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TMI Blog2019 (7) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... s is derived is a nominal member who has no right to participate in the profits of the Assessee. Such grievance would be addressed by setting aside the issue of deduction u/s.80P(2)(a)(i) to the AO for consideration afresh, with a direction to the Assessee to produce a certificate from RBI that it does not possess license from it for doing banking business and further that the business carried on by the Assessee is not akin to business of a co-operative bank. Further the first part of Sec.80P(2)(a)(i) allows deduction in respect of income derived by a co-operative society from the business of banking. Even the claim of the Assessee for deduction requires to be examined under the first part of Sec.80P(2)(a)(i). The relevant law governi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 17-7-2019 - Shri N.V. Vasudevan, Vice President And Shri Jason P Boaz, Accountant Member For the Appellant : Shri Vikas Suryavamshi, Addl.CIT(DR) For the Respondent : Smt. Soumya, Advocate. ORDER PER N.V. VASUDEVAN, VP: This is an appeal by the revenue against the order dated 28/01/2019 of the CIT(Appeals)-7, Bengaluru, relating to assessment year 2013-14. 2. Ground Nos.1, 7 and 8 raised by the revenue are general in nature and call for no specific adjudication. Ground Nos.2 to 5 raised by the revenue read as follows: 2. The CIT(A) was not justified in law in allowing deduction u/s. 80P(2)(a)(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0P(2) to the co-operative societies engaged in banking activities ? 4. These grounds relate to the claim of the assessee with regard to deduction u/s 80P(2)(a)(i) of the Income-tax Act,1961 ['the Act' for short]. It is not in dispute that the assessee is a credit co-operative society carrying on business of banking and providing credit facilities to its members. The assessee claimed deduction u/s 80P(2)(a)(i) a sum of ₹ 1,10,80,435/-. Out of the aforesaid sum a sum of ₹ 86,72,910/- was claimed as income from the business of providing credit facilities to its members and a sum of ₹ 24,07,525/- was interest income earned on investments in co-operative and other banks. Both the aforesaid income was cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and since the Assessee in that case which was a co-operative society did not have such license and further that Assessee also produced a certificate from RBI that it was not carrying on the business of banking, the Hon ble Supreme Court held that it cannot be said to be a co-operative Bank. 6. With regard to the deduction u/s.80P(2)(a)(i) of the Act on interest income of ₹ 4,07,525, the CIT(A) allowed the claim of the Assessee by following CBDT Circular No.18/2015 wherein it has been laid down following the decision of the Hon ble Supreme Court in the case of CIT Vs. Nawanshahar Central Co-operative Bank Ltd. (2007) 160 Taxman 48 (SC) wherein it was held that investments made by a banking concern are part of the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson from whom income from providing credit facilities is derived is a nominal member who has no right to participate in the profits of the Assessee. Such grievance would be addressed by setting aside the issue of deduction u/s.80P(2)(a)(i) of the Act to the AO for consideration afresh, with a direction to the Assessee to produce a certificate from RBI that it does not possess license from it for doing banking business and further that the business carried on by the Assessee is not akin to business of a co-operative bank. Further the first part of Sec.80P(2)(a)(i) allows deduction in respect of income derived by a co-operative society from the business of banking. Even the claim of the Assessee for deduction requires to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and filing appropriate evidence, if desired, by the Assessee to substantiate its case, before deciding the issue. The Assessee will also be at liberty to show that income earned is income from business of banking and some part of the income was earned by making investment in statutory reserves in fulfilment of law regarding maintenance of statutory reserves. We hold and direct accordingly. 9. Ground No.6 raised by the revenue reads as follows: 6. Whether the CIT(A) was right in not considering that the provisions of section 40(a)(ia) of the IT Act do not provide any exception to co-operative societies for non deduction of tax for pigmy commission payments ? 10. The AO disallowed a sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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