few debtors had come forward to take benefit of this Scheme. As a result, the main purpose of getting recovery was not achieved. Consequent upon cancelling of banking license of Nagrik Cooperative Banks by the Reserve Bank of India, banking function of the Nagrik co-operative banks under liquidation comes to close. And as per the direction of Reserve Bank, bank is taken into liquidation as per provisions of Co-operative Act in which a liquidation officer (Liquidator) is appointed by the Registrar as per provisions of Cooperative Act. Bank loses its status as a B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank is entitled to exemption as provided above in the Act. 7.3 Since the society duly registered and functioning as credit societies be allowed exemption u/s.80(P)(2)(a)(i) of the Act. 8. Assessee has cited the judgment of Jurisdictional High Court [1976] 104 ITR 568 (Gujarat) in the case of Morvi Mercantile Bank Ltd. vs. Commissioner of Income Tax: Section 56, read with section 28(i) of the Income Tax Act, 1961 - Income from other sources - Chargeable as - Assessment year 1969-70 - Whether where assessee a banking company was wound up and its licence to carry on business of banking had been suspended by Reserve Bank of India, it could not be said that liquidator when he was realising assets and investing realisation in short-term deposits with permission of Court pending distribution amongst creditors was really carrying on business Held, yes - Whether therefore, received by liquidator in such deposits was taxable as income from other sources and not as business income - Held, ye FACTS he assessee, a banking company was compulsorily wound up and the official liquidator of the High Court was appointed as the provisional liquidator. The Reserve Bank of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use he was investing the realisations, assuming that that was permissible either under the memorandum or under the statute, the activities which he was carrying on as a liquidator were those of a businessman. In the circumstances, therefore, it could not be held that the liquidator was making for mercantile necessity the investment of realisations as a business for beneficial winding' up of the company. The Tribunal had found as a fact that the main business of the assessee-company having gone as a result of the winding-up order, there did not remain any other activity which could be legitimately said to be a business activity and Whatever the liquidator did was merely as a liquidator for purposes of liquidation of the company. There were no justifying grounds for disturbing this finding of fact. Therefore, the Tribunal was right in law in holding that the interest on deposits was taxable as income from other sources and not as a business income. 9. We allow the set off brought forward business loss of earlier years against income of ₹ 36,76,825/-. 10. In the result appeal filed by the assessee is allowed. This Order pronounced in Open Court on 29/05/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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