Income Tax Appellate Tribunal - Pune
Niphad Nagari Sahakari Pathsanstha ... vs Department Of Income Tax on 10 June, 2013
1
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 1336/PN/2011
(Asstt.Year : 2008-09)
ITO Ward-1(4), Nashik .. Appellant
Vs.
Niphad Nagari Sahakari Patsanstha Ltd.,
Ugaon Road, Niphad, Nashik
PAN No.AAFFN 6079B .. Respondent
Appellant by : Shri K.K.Ojha
Respondent by : Shri Nikhil Pathak
Date of Hearing : 10-06-2013
Date of Pronouncement : 31-07-2013
ORDER
PER R.K.PANDA, AM :
This appeal filed by the Revenue is directed against the order dated 19- 08-2011 of the CIT(A)-I, Nashik relating to Assessment year 2008-09.
2. Facts of the case, in brief, are that the assessee is a cooperative society providing credit facility to its members and also earns income from various investments made. During the impugned assessment year, the assessee society earned income of Rs.64,20,855/- as per audited profit and loss account. The assessee has declared the said income as income from its business and claimed deduction of the same u/s.80P(2)(a)(i) and declared the income of the society at NIL.
3. During the course of assessment proceedings the Assessing Officer noticed that the assessee has shown bank interest of Rs.83,32,886/-. He observed that the assessee being a cooperative credit society is entitled to 2 deduction u/s.80P(2)(a)(i) in respect of income attributable to providing credit facility to its member and interest income from other cooperative society u/s.80P(2)(d). However, from the details furnished by the assessee he noted that there is interest income from other investment in other than cooperative bank which is not deductible u/s.80P(2)(a)(i). From the details furnished by the assessee he noted that the interest income from banks shown at Rs.83,32,886/- includes interest income of Rs.36,15,925/-, the details of which are as under :
Sl.No. Particulars Amount
1. UTI bank FDR Interest Rs.91,303/-
2. Kotak Mahindra Rs.1,79,208/-
3. ICICI Bank Rs.4,74,926/-
4. State Bank of India Rs.19,64,302/-
5. Other (Misc. Bank) as per details Rs.9,06,186/-
given by the assessee without
giving the bank name
TOTAL Rs.36,15,925/-
3.1 Relying on the decision of Hon'ble Supreme Court in the case of Totogar's cooperative sales society Vs. ITO reported in 322 ITR 283 he held that the interest from bank deposits and Government securities fell under the head "income from other sources and hence is taxable u/s.56 and cannot fall within the expression "profit and gains of business". Such interest income cannot be said to be attributable to the activities of the society namely the business of providing credit facilities to its members or marketing of agricultural produce to its members.
3.2 The Assessing Officer further noted that assessee has shown income from mutual funds amounting to Rs.44,64,353/. Rejecting the explanation given by the assessee and relying on the decision of Hon'ble Supreme Court in the case of Totogar's Co-op Society Ltd. (Supra) he held that such income on sale of mutual funds amounting to Rs.44,64,353/- cannot be allowed u/s.80P. 3 He also rejected the claim of the assessee that long term capital gain of Rs.22,72,278/- on sale of mutual funds is exempt u/s.10(38) in absence of giving details of notification of mutual funds u/s.10(23D) and in absence of information relating security transaction tax paid. The Assessing Officer similarly held that interest income on Mutual Fund sold amounting to Rs.23,21,994/- and short term capital gain of Rs.22,70,597/- are not deductible u/s.80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act, 1961. 3.3 From the various details furnished by the assessee he noted that part of the investment has been made out of loans and deposits on which interest has been paid. The assessee has paid interest to members on deposits by them amounting to Rs.2,20,86,063/-. The loans and deposits advanced by the assessee is Rs.17,34,15,808/- which is 64.74% of the loans and deposits from its members. Therefore, he held that out of the interest paid at Rs.2.21 crores, 64.71% is attributable to loans which works out to Rs.1,42,91,891/-. Thus, he held that the balance interest amounting to Rs.77,94,172/- is attributable to investment for the following income earned :
Particulars Amount
Bank interest Rs. 83,32,886/-
Dividend Rs.9,15,288/-
Mutual Fund Gain Rs.44,64,353/-
Mutual Fund Interest Rs.23,21,994/-
TOTAL Rs.1,79,44,521/-
3.4 The Assessing Officer computed the interest expenditure attributable for earning the said income which comes to 43.43%. The Assessing Officer accordingly worked out the net income not eligible for deduction u/s.80P(2)(a)(i) as under:
4
Head of income Amount of Interest at Net income not
income 43.43% eligible
deduction
u/s.80P
1) Interest from banks other than 36,15,925 17,70,396 18,45,529
Co-op Bank
2) Interest on Mutual funds 23,21,994 10,08,442 13,13,552
3) Long Term Capital Gain 22,72,278 9,86,850 12,85,428
4) Short Term Capital Gain 22,70,597 9,86,120 12,84,477
Total 1,04,80,794 47,51,808 57,28,986
The A.O. held that the above income is not attributable to the activity of the society namely business of providing credit facilities to its members and hence income from the said activity is not profit and gains of its business but the said income is "income from other sources" not eligible for deduction u/s. 80P(2)(a)(i) of the IT. Act.
4. Before the Ld. CIT(A) the assessee strongly argued that the decision relied on by the Assessing Officer in the case of Totogar's Co-op Society Ltd. (Supra) is distinguishable and not applicable to the facts of the present case. The assessee furnished the distinctions which are as under :
Case of Totogar's Co-op. Society Ltd. Case of the Appellant
1) The society is not a credit co-op, 1) The society is a credit co-op, society i.e. society i.e. Patsanstha. Patsanstha, authorized by Registrar of Co-
Op. Societies for accepting deposits and lending money to its members by way of license granted by the said authority.
2) The main object of the society is to 2) The main object of the society is to provide marketing facility to its provide credit facility to members who members who are farmers. The activity can be any person of the society. As per of the society is limited in respect of the bylaws of the society any person can members, who are farmers. become member by paying nominal fees and nominal cost of share of the society.
3) The agricultural produce of the 3) No such activity of providing members who are farmers has been marketing facility of agricultural produce marketed by the society and the funds so to farmers and then investment of the sale generated have been invested in short proceeds in short term deposits and term deposits and securities. On the securities has been carried out by the above facts the interest income was society. The society has collected interest treated as "income from other sources" bearing deposits from its members and by Hon'ble Court. surplus idle funds have been invested in bank deposits and mutual funds.
5
4) In the case under appeal the appellant
4) Section 80P(2)(a)(i) reads as under: (a) society is carrying on business of banking, in the case a co-operative society though the society itself is not a bank.
engaged in - Therefore the first part of section
(i) carrying on the business of banking 80P(2)(a)(i) i.e. deduction is allowable to a
or providing credit facilities to co-op, society carrying on business of
its members, or ........... banking is applicable to the case of the
appellant society. The term 'banking
The Hon'ble Court has decided the issue business' has not been defined in the
by considering the later part of the Income-tax Act. As per Oxford
above section i.e. the income of the Dictionary, 7th Edition, services of keeping
society providing credit facility to its money or lending money amounts to
members is only eligible for deduction. banking business. While deciding the case
The Hon'ble court has not considered the of a credit society i.e. Patsanstha in the
earlier part of the section i.e. the income case of Mahavir Nagari Sahakari Patsanstha of co-op, society carrying on the business Ltd. Vs. DCIT (2002) 74 TTJ 793 (Pune), of banking is eligible for deduction. the Hon'ble ITAT has held that the said credit society is carrying on business of banking and providing credit facilities to its members is eligible for deduction u/s.80P(2)(a)(i). In the said decision in para 29 the Hon'ble ITAT has termed the said credit society i.e. Patsanstha as banking concern. Further Hon'ble ITAT, Calcutta, in the case of Electro Urban Co-
Op. Credit Society Ltd. Vs. ITO (2001) 70 TTJ 441 (Cal)(T.M.), it has been held that income from units of UTI invested out of circulating capital of banking business and interest on fixed deposits earned by a co-operative society engaged in lending money to its members out of membership funds and deposits collected from such members was income attributable to business of banking carried on by it and was eligible for deduction u/s.80P(2)(a)(i).
It was accordingly argued that the assessee society is carrying on the business of banking and hence is eligible for deduction u/s.80P(2)(a)(i) of the Income Tax Act.
5. Following decisions were also relied on by the assessee to the proposition that interest income on Government Securities, F.Ds, KVPs/IVPs, investments in UTI etc. out of surplus/idle money available from working capital including voluntary reserves accruing to Cooperative 6 banks are all income attributable to business of banking and are eligible for grant of deduction u/s.80P(2)(a)(i) :
1. Surat District Co-Op. Bank Ltd. & Ors Vs. ITO (2003) 78 TTJ 1 (Ahd, Spl.Bench).
2. CIT Vs. Ramanathapuram District Co-Op. Central Bank Ltd. (2002) 255 ITR 423 (SC)
3. CIT Vs. Ratnagiri District Central Co-Op. Bank Ltd. (2002) 174 CTR 116 (Bom.)
4. CIT Vs. Madurai District Co-Op. Bank Ltd. (1991) 239 ITR 700 (Mad) and
5. CIT Vs. Solapur Nagari Audyogic Sahakari Bank Ltd. (2009) 182 Taxman, 231 (Bom)."
6. It was accordingly submitted that the assessee society is carrying on business of banking and hence is eligible for deduction u/s. 80P(2)(a)(i), whereas in the case of Totogar's Co-Op. Society, the said society was not carrying on business of banking and the Hon'ble Court, therefore, held that interest income earned by the said society on short term deposits and securities out of sale proceeds of agricultural produce of its farmers is 'income from other sources.' In the case of the assessee society, the interest income and surplus on sale of investment is forming part and parcel of income of banking business activity and hence is eligible for deduction u/s.80P(2)(a)(i).
7. Based on the arguments advanced by the assessee the Ld.CIT(A) held that the assessee is entitled to deduction u/s.80P(2)(a)(i). The relevant observations of Ld.CIT(A) at Para 5.2 of his order reads as under :
"5.2. I have carefully considered the facts of the case, the assessment order and the rival submissions. The A.O. has held that interest income from banks other than co-operative banks, interest from mutual funds and surplus on sale of mutual funds is 'income from other sources' and not 'income from business' of the society. The A.O. held that: the business of the society is providing credit facility to its members and the above income is not related to the said 7 activity of the society and hence the same is income from "other sources" not eligible for deduction u/s. 80P(2)(a)(i) of the Act. In support of this proposition, the A.O. has relied on the decision in the case of Totogar's Co-Op. Society Ltd. Vs. ITO 322 ITR 283 (SC). On the other hand, the appellant has pointed out that the facts of the case of the-appellant are distinguishable from the facts of the case relied on by the A.O. The appellant has pointed out that the activity carried out by the appellant society is covered by activity of business of banking. In support of this proposition the appellant has relied on the ratio laid down in the cases of Mahavir Nagari Sahakari Patsanstha Ltd. Vs. DCIT (2002) 74 TTJ 793 (Pune) and Electro Urban Co-Op. Credit Society Ltd. Vs. ITO (2001) 70 TTJ 441 (Cal) (T.M.). In these cases the assessees were credit co-operative societies i.e. Patsanstha, as is the case of the appellant. In these cases the Hon'ble Tribunals have laid down that the said societies providing credit facilities to its members are carrying on activity which is covered by activity of business of banking and hence they are eligible for deduction u/s. 80P(2)(a)(vi). In the case decided by Calcutta Tribunal it has been held that even income from UTI investment and interest on bank deposits invested out of amounts collected from members as deposits is eligible or deduction u/s.80P(2)(a)(i). In the case decided by Hon'ble Apex Court relied on by the A.O. the amount invested in short term deposits and securities was not out of interest bearing deposits collected from members but out of sale proceeds of agricultural produce of farmer members marketed by the society. The appellant has therefore correctly pointed out that the facts of the case relied on by the A.O. are distinguishable. In the said case relied on by the A.O. the society has not carried out the activity of collecting interest bearing deposits from members and lending the same to members and investing the funds in bank deposits and mutual funds for earning interest income, etc. The Hon'ble Apex Court has, therefore, considered only the later part of section 80P(2)(a)(i) i.e. income of a co- operative society engaged in providing credit facilities to its members is eligible for deduction and has not considered the earlier part of section 80P(2)(a)(i) i.e. income of a co-op. society in carrying on the business of banking in eligible for deduction. In view of the above facts and discussion, I am of the considered view that the appellant society is eligible for deduction u/s.80P(2)(a)(i) in respect of interest on bank deposits, mutual funds and surplus on sale of mutual funds.
The A.O. is not justified in holding that the appellant is not eligible to claim deduction u/s.80P(2)(a)(i) in respect of income to the extent of Rs.57,28,986/-. The A.O. is therefore directed to allow the said deduction of Rs.57,28,986/-. This ground of appeal is allowed."
8. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds :
"1. On the facts and in the circumstances of the case the Ld. CIT (A) is not justified in holding that the assessee is entitled to deduction u/s.80P(2)(a)(i) when the income of the society on account of interest 8 from banks other than Co-op. Banks, interest on Mutual Funds, long term capital gain on mutual funds and short term capital gain on Mutual Fund are not covered by the activity of providing credit facilities to its members and hence not eligible for deduction u/s.80P(2)(a) (i) of the I.T. Act.
2. The Ld. CIT(A) has also disregarded the fact that the Co-operative Society is required to satisfy the criteria for availing benefit of Sec.80P(2)(d) i.e. the interest income should be from other Co-op. Society, whereas in the assessee society's case the interest income is from other than Co-op Bank with regard to investments made.
3. The order of the Ld. CIT(A) be cancelled and that of the A.O. be restored.
4. The appellant craves leave to add/alter/amend ground of appeal".
9. The Ld. Departmental Representative heavily relied on the order of the Assessing Officer. Referring to the decision of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) he submitted that the issue is decided against the assessee. He also relied on the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Cooperative Supply & Commission & Shop Ltd. reported in 204 ITR 713 and the decision of Japur Bench of the Tribunal in the case of JME Employees Cooperative Credit & Thrift Society Ltd. Vs. ITO reported in 731 ITD 296 and the decision of Hon'ble Gujarat High Court in the case of Mehsana District Cooperative Bank Ltd. Vs. ITO reported in 251 ITR 520.
10. The Ld. Counsel for the assessee on the other hand heavily relied on the order of CIT(A). Referring to the decision of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) he drew the attention of the Bench to the following observations of Hon'ble Supreme Court at Page 289 placeturn (10) :
9
"At the outset, an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduction under section 80P(2)(a)(i) of the Act is not the interest received from the members for providing credit facilities to them. What is sought to be taxed 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. The assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is - Whether interest on such deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under section 28 of the Act? In our view, such interest income would come in the category of "Income from other sources", hence, such interest income would be taxable under section 56 of the Act, as rightly held by the Assessing Officer".
Referring to the above he submitted that the Hon'ble Apex Court had only decided a part of the provisions of section 80P(2)(a)(i) and the first part is not answered.
10.1 Referring to the decision of the Ahmedabad Bench of the Tribunal in the case of ITO Vs. M/s. Jafari Momin Vikas Co-op. Credit Society Ltd. vide ITA No.1491/Ahd/2012 and CO No.138/Ahd/2012 order dated 31-10-2012 for A.Y. 2009-10 the Ld. Counsel for the assessee submitted that the Tribunal in the said decision after considering the decision of the Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) has held that CIT(A) was not justified in disallowing deduction u/s.80P to the extent of Rs.6,40,639/- by treating the income from interest on bank deposit as taxable u/s.56 of the Income Tax Act. He also relied on the decision of the Cochin Bench of the Tribunal in the case of Muttom Service Cooperative Bank Ltd. Vs. ITO vide ITA No.372/Coch/2010 order dated 20-01-2012. 10.2 So far as the decisions relied on by the Ld. Departmental Representative he submitted that those decisions are distinguishable and not applicable to the 10 facts of the present case. In the case of JME Employees Cooperative Credit and Thrift Society Ltd. Vs. ITO (Supra) it has been held that activity of purchasing shares and earning dividend income is not attributable to banking activity and therefore dividend income earned by cooperative society did not qualify for deduction u/s.80P(2)(i) more so when the society had no surplus funds and it had to borrow funds for carrying on banking activity. Referring to the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Cooperative Supply & Commission & Shop Ltd. he submitted that in the above decision it has been held that a society doing no banking business and only supplying goods to its members of credit cannot be said to be providing credit facilities for purposes of 80P(2)(a)(i) and interest of outstanding balances of members cannot qualify for relief under that section. Further, the assessee has no surplus funds and it is not engaged in marketing and its produce. Referring to the decision of Hon'ble Bombay High Court he submitted that interest on IVP/KVP etc. is allowable deduction u/s.80P. He submitted that in the instant case the decision of the Ahdmedabad Bench of the Tribunal is squarely applicable and the assessee is entitled to claim deduction u/s.80P(2)(a)(i). He submitted that when divergent views are available, the view which is in favour of assessee have to be accepted unless it is the view of Hon'ble Apex court or Jurisdictional High Court
11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case there is no dispute to the fact that the assessee is a cooperative society engaged in the business activity of credit cooperative society, i.e. providing credit facility to its members. According to the Revenue 11 the income of the society on account of interest from banks other than cooperative banks, interest on mutual funds, long term and short term capital gain on sale of mutual funds etc. are not covered by the activity of providing credit facilities to its members and hence not eligible for deduction u/s.80P(2)(a)(i) of the Income Tax Act in view of the decision of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra). We find the Ld. CIT(A) allowed the claim of the assessee on the ground that the assessee is entitled to deduction u/s.80P(2)(a)(i) on account of interest from banks other than cooperative banks, interest on mutual funds long term and short term capital gain on mutual funds etc. While doing so, he held that the decision in the case of Totagar's Cooperative Sale Society Ltd. (Supra) is not applicable to the facts of the present case since in that case the amount invested in short term deposits and securities was not out of interest bearing deposits collected from members but out of sale proceeds of agricultural produce of farmer members marketed by the society. Further, the Hon'ble Apex Court has considered only the latter part of section 80P(2)(a)(i), i.e. income of a cooperative society engaged in providing credit facilities to its members is eligible for deduction and has not considered the earlier part of section 80P(2)(a)(i), i.e. income of a cooperative society engaged in carrying on the business of banking is eligible for deduction.
11.1 We find the Ahmedabad Bench of the Tribunal in the case of M/s. Jafari Momin Vikas Cooperative Credit Society Ltd. (Supra) after considering the decision of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) has observed as under :
"17. We have carefully considered the submissions of the either party, perused the relevant records and also the case law on which the learned AR had reservation in it's applicably in the circumstances of the assessee's case.12
18. It was the stand of the learned CIT (A) that the entire income was not exempt and that it was to be examined as to whether there was any interest income on the short term bank deposits and securities included in the total income of this society which has been claimed as exempt. According to the CIT (A), a similar issue to that of the present one was dealt with by the Hon'ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd v. ITO (supra). The issue before the Hon'ble Court for determination was whether interest income on short term bank deposits and securities would be qualified as business income u/s 80P (2)(a)(i) of the Act.
19. The issue dealt with by the Hon'ble Supreme Court in the case of Totgars (supra) is extracted, for appreciation of facts, as under:
"What is sought to be taxed 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? The assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is-whether interest on such deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under section 28 of the Act? in our view, such interest income would come in the category of 'income from other sources', hence, such interest income would be taxable under section 56 of the Act, as rightly held by the assessing officer..."
19.1 However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon'ble Supreme Court -
"(On page 286) 7............Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 and not under section 56 of the Act and, consequently, the assessee(s) was entitled to deduction under section 80P(2)(a)(i) of the Act. The argument was rejected by the assessing officer as also by the Tribunal and the High Court, hence, these civil appeals have been filed by the assessee(s)."
19.2 From the above, it emerges that -
(a) that assessee (issue before the Supreme Court) had admitted before the AO that it had invested surplus funds, which were not immediately required for the purpose of its business, in short term deposits;
(b) that the surplus funds arose out of the amount retained from marketing the agricultural produce of the members;
(c) that assessee carried on two activities, namely, (i) acceptance of deposit and lending by way of deposits to the members; and (ii) marketing the agricultural produce; and 13
(d) that the surplus had arisen emphatically from marketing of agricultural produces.
19.3 In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4 While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities emerge, namely:
(1) in the case of the assessee, the entire funds were utilized for the purposes of business and that there were no surplus funds;
- in the case of Totgars, it had surplus funds, as admitted before the AO, out of retained amounts on marketing of agricultural produce of its members;
(2) in the case of present assessee, it did not carry out any activity except in providing credit facilities to its members and that the funds were of operational funds. The only fund available with the assessee was deposits from its members and, thus, there was no surplus funds as such;
- in the case of Totgars, the Hon'ble Supreme Court had not spelt out anything with regard to operational funds;
19.5 Considering the above facts, we find that there is force in the argument of the assessee that the assessee not a co-operative Bank, but its nature of business was coupled with banking with its members, as it accepts deposits from and lends the same to its members. To meet any eventuality, the assessee was required to maintain some liquid funds. That was why, it was submitted by the assessee that it had invested in short-term deposits. Furthermore, the assessee had maintained overdraft facility with Dena Bank and the balance as at 31.3.2009 was Rs.13,69,955/- [source: Balance Sheet of the assessee available on record] 19.6 In overall consideration of all the aspects, we are of the considered view that the ratio laid down by the Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd (supra) cannot in any way come to the rescue of either the Ld. CIT (A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT (A) was not justified in coming to a conclusion that the sum of Rs.9,40,639/- was to be taxed u/s 56 of the Act. It is ordered accordingly. 19.7 Before parting with, we would, with due regards, like to record that the ruling of the Hon'ble jurisdictional High Court in the case of CIT v. Manekbang Co-op Housing Society Ltd reported in (2012) 22 Taxmann.com 220(Guj) has been kept in view while deciding the issue."
11.2 We find the Cochin Bench of the Tribunal in the case of Muttom Service Cooperative Aplappuzha Bank Ltd. Vs. ITO (Supra) after considering the decision of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) and various other decisions has observed as under : 14
"5. We have considered the rival submission on either side and also perused the material available on record. We have also carefully gone through the order of the lower authority. No doubt, the latest judgment in Totgar's Co-operative Sale Society Ltd vs ITO (supra), the Apex court found that the deposit of surplus funds by the co- operative society is not eligible for deduction u/s 80P(2). In the case before the Apex Court in Totgar's Co-operative Sale Society Ltd vs ITO (supra), the assessee co- operative society was to provide credit facility to its members and market the agricultural produce. The assessee is not in the business of banking. Therefore, this Tribunal is of the opinion that the judgment of the Apex court in Totgar's Co- operative Sale Society Ltd (supra) is not applicable in respect of the co-operative society whose business is banking. Admittedly, the assessee has invested funds in state promoted treasury small savings fixed deposit scheme. Since Government of India has withdrawn India Vikas Patra, as a small savings instrument, funds invested at the discretion of the bank is one of the activities of the banking as per the Banking Regulation Act. Since the assessee co-operative society is in the business of banking the investment in the state promoted treasury small savings fixed deposit certificate scheme is a banking activity, therefore, the interest accrued on such investment has to be treated as business income in the course of its banking activity. Once it is a business income, the assessee is entitled for deduction u/s 80P(2)((a)(i). therefore, this Tribunal is of the opinion that the judgment of the Larger Bench of the apex Court in Karnataka State Co- operative Apex Bank (supra) is applicable to the facts of this case. By respectfully following the judgment of the Apex court in Karnataka State Co-operative Bank (supra), the order of the Commissioner of Income-tax(A) is upheld.
6. In the result, the appeal of the revenue stands dismissed."
11.3 In the instant case there is no dispute to the fact that the society is a credit cooperative society authorised by the registrar of cooperative societies for accepting deposits and lending money to its members as per license granted by the registrar of cooperative societies and the main object of the society is to provide credit facility to members who can be any person of the society. We find the Pune Bench of the Tribunal in the case of Mahavir Nagari Sahakari Pat Sanstha Ltd. reported in 74 TTJ 793 (Pune) has held that the credit society which is carrying on the business of banking activity and providing credit facility to its members is eligible for deduction u/s.80P(2)(a)(i). In view of the above discussion and following the decisions of the Ahmedabad Bench of the Tribunal and Cochin Bench of the Tribunal which in turn have considered the decision of the Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) we find no infirmity in the order of the Ld.CIT(A). 15 Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed.
12. In the result, the appeal filed by the Revenue is dismissed.
Pronounced in the Open court on this the 31st day of July, 2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated : 31st July 2013
satish
Copy of the order is forwarded to :
1. The assessee
2. The Department
3. The CIT(A)-I, Nashik
4. The CIT-I, Nashik
5. D.R. "B" Bench, Pune
6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune