ACIT, Rewari V. The Palhawas Primary Agriculture Co- Op. Society Ltd., Rewari

ITA 2368/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61697 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 20-03-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: OTHERS; DR B R R KUMAR S R DR ITA DEL
• Keywords: Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI A.N. PAHUJA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.2368/DEL/2011 ASSESSMENT YEAR : 2008-09 ACIT, VS THE PALHAWAS PRIMARY AGRICULTURE CO-O P. CIRCLE REWARI, SOCIETY LTD. PALHAWAS DISTT ., REWARI. AAYAKAR BHAWAN, HARYANA. MODEL TOWN,REWARI. (PAN AABAT7737P) I.T.A.NO.2370/DEL/2011 ASSESSMENT YEAR : 2008-09 ACIT, VS THE NANGLI PARASPUR PRIMARYAGRICULTUR E CO-OP. CIRCLE REWARI, SOCIETY LTD., NANGALI PARAS PUR, DISTT., REWARI. AAYAKAR BHAWAN, HARYANA. MODEL TOWN,REWARI. (PAN AAAAN7022J) I.T.A.NO.2369/DEL/2011 ASSESSMENT YEAR : 2008-09 ACIT, VS THE MANETHI PRIMARY AGRICULTURE CO-OP . CIRCLE REWARI, SOCIETY LTD., MANETHI, DIST T. REWARI. AAYAKAR BHAWAN, HARYANA. MODEL TOWN, REWARI. (PAN AABAM2190F) I.T.A.NO.2371/DEL/2011 ASSESSMENT YEAR : 2008-09 ACIT, VS THE DHARUHERA PRIMARY AGRICULTURE CO- OP. CIRCLE REWARI, SOCIETY LTD., DHARUHERA, DI STT., REWARI. AAYAKAR BHAWAN, HARYANA. MODEL TOWN,REWARI. (PAN AAAAD6248E) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI KUMAR RESPONDENT BY : DR. B.R.R. KUMAR, S R.DR ITA 2368/DEL/2011 & OTHERS 2 O R D E R PER BENCH THE ABOVE FOUR APPEALS PERTAINING TO ASSTT. YEAR 20 08-09 HAVE BEEN PREFERRED BY THE REVENUE AGAINST THE SEPARATE ORDER S DATED 15.3.2011 PASSED BY CIT(A), ROHTAK ON THE SAME ISSUE RELATED TO SECT ION 80P OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). THEREFORE, WE DEEM IT FIT TO DISPOSE ALL THE ABOVE APPEALS TOGETHER. 2. ALL THESE APPEALS HAVE BEEN FILED ON THE SAME GR OUND WHICH READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION M ADE BY DISALLOWING EXEMPTION U/S 80P WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-APPELLANTS ARE AGRICULTURE COOPERATIVE SOCIETIES REGISTERED UNDER COOPERATIVE SOCIETY ACT, HARYANA, CARRYING OUT BANKING ACTIVITIES LIKE BORRO WING, RAISING OR TAKING UP MONEY AND LENDING OR ADVANCING MONEY FOR THE PURPOS E OF AGRICULTURE, SALE AND PURCHASE OF SEEDS AND FERTILIZERS ETC. THE APP ELLANT SOCIETY IS FINANCED BY THE DISTRICT CENTRAL COOPERATIVE BANK TO PROVIDE FURTHER CREDIT FACILITIES IN ITS SPECIFIED AREA ON BEHALF OF STATE GOVT. TO F ACILITATE THE FARMERS OF ITA 2368/DEL/2011 & OTHERS 3 VILLAGES FOR THEIR CREDIT REQUIREMENTS AS WELL AS T O FULFILL OTHER ANCILLARY AND LOGISTIC REQUIREMENTS. 4. THE ABOVE APPELLANT SOCIETIES DECLARED NET PROFI T AND CLAIMED DEDUCTION U/S 80P(2)(A)(I) AND 80 P(2)(A)(IV) OF TH E ACT. ON BARE READING OF THE ASSESSMENT ORDER, WE NOTE THAT RELEVANT FINDING S READ AS UNDER:- 3.4 FROM THE REPLY FILED BY THE ASSESSEE IT IS EV IDENT THAT THEY HAVE ACCEPTED THE VERSION THAT DEPOSITS F ROM NON MEMBERS WERE ACCEPTED BY THE SOCIETY. WHEN A SOCIE TY IS ACCEPTING THE DEPOSIT FROM NON MEMBERS, IT TANTAMOU NTS TO THE FACT THEY HAVE PROVIDED BANKING FACILITIES TO T HE PERSONS OTHER THAN MEMBERS. ACCEPTING DEPOSITS FRO M THE NON MEMBERS, OPENING THEIR ACCOUNTS WITH THE PACS, ALLOWING DEPOSIT AND WITHDRAWALS TO THE PUBLIC OR W E CAN SAY NON MEMBERS MEANS BANKING FACILITIES ARE BEING PROVIDED TO THEM. IF A SOCIETY IS ACCEPTING THE DE POSITS FROM NON MEMBERS THAT MONEY HAS GOT CIRCULATED THRO UGH ADVANCES TO ITS MEMBERS WHO IN RETURN PAID INTEREST ON THE ADVANCES AND INCOME HAS BEEN GENERATED TO THE SOCIE TY. THEREFORE, SOCIETY IS NOT ELIGIBLE TO CLAIM 100% DE DUCTION U/S 80P FROM PROFITS. THE COUNSEL OF THE ASSESSEE ALSO SUBMITTED HIS INABILITY TO BIFURCATE THE INCOME AND EXPENDITURE FROM MEMBERS AND NON MEMBERS. THE TAX CONCESSIONS ARE ALLOWED ONLY TO THOSE SOCIETIES WHO ARE ENGAGED IN ACTIVITIES AS PER THE CONDITIONS LAID DO WN IN THE ACT AND NOT ON THE BASIS OF THEIR NAMES. ONLY THOS E PACS ARE ALLOWED 100% DEDUCTION OF ITS PROFIT U/S 80P WH ICH ARE ENGAGED IN PROVIDING FACILITIES TO ITS MEMBERS ONLY . IT MAY BE MENTIONED HERE THAT THE PROVISIONS RELATING TO T AX CONCESSIONS HAVE TO BE INTERPRETED RIGIDLY AND THAT THE BURDEN OF PROOF IN SUCH A CASE LIES ON THE ASSESSEE . (CIT VS ANARKAPALLI CO-OP MARKETING SOCIETY LTD. 245 ITR 616, A.P. AND UOI VS WOOD PAPER LTD., AIR 1991 HONBLE SUPREME COURT 2049). HOWEVER, IN THIS CASE, THE AS SESSEE HAS NOT DISCHARGED ITS ONUS OF JUSTIFYING ITS CLAIM FOR DEDUCTION. IT MAY BE POINTED OUT THAT IF PERSONS O THER THAN ITA 2368/DEL/2011 & OTHERS 4 THE MEMBERS OF THE SOCIETY HAS BEEN PROVIDED BANKIN G FACILITIES BY THE SOCIETY, IT WOULD HAVE THE EFFECT OF MAKING THE INCOME SO EARNED NOT PURELY FROM ITS MEMBERS. ( A.O. VS GANESH CO-OP L/C SOCIETY, 67 ITD 436 ASSAM TRIBU NAL AND NILGIRI ENGINEERING CO-OP SOCIETY LTD. VS CIT, 208 ITR 326 ORISSA). 4. IN VIEW OF THE ABOVE FACTS AND THE POSITION OF LAW, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80P(2)(A)(I) & 80P(2)(A)(IV) IS HEREBY REJECTED AS THE INCOME OF T HE ASSESSEE IS NOT ATTRIBUTABLE TO THE QUALIFYING ACTI VITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CR EDIT FACILITIES TO ITS MEMBERS AND THE PURCHASE OF AGRIC ULTURAL IMPLEMENTS, SEEDS, LIVESTOCK OR OTHER ARTICLES INTE NDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING THEM TO IT S MEMBERS AS THE SIMILAR ACTIVITIES ARE BEING PROVIDE D TO THE NON MEMBERS ALSO. 5. WE ALSO NOTED THAT ON THE BASIS OF ABOVE FINDING S, THE AO REJECTED THE CLAIM OF ASSESSEE BY COOPERATIVE SOCIETY MADE U/S 8 0P(2)(A)(I) & (IV) AND INITIATED PENALTY PROCEEDINGS BUT ALLOWED A DEDUCTI ON OF RS.50000 U/S 80P(2)(C)(II) OF THE ACT. THE LD. DR SUPPORTED THE ASSESSMENT ORDER AND SUBMITTED THAT WHEN THE COUNSEL OF THE ASSESSEE SUB MITTED HIS INABILITY TO BIFURCATE THE INCOME AND EXPENDITURE FROM MEMBERS A ND NON-MEMBERS, THEN THE AO RIGHTLY HELD THAT THE ASSESSEE DID NOT DISCH ARGE ITS ONUS OF JUSTIFYING CLAIM FOR DEDUCTION SOUGHT U/S 80P(2)(A)(I) AND (IV ) AND AGAIN HE RIGHTLY REJECTED THE SAME. 6. WE HAVE ALSO CONSIDERED THE IMPUGNED ORDER OF TH E CIT(A) AND ITS RELEVANT FINDINGS READ AS UNDER:- ITA 2368/DEL/2011 & OTHERS 5 4. I HAVE CONSIDERED THE ISSUE AND THE SUBMISSION S MADE BY THE AR. IT IS NOT IN DISPUTE THAT THE CRED IT FACILITIES AND SUPPLY OF SEEDS, UREA ETC. WERE GIVE N ONLY TO THE MEMBERS OF THE APPELLANT SOCIETY. ONLY WITH RE GARD TO THE DEPOSITS, THE APPELLANT ACCEPTED FROM NON ME MBERS ALSO. ACCEPTANCE OF DEPOSITS FROM NON MEMBERS DOES NOT IN ANY WAY AFFECT THE REVENUE GENERATED BY THE APPE LLANT IN PROVIDING CREDIT FACILITIES AND SUPPLY OF SEEDS, UREA ETC. TO THE MEMBERS. FURTHER, MERELY BECAUSE THE APPELLANT IS UNABLE TO BIFURCATE THE EXPENDITURE FO R THE DEPOSITS FROM THE MEMBERS AND NON MEMBERS, DEDUCTIO N U/S 80P(2)(A)(I) AND U/S 80P(2)(A)(IV) CANNOT BE DISALLOWED. THE RATIO OF CASE LAWS RELIED UPON BY THE AO ARE DISTINGUISHABLE ON FACTS. ON THE OTHER HAND, T HE RATIO OF HONBLE APEX COURT IS RELIED UPON BY THE AR, THO UGH ON DIFFERENT SET OF FACTS, IS APPLICABLE TO THE APP ELLANT. IN VIEW OF ABOVE, THE ACTION OF THE AO IN NOT ALLOWING DEDUCTION U/S 80P(2)(A)(I) AND U/S 80P(2)(A)(IV) IS HELD AS NOT TENABLE AND THEREFORE THE GROUND OF APPEAL I S ALLOWED. 7. FROM BARE READING OF ABOVE CONCLUDING PART OF TH E IMPUGNED ORDER, WE OBSERVE THAT THAT THE LD CIT(A), RELIED ON THE J UDGMENT OF THE FULL BENCH OF HONBLE THREE JUDGES OF THE SUPREME COURT, THE A PEX COURT IN THE CASE OF CIT VS KARNATAKA STATE COOPERATIVE APEX BANK (2001) 251 ITR 194(SC), WHEREIN IT HAS BEEN HELD THAT INCOME ARISING FROM I NVESTMENT OF FUNDS WITH STATE BANK OR WITH RESERVE BANK OF INDIA IN BANKING INCOME AND EXEMPTION U/S 80P(2)(A)(I) OF THE ACT IS AVAILABLE TO THE ASS ESSEE. IN THIS VIEW, FULL BENCH OF HONBLE APEX COURT REFERRED THE APPEALS TO A BENCH OF HONBLE THREE JUDGES TO DECIDE THE APPARENT CONFLICT BETWEE N JUDGEMENTS (OF BENCHES ITA 2368/DEL/2011 & OTHERS 6 OF TWO JUDGES OF HONBLE APEX COURT) IN THE CASE OF MADHYA PRADESH COOPERATIVE BANK LTD. VS CIT (1996) 218 ITR 438(SC) AND CIT VS BANGALORE DISTRICT COOPERATIVE CENTRAL BANK LTD. (1 998) 233 ITR 282 . THE RATIO OF THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KARNATAKA STATE COOPERATIVE APEX BANK (SUPRA) READS AS UNDER: - INTEREST ARISING FROM INVESTMENT MADE, IN COMPLIANCE WITH STATUTORY PROVISIONS TO ENABLE IT T O CARRY ON BANKING BUSINESS, OUT OF RESERVE FUND BY A COOPE RATIVE SOCIETY ENGAGED IN BANKING BUSINESS, IS EXEMPT UNDE R SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961.TH EW PLACEMENT OF SUCH FUNDS BEING IMPERATIVE FOR THE PURPOSE OF CARRYING ON BANKING BUSINESS THE INCOME THEREFROM WOULD BE INCOME FROM THE ASSESSEES BUSIN ESS. THERE IS NOTHING IN THE PHRASEOLOGY OF SECTION 80P(2)(A)(I) WHICH MAKES IT APPLICABLE ONLY TO INCO ME DERIVED FROM WORKING OR CIRCULATING CAPITAL. 8. IN THE APPEALS IN HAND, THE MATERIAL FACT DOES N OT PERTAIN TO THE INCOME OF INTEREST ACCRUED FROM INVESTMENT MADE OUT OF RES ERVE FUND IN COMPLIANCE WITH STATUTORY PROVISIONS TO ENABLE THE COOPERATIVE BANKING SOCIETY TO CARRY ON BANKING BUSINESS BUT AS IT WAS HELD BY THE CIT(A ) THAT IT WAS NOT IN DISPUTE THAT THE CREDIT FACILITIES AND SUPPLY OF SE EDS, UREA ETC. WERE GIVEN ONLY TO THE MEMBERS OF THE APPELLANT SOCIETY. THE DISPUTE WAS ONLY WITH REGARD TO THE DEPOSITS WHICH THE APPELLANT ACCEPTED FROM NON-MEMBERS. ITA 2368/DEL/2011 & OTHERS 7 9. THE LD. DR SUBMITTED THAT THE EXEMPTION U/S 80P( 2)(A)(I) OF THE ACT IS AVAILABLE AND RESTRICTED TO THE INTEREST INCOME EAR NED FROM CREDIT OR LOANS PROVIDED TO ITS MEMBERS ONLY. THE DR ALSO ADDED BY DRAWING OUR ATTENTION TO PARA 3.4 IN APPEAL NOS. 2368/DEL/11, 2369/DEL/11 AND 2370/DEL/11 AND PARA 3.2 IN APPEAL NO. 2371/DEL/11 OF ASSESSMENT OR DER AND VEHEMENTLY SUBMITTED THAT WHEN THE COUNSEL OF ASSESSEE SOCIETY WAS ASKED TO SUBMIT BIFURCATED DETAILS OF INCOME AND EXPENDITURE PERTAI NING TO ITS MEMBERS AND NON-MEMBERS, HE EXPRESSED HIS INABILITY TO SUBMIT T HE SAME. IN THE RESULT, THE AO RIGHTLY REJECTED THE CLAIM U/S 80P(2)(I) & ( IV) AND BEING A GENEROUS ASSESSING OFFICER, HE SUO MOTO GRANTED/ALLOWED EXEM PTION OF RS.50,000/- TO EACH OF THE ABOVE FOUR ASSESSEES U/S 80P(2)(C)(II) OF THE ACT. 10. SECTION 80P(2)(A)(I) & (IV) OF THE ACT IS BEING REPRODUCED AS UNDER FOR READY REFERENCE:- 80P (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY : ( A ) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN ( I ) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR (II) .. [( III ) . ( IV ) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, L IVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYI NG THEM TO ITS MEMBERS, OR ( V ) .. [( VI ) .. ( VII ) .. THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF B USINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES : ITA 2368/DEL/2011 & OTHERS 8 [ PROVIDED THAT IN THE CASE OF A CO-OPERATIVE SOCIETY FALLING UNDER SUB-CLAUSE ( VI ), OR SUB-CLAUSE ( VII ), THE RULES AND BYE-LAWS OF THE SOCIETY RESTRICT T HE VOTING RIGHTS TO THE FOLLOWING CLASSES OF ITS MEMBERS, NAM ELY: ( 1 ) THE INDIVIDUALS WHO CONTRIBUTE THEIR LABOUR OR, A S THE CASE MAY BE, CARRY ON THE FISHING OR ALLIED ACTIVITIES; ( 2 ) THE CO-OPERATIVE CREDIT SOCIETIES WHICH PROVIDE F INANCIAL ASSISTANCE TO THE SOCIETY; ( 3 ) THE STATE GOVERNMENT;] THE ABOVE PROVISION CLEARLY STATES THAT THE EXEMPTI ON U/S 80P(2)(A) IS AVAILABLE TO THE INCOME OF A COOPERATIVE SOCIETY EN GAGED IN THE BUSINESS OR ACTIVITIES FACILITATING TO ITS MEMBERS AS MENTIONED IN CLAUSES (I) TO (VI) OF SUB-SECTION (A) OF SECTION 80P(2) OF THE ACT. 11. ON THE BASIS OF ABOVE OBSERVATIONS, WE ARE OF THE VIEW THAT THE LD. AO RIGHTLY APPLIED THE RATIO OF THE JUDGMENT OF HONBL E HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS ANKAPALLI COOPERATIVE MARKETING SOCIETY LTD. REPORTED AS 245 ITR 616(AP) THAT THE PROVISIONS RELATING TO TAX CONCESSIONS HAVE TO BE INTERPRETED RIGIDLY AND THE BURDEN OF PR OOF LIES ON THE ASSESSEE TO ESTABLISH HIS ENTITLEMENT FOR EXEMPTION CLAIMED. B UT IN THE JUDGEMENT OF HONBLE HIGH COURT OF ORISSA IN THE CASE OF NILGIRI ENGINEERING COOPERATIVE SOCIETY LTD. VS CIT REPORTED AS 208 ITR 326 (ORISSA ), IT WAS HELD THAT EARNING OF A SOCIETY OF ENGINEERS MUST BE ATTRIBUTA BLE TO THE ACTUAL LABOUR OF ITS MEMBERS IF ACTUAL SUPERVISION OF WORK IN FIELD WAS DONE BY PAID EMPLOYEES AND AS THERE WAS NO DIRECT CONNECTION BET WEEN THE WORK EXECUTED AND THE SPECIALTY OF MEMBERS OF THE SOCIETY AS ENGI NEERS, THE SOCIETY IS NOT ITA 2368/DEL/2011 & OTHERS 9 ENTITLED FOR EXEMPTION U/S 80P OF THE ACT. THE RAT IO OF THIS CASE IS NOT APPLICABLE TO THE PRESENT CASE OF BANKING COOPERATI VE SOCIETIES. 12. ON THE BASIS OF FOREGOING DISCUSSION AND CAREFU L CONSIDERATION OF THE FACTS OF THE PRESENT CASE, WE RESPECTFULLY OBSERVE THAT THE RATIO OF ABOVE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS KARNATAKA STATE COOPERATIVE APEX BANK (SUPRA) IS NOT AVAILABLE TO T HE PRESENT APPELLANT ASSESSEE AS THE FACTUAL ISSUES IN THESE APPEALS ARE NOT RELATED TO INTEREST INCOME EARNED ARISING FROM INVESTMENTS MADE FROM RE SERVE FUND, IN COMPLIANCE WITH STATUTORY PROVISIONS TO ENABLE THE ASSESSEE COOPERATIVE SOCIETIES TO CARRY ON BANKING BUSINESS BUT FACTUAL ISSUE IN APPEALS IN HAND IS ONLY RELATED TO THE DEPOSITS WHICH THE APPELLANT SO CIETY ACCEPTED FROM NON- MEMBERS. THE LD. CIT(A) NOTED THAT THE ACCEPTANCE OF DEPOSITS FROM NON- MEMBERS DOES NOT, IN ANY WAY, AFFECT THE REVENUE GE NERATED BY THE APPELLANT IN PROVIDING CREDIT FACILITIES AND SUPPLY OF SEEDS, UREA ETC. TO THE MEMBERS. WE OBSERVE THAT THE DEPOSITS FROM NON-MEMBERS DO NO T ARISE ANY INCOME. ON THE OTHER HAND, THE BANKING SOCIETY USED THESE D EPOSITS TO PROVIDE CREDITS TO ITS MEMBERS AND PAID INTEREST TO THE NON-MEMBER DEPOSITORS. WE ALSO OBSERVE THAT THESE APPEALS HAVE BEEN FILED BY THE R EVENUE, THE AR APPEARED FOR THE HEARING ON 29.11.2011 AND SOUGHT ADJOURNMEN T ON THE GROUND THAT THE ASSESSEES ARE IN THE PROCESS OF ENGAGING A COUNSEL TO PLEAD THE CASE AND THE ITA 2368/DEL/2011 & OTHERS 10 BENCH ALLOWED THE SAME AND FIXED THE DATE OF HEARIN G FOR 20 TH MARCH 2012, BUT ON 20 TH MARCH, 2012, NEITHER THE OFFICER-IN-CHARGE OF THE ASSESSEE NOR ANY COUNSEL OR REPRESENTATIVE ATTENDED THE PROCEEDINGS. THEREFORE, IN THESE CIRCUMSTANCES, WE DEEM IT JUST AND PROPER TO ADJUDI CATE THE APPEALS ON THE BASIS OF RECORD AND FINALLY WE PROCEED TO DECIDE TH E APPEAL ON MERITS. 13. AS THE PROVISIONS OF SECTION 80P(2)(A)(I) OF TH E ACT CLEARLY STATES THAT INCOME EARNED FROM CREDIT FACILITIES TO MEMBERS AND AS PER SUB-CLAUSE (IV), THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LIV ESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYI NG THEM TO ITS MEMBERS, THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTED TO ANY ONE OR MORE OF SUCH ACTIVITIES ARE ENTITLED FOR DED UCTION. WE ALSO SEE THAT FIRST LIMB OF SUB-CLAUSE (I) OF CLAUSE (A) STATES THAT CARRYING ON THE BUSINESS OF BANKING AND AFTER OR SECOND LIMB STATES THAT AS PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THEREFORE, IT CONSTRUED THAT INCOME FROM BUSINESS OF BANKING AS WELL AS INCOME FROM CREDIT FACILITIES RESTRICTED TO ITS MEMBERS ONLY ARE ENTITLED FOR DEDUCTION AND INCOME FROM NON -MEMBERS IS NOT INCLUDED AND ENTITLED FOR DEDUCTION UNDER SAID PROV ISIONS. 14. BUT IN THE PRESENT CASE, IT WAS NOT IN DISPUTE THAT CREDIT FACILITIES AND SUPPLY OF SEEDS, UREA ETC.WERE GIVEN ONLY TO THE ME MBERS OF THE APPELLANT SOCIETY. ONLY WITH REGARD TO THE DEPOSITS, THE APP ELLANT BANKING SOCIETY ITA 2368/DEL/2011 & OTHERS 11 ACCEPTED FROM NON-MEMBERS DOES NOT, IN ANY WAY, AFF ECT THE REVENUE GENERATED BY THE APPELLANT IN PROVIDING CREDIT FACI LITIES AND SUPPLY OF OTHER AGRICULTURE RELATED EQUIPMENTS AND FERTILIZERS ETC. TO ITS MEMBERS. AS WE ALSO NOTED THAT BANKING COOPERATIVE SOCIETY DOES NO T EARN INCOME FROM DEPOSITS BUT IT HAS TO PAY INTEREST ON THE DEPOSITS , THEREFORE, DEPOSITS FROM NON-MEMBERS CAN NEVER EARN INCOME IN THE HANDS OF A SSESSEE ALTHOUGH IF OUT OF DEPOSITS, THE BANK COOPERATIVE SOCIETY HAD PROVI DED CREDIT TO ITS MEMBERS, ONLY THEN THE INCOME ARISING FROM THESE ACTIVITIES ARE ENTITLED FOR DEDUCTION. 15. THE LD. DR PLACED HIS RELIANCE ON THE JUDGEMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PUNJAB STATE COOP ERATIVE MILK PRODUCERS FEDERATION LTD. VS CIT(A) REPORTED AS (2011) 336 IT R 501(P&H) WHERE THE HONBLE DIVISION BENCH HELD THAT MEMBER SOCIETIES E NGAGED IN MARKETING MILK AND MILK PRODUCTS WHEN CREDIT FACILITIES ARE P ROVIDED BY THE ASSESSEE FOR WORKING CAPITAL OF MEMBERS, THEN INTEREST EARNE D IS NOT ENTITLED TO SPECIAL DEDUCTION UNDER SECTION 80P OF THE ACT. IN THIS CA SE, THE HONBLE HIGH COURT ALSO HELD THAT THE CREDIT FACILITIES PROVIDED TO ITS MEMBERS WERE ANCILLARY TO ITS MAIN OBJECT AND IT WAS NOT CARRYIN G ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBE RS, THEREFORE, AS A RESULT, THE ASSESSEE SOCIETY WAS NOT FOUND ENTITLED TO THE BENEFITS OF SECTION ITA 2368/DEL/2011 & OTHERS 12 80P(2)(A)(I) OF THE ACT. WE RESPECTFULLY CONSIDER THE RATIO OF THIS JUDGEMENT BUT IN THE PRESENT CASE, THE BENEFIT OF THE RATIO I S NOT AVAILABLE TO THE REVENUE AS THE PRESENT CASE IS RELATED TO THE ASSESSEES OF BANKING BUSINESS AS THEIR MAIN OBJECT. 16. ON THE BASIS OF FOREGOING DISCUSSION, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING DEDUCTION ON THIS SOLE GROUND THAT THE INCOME DECLARED BY THE ASSESSEE INCLUDES INCOME FRO M BUSINESS OF BANKING FROM ITS NON-MEMBERS BECAUSE THERE WAS NO INCOME FR OM THE SAME ACTIVITIES AS THE ASSESSEE ACCEPTED ONLY DEPOSITS FROM NON-MEM BERS ON WHICH THE ASSESSEE BANK WAS UNDER OBLIGATION TO PAY INTEREST, THEREFORE, THESE DEPOSITS FROM NON-MEMBERS, IN ANY WAY, NEVER BROUGHT ANY INC OME TO THE ASSESSEE. ACCORDINGLY, WE HOLD THAT LD. CIT(A) RIGHTLY ALLOWE D THE DEDUCTION AND ACCEPTED THE APPEALS OF ASSESSEE SOCIETIES AND WE H AVE NO REASON TO INTERFERE WITH THE IMPUGNED ORDERS. 17. THEREFORE, WE CONCLUDE WITH THE FINDING THAT TH ESE APPEALS BY THE REVENUE ARE DEVOID OF MERITS AND DESERVE TO BE DISM ISSED. HENCE, IN THE RESULT, THE SAME ARE DISMISSED. ITA 2368/DEL/2011 & OTHERS 13 ORDERS PRONOUNCED IN THE OPEN COURT ON 18.5.2012. SD/- SD/- (A.N. PAHUJA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 18TH MAY, 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR