SBI EMPLOYEES M.S. PATEL CO OP. CREDIT SOCIETY LTD.,MUMBAI vs. ITO 17 (3)(4), MUMBAI

The brief facts of the case are that assessee is a Co- operative Credit Society providing loans to its members after accepting deposits from its members only during the year under consideration. Assessee filed its return of income on 27.09.13 declaring total income at Rs. NIL. The return was processed u/s 143(1). Subsequently, the case was selected for scrutiny and accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. In response, AR of the assessee filed the relevant information as called for. After considering the submission of assessee, AO passed assessment order u/s 143(3) of the Act determining the total income at Rs. 92,69,730/- by making disallowances u/s 80P of the Act.

Aggrieved by the above order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the submission of assessee, dismissed the appeal filed by the assessee.

Now before us, the assessee has preferred the appeal against the order of Ld. CIT(A).

At the outset, Ld. AR appearing on behalf of the assessee submitted that the grounds raised by the assessee are squarely covered by the order of Coordinate Bench of ITAT in the case of M/s Jaoli Taluka Sahakari vrs. ITO in for AY 2010-11, wherein the Co-ordinate Bench of ITAT has passed order on identical ground in favour of the assessee.

On the other hand, Ld. DR supported the orders passed by the revenue authorities.

We have heard counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT in the case of M/s Jaoli Taluka Sahakari vrs. ITO in for AY 2010-11, wherein it was held as under:-

In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co- operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee-Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. 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.

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 in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com66. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order:”

In the result, the appeal filed by the assessee is allowed.

Therefore, respectfully following the aforesaid decisions which is applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, we allow the grounds raised by the assessee.