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TMI Blog2023 (5) TMI 1357X X X X Extracts X X X X X X X X Extracts X X X X ..... s set aside and the Addition is deleted, accordingly. Assessee appeal allowed. - DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER For the Appellant : Sh. Rakesh Joshi, Adv. For the Respondent : Sh. S. M. Surendranath, Sr. DR ORDER Per Dr. M. L. Meena, AM: This appeal has been filed by the assessee against the order of the Ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi dated 31.07.2021 in respect of Assessment Year 2017-18 whereby challenging the confirmation of addition of Rs.54,00,164/- on account of disallowance of deduction claimed u/s 80P(2)(d) of the Income Tax Act, 1961. 2. Briefly, facts of the case are that the assessee is a co-operative agricultural service society dealing in the business of providing credit facility to its members and it is formed for the purposes of development of agriculture. The assessee is duly registered under the Punjab Societies Registration Act, 1961, with the office of The Registrar co-operative societies, Punjab (A.O. page 1, in para 2). During the Assessment Year 2017-18, the year relevant, the assessee deposited its reserve funds with The Nawanshahr Central Co-operative Bank Ltd; Nawanshahr [another coop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessment year 2010- 11. The assessee is aggrieved by the decision of ld CIT(A) in holding that the interest income earned on the deposits kept with banks is not eligible for deduction u/s 80P(2)(a)(i) of the Act and hence liable to be assessed as income from other sources. 2. The facts relating to the above said issue are stated in brief. The assessee is a co-operative credit society registered under Maharashtra Co-operative Society Act, 1960. The main objects of the society is to provide credit/loans to its members and collect deposits from its members by way of fixed deposits, saving deposits and daily recurring deposits. The assessee filed its return of income for the year under consideration declaring NIL income after claiming deduction u/s 80P(2)(a)(i) of the Act. Sec. 80P(1) of the Act provides for deduction of income specified in sec. 80P(2) in case of an assessee, being a co-operative society. Sec. 80P(2)(a)(i) provides deduction of the whole of the amount of profits and gains of business attributable to any one or more of such activities. Since the assessee is a co-operative society engaged in carrying on the business providing credit facilities to its members, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from deposits kept with Co-operative societies is exempt u/s 80P(2)(d). The Ld CIT(A) was not convinced with the contentions of the assessee and accordingly held that the interest income received from deposits cited above is assessable as income under the head Income from other sources and accordingly held that the deduction u/s 80P(2)(a)(i) is not available to it. In this regard, he placed reliance on the decision rendered by Hon ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd (2010) (229 CTR (SC) 209 : [2010] 35 DTR (SC) 25 : [2010] 322 ITR 283 (SC) : [2010] 188 Taxman 282 (SC). Aggrieved, the assessee has filed this appeal. 6. I heard the parties and perused the record. I notice that an identical issue was considered by me in the case of M/s Jaoli Taluka Sahakari Patpedhi Maryadit vs. ITO in I.T.A. No. 6627/Mum/2014 relating to AY 2010-11and I have decided the issue in favour of the assessee, vide my order dated 10.8.2015.For the sake of convenience, I extract below the operation portion of the said order: 9. I heard the parties and perused the record. In my view, the decision rendered by Hon ble Karnataka High Court in the case of Tumkur Merchants Souha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and is not a bank for the purpose of Section 80P(4) of the Act? Apart from the fact that against the relied upon decision in the case of M/s. Quepem Urban Co-operative Credit Society Ltd. (supra), the Special Leave Petition has been dismissed, having heard learned counsel appearing on behalf of the respective parties, the issue involved in the present appeal is squarely covered against the Revenue in view of the decision of this Court in Mavilayi Service Cooperative Bank Limited and Others Vs. Commissioner of Income Tax, Calicut and Another (2021) 7 SCO 90. This Court, in the aforesaid decision has specifically observed and held that primary Agricultural Credit Societies cannot be termed as Co-operative Banks under the Banking Regulation Act and, therefore, such credit societies shall be entitled to exemption under Section 80(P)(2) of the Income Tax Act, 1961. Ms. Aakansha Kaul, learned counsel appearing on behalf of the appellant/Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan. However, it is required to be noted that merely giving credit to its members only cannot be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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