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TMI Blog2018 (5) TMI 2158X X X X Extracts X X X X X X X X Extracts X X X X ..... without restricting on/v to its own members. On facts therefore the A.O has not demonstrated as to how the appellant qualifies to be a bank. Thus hold that the appellant is a cooperative society and not a cooperative bank and is therefore eligible for deduction u/s 80P(2)(a)(i). A.O is accordingly directed to allow the deduction claimed by the appellant - Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... rther submitted by the assessee that the aforesaid investments were not made out of surplus funds, but to meet the requirements of its business. It was claimed by the assessee that the purpose of maintaining the aforesaid fixed deposits was imperative for smooth functioning of the cooperative credit societies especially to cover any contingencies such as sudden spurt in demand for loans, repayment of deposits of members on demand amongst others. It was thus submitted by the assessee that the earning of interest on fixed deposits with bank was incidental to its business of acceptance of deposits and provision of credit facilities from/to its members. As such, it was submitted that the said interest income was to be treated as business income and assessed to tax under the head profit and gains from business. The assessee in order to drive home his aforesaid contention that parking of the amount with the banks as fixed deposits was well in order, submitted that the laws governing Co-operative Credit Societies laid down that 23% of deposits of the society were to be kept in fixed deposits with nationalized banks. The assessee further submitted before the A.O the reasons for parking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argeable to tax under Sec. 56 of the Act. The A.O observed that the Hon'ble Supreme Court had concluded that as such interest income earned by a Co-operative society cannot be attributed to the activities of the society, hence the interest income earned therefrom would not qualify for deduction under Sec. 80P(2)(a)(i). The A.O in support of his aforesaid view took support of the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Common Effluent Treatment Plant (Thane, Belapur) Association (2010) 328 ITR 362 (Bom). The High Court in the aforementioned case had observed that the interest income earned by an assessee co-operative society on money invested in fixed deposits of bank would not possess same character of mutuality as surplus fund derived by the assessee from contributions of its members, and would be exigible to tax as income from other sources. The A.O on the basis of his aforesaid observations subjected the interest income of Rs.65,88,008/- earned by the assessee co-operative society to tax under the head "Income from other sources". However, out of the above interest income of Rs.65,88,008/-, as the assessee had earned interest of Rs.32,60,150/- on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such society, such an income was to be construed as the profits and gains of the business and therefore be eligible for deduction under Sec. 80P(2)(a)(i) of the Act. The CIT(A) observed that as the Hon'ble Supreme Court in the case of Totagars Co-operative Society Vs. ITO (2010) 322 ITR 283 (SC) was dealing with the proposition that where the interest income had accrued on funds invested in the banks which were not immediately required by the assessee for its business and were invested in securities and short term deposits with the others banks, such interest earned on the deposits would fall within the category of "Income from other sources" taxable under Sec. 56 and would not be eligible for deduction under Sec. 80P(2)(a)(i). The CIT(A) on the basis of his aforesaid observations concluded that the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Society (supra), being distinguishable on facts, would not be applicable to the case of the assessee before him. It was further observed by the CIT(A) that unlike the case of the assessee before him, the Totagars Society was not a society engaged in the business of banking, but was a credit society providing credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th co-operative banks and nationalized banks, was eligible for claim of deduction under Sec.80P of the Act, or not. As observed by us hereinabove, the assessee is a co-operative society engaged in the business of providing credit facilities to its members. We have perused the order of the coordinate bench of the Tribunal, viz. ITAT "H" Mumbai in the assessee's own case for A.Y 2012-13 in ITA No. 344/Mum/2016, dated 05.07.2017 and are persuaded to be in agreement with the claim of the ld. A.R that the issue under consideration before us in the present appeal is squarely covered by the said order of the Tribunal. The Tribunal in the aforementioned order passed in the assessees own case for AY. 2012-13, viz. ITO-20(2)(1) Vs. The Mumbai Sales Tax Staff Co-op Credit Society Ltd (ITA No. 344/Mum/2016; dated 05.07.2017), had held as under: "5. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 5.1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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