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TMI Blog2017 (6) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... the non-members are concerned the benefit of Section 80P of the Act would not be available. In the above view of the matter, at the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction under Section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. - Decided in favour of assessee. - ITA No.3783/Mum/2014 - - - Dated:- 24-5-2017 - SRI MAHAVIR SINGH, JM AND SRI N.K. PRADHAN, AM For The Appellant : Mr. M Subramanian, AR For The Revenue : Mr. K. Ravi Kiran, DR ORDER PER MAHAVIR SINGH, JM : These Cross appeals by the assessee and by the Revenue are arising out of the order of CIT(A)-26, Mumbai, in appeal No. CIT(A)-26/IT-102/15(3)(4)/12-13 dated 25-03-2014. The Assessment was framed by ITO ward-15(3)(4), Mumbai for the A.Y. 2010-11 vide order dated 08-02-2013 u/s 143(3) of the Income Tax Act, 1961 (hereinafter the Act ). 2. The only issue in the Revenue s appeal is as regards to the order of CIT(A) directing the AO to allow deduction under section 80P of the Act to the assessee even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction at ₹ 24,32,807/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) noted that the income earned by the society from the activities entered into with its members only and it accepts deposits from members and also grant loans and advances to members only. For this the CIT(A) after verifying the records noted in Para 3.1 of his appellate order reads as under: - 3.1.4 During appeal, the appellant has filed details regarding interest income and its members. It has been submitted that all activities of the appellant are with members only. It accepts deposits from embers and also grants loan/advances to the members. Society does not conduct any business with any person other than a member. It was also submitted that the AO was not correct while holding that the appellant is a bank or that assessee is engaged in the business of banking in any manner. It has also relied on various case laws in its support viz. judgement of ITAT, Pune in case of Jankalyan Nagri Sahakari Pat Sanstha Ltd. 54 SOT 60, ITAT, Panji in the case of Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. (2012) 137 ITD 163and ITAT Nagpur Bench in the case of Buldana Urban Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a plain reading of the Act, it is clear that the assessee is eligible for deduction u/s.80P read with section 80P(2)(a)(i) of the Act. Aggrieved, now Revenue is in second appeal before Tribunal. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. Now, the issue before us is whether the assessee, being a co-operative society register under the Maharashtra State Co-operative Act 1960, enables its members to obtaining loans and to make deposits as per the bye laws of the society, can be equated to be engaged in the banking business or with the co-operative bank so as to be treated under exclusionary clause of sub-section 4 of section 80IP of the Act. We find that this issue has been decided by Hon ble Bombay High Court in the case of Quepem Urban Co-Operative Credit Society Ltd vs. ACIT [2015] 377 ITR 272 (Bom), Wherein the question referred before Hon ble Bombay High Court reads as under: - 9. There is no dispute between the parties that the appellant is a cooperative society as the same is registered under the Co-operative Societies Act. The appellant is claiming deduction of income earned on providing credit facilities to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who are not members has been so recorded by the CIT(A) in his order dated 15 July, 2014. Before the Tribunal also the appellant did not dispute the fact that in a few cases they have dealt with non members. However so far as accepting deposits from non members is concerned it is submitted that the Bye-law 43 only permits the society to accept deposits from its members. It is submitted that Bye laws 43 does not permit receipt of deposits from persons other then members, the word any person is a gloss added in the impugned order as it is not found in Bye law 43. It is undisputed that the transactions with non members are insignificant/miniscule. On the above basis it cannot be concluded that the appellant's principal business is of accepting deposits from public and therefore it is in banking business. In fact, the impugned order erroneously relies upon bye-law 43 of the society which enables the society to receive deposits to conclude that it can receive deposits from public. However, the impugned order relies upon bye-law 43 to conclude that it enables the appellant to receive deposits from any person is not correct. Thus in the present facts the finding that the appellant&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition 3 for being considered as a primary Cooperative bank is that the bye laws must not permit admission of any other cooperative society. This is a mandatory condition i.e. the bye laws must specifically prohibit admission of any other cooperative society to its membership. The Revenue has not been able to show any such prohibition in the bye laws of the appellant. Thus even the aforesaid qualifying condition (3) for being considered as a primary cooperative bank is not satisfied. Thus, the three conditions as provided under Section 5 (CVV) of the Banking Regulation Act, 1949, are to be satisfied cumulatively and except condition (2) the other two qualifying conditions re not satisfied. Ergo, appellant cannot be considered to be a co-operative bank for the purposes of Section 80P(4) of the Act. Thus, the appellant is entitled to the benefit of deduction available under Section 80P(2)(a)(i) of the Act. 13. The contention of Ms. Dessai, learned Counsel for the revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cannot be upheld. This for the reason that Section 80P(1) of the Act r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the business providing credit facilities to its members. Hon ble High Court in this case held as under: - 11. In this context when we look at the judgment of the Apex Court in Totgars Co-operative Sale Society's case (supra), 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 of 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 assessing officer was right in taxing the interest income indic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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