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TMI Blog2018 (10) TMI 1394X X X X Extracts X X X X X X X X Extracts X X X X ..... a business of extending credit facilities to its members. The assessee claimed deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") of Rs. 15,12,750/- which was processed u/s.143(1) of the Act. Subsequently, upon scrutiny, notice u/s.143(2) of the Act was issued on 094.09.2014 which was served upon the assessee followed by another notice u/s.142(1) dated 29.05.2015 and 09.10.2015. 3.1. The Ld. Assessing Officer disallowed the claim of the assessee. However, deduction at Rs. 50,000/- u/s.80P(2)(c)(ii) of the Act was allowed. Appeal preferred by the assessee against the said order was dismissed. Hence, the instant appeal. 3.2. At the time of hearing of the instant appeal, no one appears on behalf of the assessee. The Ld.DR also agrees to get the matter disposed of by us since the matter is duly covered against the assessee i.e. in favour of the Revenue. 3.3. During the assessment proceeding, the Ld. Assessing Officer worked out the income of the assessee as follows: Interest from other banks - Rs.18,36,400/- Draft/cheque charge income - Rs. 28,085/- Total = Rs.18,64,485/- 3.4. The Ld. Assessing Officer proposed to disallow the deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the above, the assessee has also received draft cheque charges income. These incomes are not eligible for deduction u/s.80P(2)(a)(i). The interest earned from fix deposit etc which is in question is not eligible for deduction under section 80P(2)(a)(i) of the Act is not the members for proving credit facility to them, What is under section 56 of the Act is the interest income arising on the surplus invested in short-term deposits and securities which surplus was not required for business purposes, Since the fund created by such retention was not required immediately for business purpose, the assessee in specified securities. Interest on such deposits/securities, which strictly speaking accrues to the members account, could not be taxed as business Income under section 28 of the Act. Such interest income would be. taxable under section 56 of the Act. Further, these incomes, the assessee has debited all the expenditures and net profit was shown at Rs,9,43,641. As such no further expenditure required to be given for earning these incomes. 3.4 The assessee has relied upon various decisions. The same is also not applicable to the facts of the present case. 3.5. Further, the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment of surplus amounts with banks and bonds is not eligible for deduction u/s.80P of the Act, in case where the co-operative society is a bank, one of its objects would be to carry on the general business of banking. Like other banks, money would be its stock-in-trade or circulating capital and its normal business is to deal in money and credit. The business of such a bank does not consist only of receiving deposits and lending money to its members or such other societies as are mentioned in the objects. When such a society lends out its monies so that they may be readily available to meet the demands of its depositors if and when they arise, it is a legitimate mode of carrying on its banking business. In case of a credit society like the present one, the business of the society is limited to providing credit to its members and the income that is earned from providing such credit facilities to its members is deductible under section 80P(2)(a)(i), However, investing its surplus funds with the nationalized banks is no part of the business of the appellant of providing credit to its members and hence, it cannot be said that the interest income derived from depositing surplus fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in providing credit facilities to its members, income from investments made in banks does not fall in any of the categories mentioned under section 80P(2)(a) of the Act. In the case of Totgars Co-operative Sale Society (supra), as rightly submitted by the learned counsel for the respondent, the court was dealing with two kinds of activities: interest income earned from the amount retained from the amount payable to the members from whom produce was bought and which was invested in short-term deposits/securities; and the interest derived from the surplus funds that the assessee therein invested in short-term deposits with the Government securities. This is further clear when one peruses the decision of the Karnataka High Court from which the matter travelled to the Supreme Court wherein it was the case of the assessee that it was carrying on the business of providing credit facilities to its members and therefore, the appellant-society being an assessee engaged in providing credit facilities to its members, the interest received on deposits in business and securities is attributable to the business of the assessee as its job is to provide credit facilities to its members and marketi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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