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TMI Blog2019 (12) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... through a consolidated order for the sake of convenience. ITA No. 5285/MUM/2018 Assessment Year: 2012-13 2. The grounds of appeal filed by the assessee read as under: 1. The Ld. CIT(A) erred in law and on facts in confirming the action of the AO in denying that the appellant is a mutual concern and thereby denying exemption in respect of the income on the ground of mutuality. 2. The Ld. CIT(A) erred in law and on facts in not appreciating that the appellant has acted without any profit motive purely for the benefit of members. 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2012-13 on 28.09.2012 disclosing total income of Rs. Nil. It is a Co-operative Consumers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the appellant does not have any intention to earn profit. Further, making reference to clause 13 of Bye-laws, it is stated that only employees of Ordanance Factory can become its members. Thus it is argued that on the basis of the above facts, the income earned by trading with its members should not be treated as business income. Finally, the Ld. counsel submits that the proportionate/prorata deduction which has been given by the AO u/s 80P(2)(d) for interest received/accrued on investments made in Thane District Co-operative Bank for various funds is not based on any sound reasoning. 6. On the other hand, the Ld. Departmental Representative (DR) submits that the Ld. CIT(A) has rightly denied the exemption to the appellant in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to members only, either on cash or on credit basis ; credit sales proceeds are recovered from members through their employer i.e. Ordnance Factory and its allied establishment, Ambarnath from salaries. Thus it is observed by us that the object is not to earn profit but to provide best possible consumer goods at best price to its members only. It is a case of mutual entity running on principles of mutuality. The essence of mutuality lies in the return for what one has contributed to a common fund. The fund should fulfill the essential requirements that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus should be contributors to the common fund. There must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Co-operative Bank amounting to Rs. 7,70,784/- u/s 80P(2)(d) of the Act. The AO allowed deduction u/s 80P(2)(d) in respect of interest earned on fixed deposits amounting to Rs. 7,70,784/- with other Co-operative Society after deduction of expenses on percentage basis. The AO allowed net interest deduction of Rs. 96,040/- after deducting proportionate expenses for earning such interest income received from another Co-operative Bank. The AO calculated the proportionate expenses @ 87.54%. In appeal, the Ld. CIT(A) agreed with the action of the AO in respect of deduction of proportionate expenses from interest received from non-Co-operative Bank, as to earn such income, expenses are incurred and in most of the cases, where interest is recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis since its inception and these funds are utilized for the business purpose of the appellant. During the year under consideration, the appellant invested Rs. 11,05,000/- out of interest income and surplus in the fixed deposits against various funds. In view of the above facts, there is no merit in the action of the AO to disallow the expenses @ 87.54%. Also there is no merit in the order of the CIT(A) in restricting it to 50%. It is well settled that section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the Co-operative Societies from its investment with any other Co-operative Society. Having regard to the above provisions, we are of the considered view that there is no basis to restr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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