The Govt. Telecommunication Employees Co-operative Society Ltd., CHENNAI V. ACIT Non Corporate Circle 12(1), CHENNAI

ITA 2703/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6578 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 20-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S. PANDIAN
• Assessee Lawyers: M. LAVANYA
• Keywords: Search and seizure; Commercial expediency
• Section: 56; 80P; 201; 64; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . . , , BEFORE SHRI N.R.S. GANESAN , JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTAN T MEMBE R ./ ITA NO. 2703 /CHNY/201 8 / ASSESSMENT YEAR: 2015 - 1 6 M/S. THE GOVT. TELECOMMUNICATION EMPLOYEES CO - OPERATIVE SOCIETY LTD., NEW NO.112, OLD NO.37A, SEMBUDOSS STREET, BROADWAY, CHENNAI 600 001. VS. THE ASST . COMMISSIO NER OF INCOME TAX, NON - C ORPORATE CIRCLE - 12 (1) , CHENNAI. [PAN : AABAT 3072B ] ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MS. M. LAVANYA , C.A /RESPONDENT BY : DR. S. PANDIAN, JCIT / DATE OF HEARING : 2 5 .0 7 .2019 / DATE OF PRONOUNCEMENT : 23 .10 .2019 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS) - 8 , CHENN AI IN ITA NO. 51 / 2015 - 16 DATED 03 .0 2 .201 7 FOR THE ASSESSMENT YEAR ( AY ) 20 1 5 - 1 6 WITH THE FOLLOWING GROUNDS: BOTH THE CI T APPEALS AND LEARNED ASSESSING OFFICER HAS ERRED IN MAKING THE DISALLOWANCE. AGGRIEVED BY THE CIT S ORDER THE ASSESSEE FILES THE FOLLOWIN G GROUNDS OF APPEAL. ITA NO. 2703 / CHNY /201 8 : - 2 - : 1. STAFF ADVANCE UNDER SECTION 56 - RS.1,01,03,351/ - : SINCE THE ADVANCES GIVEN TO THE EMPLOYEES AS FORMS INTEGRAL PART OF THE BUSINESS OPERATIONS OF THE ASSESSEE, THE INTEREST INCOME (RS.1,O1,03,351/ - ) EARNED ON STAFF ADVANCES IS ELIGI BLE UNDER SECTION 80P OF THE INCOME TAX ACT. 2. INTEREST EARNED ON FIXED DEPOSIT AND SAVINGS BANK ACCOUNT - RS.3,59,28,438/ - : THE INTEREST EARNED ON FIXED DEPOSIT AND SAVINGS BANK ACCOUNT IS INCIDENTAL TO THE MAIN OBJECT OF PROVIDING CREDIT FACILITIES TO TH E MEMBERS AND IT IS EMBEDDED WITH THE MAIN INCOME OF THE SOCIETY AND HENCE THE INTEREST OF RS.3,59,28,438/ - . EARNED ON THE FIXED DEPOSIT AND SAVINGS BANK ACCOUNT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT. THE ASSESSEE SHALL BE PE RMITTED TO FURNISH ANY FURTHER GROUNDS OF APPEAL DURING THE COURSE OF HEARING. THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. THE APPELLANT ALSO PRAYS TO BRING FORTH FURTHER GROUNDS OR ADDITIONAL GROUNDS AT THE TIME OF THE HEARING. 2. M/S. THE GOVT. TELECOMMUNICATION EMPLOYEES CO - OPERATIVE SOCIETY LTD., THE ASSESSEE , IS A MULTI STATE CO - OPERATIVE SOCIETY GOVERNED BY THE MULTI STATE CO - OPERATIVE ACT. WHILE M AKING THE ASSESSMENT FOR AY 201 5 - 1 6 , THE ASSESSING OFFICER (AO) DISALLOWED THE INTEREST INCOME EARNED ON STAFF ADVANCE AT RS. 1,01,03,351/ - AND THE INTEREST EARNED ON FIXED DEPOSIT AND SAVINGS BANK ACCOUNT AT RS. 3,59,28,438/ - BOTH U/S. 80P OF THE INCOME TAX ACT, 1961 . AGGRIEVED AGAINST T H AT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A). THE LD. CIT(A) DISMISSED THE APPEAL . AGGRIEVED AGAINST THAT ORDER OF THE LD. CIT(A), THE ASSESSEE FILED THIS APPEA L . ITA NO. 2703 / CHNY /201 8 : - 3 - : 3 . WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THOUGH , THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE TRIBUNAL DISMISSED THE ASSESSEE S CASE FOR AY 2014 - 15 IN ITA NO.2478/MDS/2017 DATED 11.01.2018 , HOWEVER, IT WAS PLEADED TO ALLOW THE APPEAL ON THE BASIS OF CERTAIN OTHER DECISIONS. THE RELEVANT PORTION OF THE ORDER , SUPRA, EXTRACTED AS UNDER: 2 . LD. COUNSEL FOR THE ASSESSEE, ALLUDING TO THE FIRST GROUND SUBMITTED THAT ASSESSEE WAS A CO - OPERATIVE SOCIETY REGISTERED UNDER MULTI STATE COOPERATIVE SOCIETY S ACT, 2002. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD EARNED INTEREST OF 73,60,75,563/ - FROM ITS MEMBERS ON LOANS GIVEN TO THEM. APART FROM THIS INTEREST, AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD ALSO EARNED INTEREST OF 97,19,096/ - ON ADVANCES GIVEN TO ITS STAFF. FURTHER, AS PER THE LD. AUTHORISED REPR ESENTATIVE, ASSESSEE ALSO HAD DEPOSITS WITH ITS SAVINGS BANK ACCOUNT WHICH EARNED IT AN INTEREST OF 14,85,237/ - . CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT INTEREST OF 97,19,096/ - RECEIVED FROM ITS STAFF ON ADVANCES GIVEN TO THEM WAS NOT ALLOWED AS DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT SUCH ADVANCES WERE GIVEN TO EMPLOYEES AS A MATTER OF COMMERCIAL EXPEDIENCY AND HENCE SUCH INTEREST PARTOOK THE SAME NATURE AS INTEREST FROM ASSESS EE S BUSINESS OPERATIONS. THUS, ACCORDING TO HIM, SUCH INTEREST HAD TO BE CONSTRUED AS INTEREST ATTRIBUTABLE TO THE MAIN OBJECT OF THE ASSESSEE WHICH WAS TO PROVIDE CREDIT FACILITY TO ITS MEMBERS. RELIANCE WAS PLACED ON THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. JHALAWAR SAHKARI BHOOMI VIKAS BANK LIMITED( ITA 634/JP/2012, DATED 20.03.2015). 3 . ADVERTING TO THE SECOND GROUND, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT LD. ASSESSING OFFICER HAD DENIED EXEMPTION U/S.80P(2)(A) (I) OF THE ACT ON INTEREST OF 14,85,237/ - ON DEPOSITS WITH SAVINGS BANK ACCOUNT. AS PER THE LD. AUTHORISED REPRESENTATIVE, SUCH DEPOSITS WERE MADE FROM TEMPORARY SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ASSESSEE WAS EMPOWERED TO DO SO BY VIRTUE OF SEC. 64 OF THE MULTI STATE CO - OPERATIVE SOCIETY ACT, 2002. ACCORDING TO HIM, SUCH INTEREST ONLY WENT TO REDUCE INTEREST COST OF BORROWINGS. LD. AUTHORISED REPRESENTATIVE REFERRING TO PROVISIONS OF SEC . 64 OF MULTI SOCIETY COOPERATIVE SOCIETY ACT, 2002 SUBMITTED THAT THE CONDITIONS SET - OUT THEREIN WERE COMPLIED WHILE MAKING SUCH DEPOSITS. AS PER THE LD. AUTHORISED REPRESENTATIVE LOANS WERE GIVEN TO ITS MEMBERS FROM THE DEPOSITS IN SUCH SAVINGS BAN K ACCOUNT AS WELL. ACCORDING TO HIM, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD ERRONEOUSLY TREATED THE INTEREST ON FIXED DEPOSITS AND INTEREST ON SAVINGS BANK ACCOUNT IN THE SAME VEIN. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE WAS ELIGIB LE FOR CLAIMING DEDUCTION U/S.80P(2)(A)(I) OF THE ACT FOR SUCH INTEREST ALSO. RELIANCE WAS PLACED ON THE DECISION OF ITA NO. 2703 / CHNY /201 8 : - 4 - : BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S. KPTC & HESCOM EMPLOYEES CO - OP CREDIT SOCIETY LTD (ITA NO.666/BANG/2015, DAT ED 01.10.2015). 4 . PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTING THE ORDERS OF THE AUTHORITIES BELOW SUBMITTED THAT ASSESSEE WAS GIVEN DEDUCTION U/S.80P(2)(A) (I) OF THE ACT ON THE PROFITS AND GAINS ATTRIBUTABLE TO ITS ACTIVITIES OF PR OVIDING CREDIT FACILITIES TO ITS MEMBERS. ACCORDING TO HIM, INTEREST ON STAFF ADVANCES COULD NOT BE CONSIDERED AS PART OF SUCH PROFIT SINCE STAFF WERE NOT MEMBERS OF THE ASSESSEE S SOCIETY. EVEN EMPLOYEES OF BSNL WERE ELIGIBLE TO BECOME ONLY NOMINAL MEM BERS. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE BY VIRTUE OF JUDGMENT OF APEX COURT IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY LTD VS. CIT (CIVIL APPEAL NO.10245 OF 2017, DATED 08.08.2017), EVEN INTEREST RECEIVED FROM LOANS GIVEN TO ASSOCIATE MEMB ERS WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. HENCE, ACCORDING TO HIM, ASSESSEE S CLAIM FOR DEDUCTION OF INTEREST RECEIVED ON STAFF ADVANCES WAS RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES. 5 . VIZ - A - VIZ ISSUE OF BANK INTEREST, CONTENTI ON OF THE LD. DEPARTMENTAL REPRESENTATIVE WAS THAT THE INTEREST RECEIVED FROM SAVINGS BANK ACCOUNT COULD NOT BE CONSIDERED AS PROFITS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE ASSESSEE. AS PER T HE LD. DEPARTMENTAL REPRESENTATIVE SUCH INTEREST WAS CALCULATED BY THE LD. ASSESSING OFFICER AFTER REDUCING THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING SUCH INTEREST. CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE WAS THAT EARNING OF SUCH IN TEREST WAS TOTALLY INDEPENDENT FROM ITS ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THUS, ACCORDING TO HIM, ASSESSEE WAS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S.80P OF THE ACT ON SUCH BANK INTEREST. 6 . I HAVE CONSIDERED THE RIVAL CONTENTIONS AN D PERUSED THE ORDERS OF THE AUTHORITIES BELOW . IT IS NOT DISPUTED THAT ASSESSEE WAS GIVEN DEDUCTION U/S.80P(2)(A)(I) OF THE ACT ON INTEREST EARNED BY IT FROM ITS BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS. SUCH DEDUCTION WAS DENIED ONLY ON THE I NTEREST RECEIVED BY THE ASSESSEE ON ADVANCES GIVEN TO EMPLOYEES AND INTEREST EARNED ON THE DEPOSITS IN SAVINGS BANK ACCOUNT. IN SO FAR AS INTEREST EARNED FROM EMPLOYEES ARE CONCERNED, CONTENTION OF THE ASSESSEE IS THAT THIS WAS TO BE CONSTRUED AS A PART OF ITS MAIN BUSINESS ACTIVITY OF PROVIDING CREDIT FACILITY TO ITS MEMBERS. CERTIFICATE OF REGISTRATION OF THE ASSESSEE ISSUED BY THE OFFICE OF THE CENTRAL REGISTRAR OF COOPERATIVE SOCIETIES, WHICH IS AVAILABLE ON RECORD, CLEARLY INDICATE THAT IT IS A MULTI STATE CO - OPERATIVE SOCIETY. IT IS OBVIOUSLY NOT A SOCIETY ENGAGED IN THE BUSINESS OF BANKING. SECTION 80P(2)(A)(I) OF THE ACT WHICH APPOSITE IS REPRODUCED HEREUNDER: - (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO - OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB - SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB - SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS R EFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING, NAMELY: -- ITA NO. 2703 / CHNY /201 8 : - 5 - : (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 . AS NOTED BY THE HON BLE APEX COURT IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY LTD (SUPRA), THERE ARE TWO CLASSES OF BUSINESSES MENTIONED IN THE ABOVE CLAUSE. FIRST CLASS IS THOSE CO - OPERATIVE SOCIETIES CARRYING ON BUSINESS OF BANKING AND SECOND CLASS IS CO - OPERATIVE SOCIETIES PROVIDING CREDIT FA CILITIES TO ITS MEMBERS. ASSESSEE FALLS IN THE SECOND CLASS. WHILE HOLDING THAT LIBERAL INTERPRETATION HAS TO BE GIVEN FOR SEC.80P(2)(A)(I) OF THE ACT, SINCE SAID SECTION WAS ENACTED FOR ENCOURAGING ITS CO - OPERATIVE SECTOR, THEIR LORDSHIPS TOOK A VIEW THAT INTEREST EARNED BY A CO - OPERATIVE SOCIETIES PROVIDING CREDIT FACILITIES TO ITS ASSOCIATE MEMBERS WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. IF INTEREST EARNED FROM CREDITS PROVIDED TO ASSOCIATE MEMBERS IS NOT ELIGIBLE FOR CLAI MING THE BENEFIT OF SECTION 80P(2)(A) (I) OF THE ACT, IT WILL NIGH BE IMPOSSIBLE TO GIVE SUCH BENEFIT TO INTEREST EARNED ON ADVANCES GIVEN TO STAFF. RELEVANT PARAS OF THE JUDGMENT OF HON BLE APEX COURT IS REPRODUCED HEREUNDER: - 17) WE HAVE CONSIDER ED THE SUBMISSIONS OF THE COUNSEL FOR THE PARTIES WITH REFERENCE TO THE RECORD OF THIS CASE. 18) WE MAY MENTION AT THE OUTSET THAT THERE CANNOT BE ANY DISPUTE TO THE PROPOSITION THAT SECTION 80P OF THE ACT IS A BENEVOLENT PROVISION WHICH IS ENACTED BY T HE PARLIAMENT IN ORDER TO ENCOURAGE AND PROMOTE GROWTH OF CO - OPERATIVE SECTOR IN THE ECONOMIC LIFE OF THE COUNTRY. IT WAS DONE PURSUANT TO DECLARED POLICY OF THE GOVERNMENT. THEREFORE, SUCH A PROVISION HAS TO BE READ LIBERALLY, REASONABLY AND IN FAVOR OF T HE ASSESSEE (SEE BAJAJ TEMPO LIMITED, BOMBAY V. COMMISSIONER OF INCOME TAX, BOMBAY CITY - III, BOMBAY3). IT IS ALSO TRITE THAT SUCH A PROVISION HAS TO BE CONSTRUED AS TO EFFECTUATE THE OBJECT OF THE LEGISLATURE AND NOT TO DEFEAT IT (SEE COMMISSIONER OF I NCOME TAX, BOMBAY & ORS. V. MAHINDRA AND MAHINDRA LIMITED & ORS.4). THEREFORE, IT HARDLY NEEDS TO BE EMPHASIZED THAT ALL THOSE CO - OPERATIVE SOCIETIES WHICH FALL WITHIN THE PURVIEW OF SECTION 80P OF THE ACT ARE ENTITLED TO DEDUCTION IN RESPECT OF ANY INCOME REFERRED TO IN SUB - SECTION (2) THEREOF. CLAUSE (A) OF SUB - SECTION (2) GIVES EXEMPTION OF WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANYONE OR MORE OF SUCH ACTIVITIES WHICH ARE MENTIONED IN SUB - SECTION (2). 19) SINCE WE ARE CONC ERNED HERE WITH SUB - SECTION (I) OF CLAUSE (A) OF SUB - SECTION (2), IT RECOGNIZES TWO KINDS OF CO - OPERATIVE SOCIETIES, NAMELY: (I) THOSE CARRYING ON THE BUSINESS OF BANKING AND; (II) THOSE PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 20) IN THE CASE OF KERAL A STATE COOPERATIVE MARKETING FEDERATION LIMITED & ORS. V. COMMISSIONER OF INCOME TAX5, THIS COURT, WHILE DEALING WITH CLASSES OF SOCIETIES COVERED BY SECTION 80P OF THE ACT, HELD AS FOLLOWS: 6. THE CLASSES OF SOCIETIES COVERED BY SECTION 80 - P OF THE AC T ARE AS FOLLOWS: (A) ENGAGED IN BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS; XX XX XX ITA NO. 2703 / CHNY /201 8 : - 6 - : 7. WE MAY NOTICE THAT THE PROVISION IS INTRODUCED WITH A VIEW TO ENCOURAGING AND PROMOTING GROWTH OF COOPERATIVE SECTOR IN THE ECONOMIC LIFE OF THE COUNTRY AND IN PURSUANCE OF THE DECLARED POLICY OF THE GOVERNMENT. THE CORRECT WAY OF READING THE DIFFERENT HEADS OF EXEMPTION ENUMERATED IN THE SECTION WOULD BE TO TREAT EACH AS A SEPARATE AND DISTINCT HEAD OF EXEMPTION. WHENEVER A QUESTION ARISES AS TO WHETHER ANY PARTICULAR CATEGORY OF AN INCOME OF A COOPERATIVE SOCIETY IS EXEMPT FROM TAX WHAT HAS TO BE SEEN IS WHETHER INCOME FELL WITHIN ANY OF THE SEVERAL HEADS OF EXEMPTION. IF IT FELL WITHIN ANY ONE HEAD OF EXEMPTION, IT WOULD BE FREE FROM TAX NOTW ITHSTANDING THAT THE CONDITIONS OF ANOTHER HEAD OF EXEMPTION ARE NOT SATISFIED AND SUCH INCOME IS NOT FREE FROM TAX UNDER THAT HEAD OF EXEMPTION... 21) IN THE CASE OF COMMISSIONER OF INCOME TAX V. PUNJAB STATE CO - OPERATIVE BANK LTD.6, WHILE DEALING WIT H AN IDENTICAL ISSUE, THE HIGH COURT OF PUNJAB AND HARYANA HELD AS FOLLOWS: 8. THE PROVISIONS OF SECTION 80P WERE INTRODUCED WITH A VIEW TO ENCOURAGING AND PROMOTING THE GROWTH OF THE CO - OPERATIVE SECTOR IN THE ECONOMIC LIFE OF THE COUNTRY AND IN PURSU ANCE OF THE DECLARED POLICY OF THE GOVERNMENT. THE DIFFERENT HEADS OF EXEMPTION ENUMERATED IN THE SECTION ARE SEPARATE AND DISTINCT HEADS OF EXEMPTION AND ARE TO BE TREATED AS SUCH. WHENEVER A QUESTION ARISES AS TO WHETHER ANY PARTICULAR CATEGORY OF AN INC OME OF A CO - OPERATIVE SOCIETY IS EXEMPT FROM TAX, THEN IT HAS TO BE SEEN WHETHER SUCH INCOME FELL WITHIN ANY OF THE SEVERAL HEADS OF EXEMPTION. IF IT FELL WITHIN ANY ONE HEAD OF EXEMPTION,.... IT MEANS THAT A CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING AND A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS WILL BE ENTITLED FOR EXEMPTION UNDER THIS SUB - CLAUSE. THE CARRYING ON THE BUSINESS OF BANKING BY A COOPERATIVE SOCIETY OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS ARE TWO DIFFERENT TYPES OF ACTIVITIES WHICH ARE COVERED UNDER THIS SUB - CLAUSE. XX XX XX 13. SO, IN OUR VIEW, IF THE INCOME OF A SOCIETY IS FALLING WITHIN ANY ONE HEAD OF EXEMPTION, IT HAS TO BE EXEMPTED FROM TAX NOTWITHSTANDING THAT THE CONDITION OF OTH ER HEADS OF EXEMPTION ARE NOT SATISFIED. A READING OF THE PROVISIONS OF SECTION 80P OF THE ACT WOULD INDICATE THE MANNER IN WHICH THE EXEMPTION UNDER THE SAID PROVISIONS IS SOUGHT TO BE EXTENDED. WHENEVER THE LEGISLATURE WANTED TO RESTRICT THE EXEMPTION TO A PRIMARY CO - OPERATIVE SOCIETY, IT WAS SO MADE CLEAR AS IS EVIDENT FROM CLAUSE (F) WITH REFERENCE TO A MILK CO - OPERATIVE SOCIETY THAT A PRIMARY SOCIETY ENGAGED IN SUPPLYING MILK IS ENTITLED TO SUCH EXEMPTION WHILE DENYING THE SAME TO A FEDERAL MILK CO - OPE RATIVE SOCIETY. 22) THE AFORESAID JUDGMENT OF THE HIGH COURT CORRECTLY ANALYSES THE PROVISIONS OF SECTION 80P OF THE ACT AND IT IS IN TUNE WITH THE JUDGMENT OF THIS COURT IN KERALA STATE COOPERATIVE MARKETING FEDERATION LIMITED (SUPRA). ITA NO. 2703 / CHNY /201 8 : - 7 - : 23) WITH THE INSERTION OF SUB - SECTION (4) BY THE FINANCE ACT, 2006, WHICH IS IN THE NATURE OF A PROVISO TO THE AFORESAID PROVISION, IT IS MADE CLEAR THAT SUCH A DEDUCTION SHALL NOT BE ADMISSIBLE TO A CO - OPERATIVE BANK. HOWEVER, IF IT IS A PRIMARY AGRICULTURE CREDIT SO CIETY OR A PRIMARY CO - OPERATIVE AGRICULTURE AND RURAL DEVELOPMENT BANK, THE DEDUCTION WOULD STILL BE PROVIDED. THUS, CO - OPERATIVE BANKS ARE NOW SPECIFICALLY EXCLUDED FROM THE AMBIT OF SECTION 80P OF THE ACT. 24) UNDOUBTEDLY, IF ONE HAS TO GO BY THE AFORE SAID DEFINITION OF CO - OPERATIVE BANK , THE APPELLANT DOES NOT GET COVERED THEREBY. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT IN ORDER TO DO THE BUSINESS OF A CO - OPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENSE FROM THE RESERVE BANK OF INDIA, WHICH TH E APPELLANT DOES NOT POSSESS. NOT ONLY THIS, AS NOTICED ABOVE, THE RESERVE BANK OF INDIA HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE APPELLANT DOES NOT AMOUNT TO THAT OF A CO - OPERATIVE BANK. THE APPELLANT, THEREFORE, WOULD NOT COME WITHIN THE MISCHIEF OF SUB - SECTION (4) OF SECTION 80P. 25) SO FAR SO GOOD. HOWEVER, IT IS SIGNIFICANT TO POINT OUT THAT THE MAIN REASON FOR DIS ENTITLING THE APPELLANT FROM GETTING THE DEDUCTION PROVIDED UNDER SECTION 80P OF THE ACT IS NOT SUB - SECTION (4) THEREOF. WHAT HAS BE EN NOTICED BY THE ASSESSING OFFICER, AFTER DISCUSSING IN DETAIL THE ACTIVITIES OF THE APPELLANT, IS THAT THE ACTIVITIES OF THE APPELLANT ARE IN VIOLATIONS OF THE PROVISIONS OF THE MACSA UNDER WHICH IT IS FORMED. IT IS POINTED OUT BY THE ASSESSING OFFICER T HAT THE ASSESSEE IS CATERING TO TWO DISTINCT CATEGORIES OF PEOPLE. THE FIRST CATEGORY IS THAT OF RESIDENT MEMBERS OR ORDINARY MEMBERS. THERE MAY NOT BE ANY DIFFICULTY AS FAR AS THIS CATEGORY IS CONCERNED. HOWEVER, THE ASSESSEE HAD CARVED OUT ANOTHER CATEGO RY OF NOMINAL MEMBERS . THESE ARE THOSE MEMBERS WHO ARE MAKING DEPOSITS WITH THE ASSESSEE FOR THE PURPOSE OF OBTAINING LOANS, ETC. AND, IN FACT, THEY ARE NOT MEMBERS IN REAL SENSE. MOST OF THE BUSINESS OF THE APPELLANT WAS WITH THIS SECOND CATEGORY OF PER SONS WHO HAVE BEEN GIVING DEPOSITS WHICH ARE KEPT IN FIXED DEPOSITS WITH A MOTIVE TO EARN MAXIMUM RETURNS. A PORTION OF THESE DEPOSITS IS UTILIZED TO ADVANCE GOLD LOANS, ETC. TO THE MEMBERS OF THE FIRST CATEGORY. IT IS FOUND, AS A MATTER OF FACT, THAT HE D EPOSITORS AND BORROWERS ARE QUIET DISTINCT. IN REALITY, SUCH ACTIVITY OF THE APPELLANT IS THAT OF FINANCE BUSINESS AND CANNOT BE TERMED AS CO - OPERATIVE SOCIETY. IT IS ALSO FOUND THAT THE APPELLANT IS ENGAGED IN THE ACTIVITY OF GRANTING LOANS TO GENERAL PUB LIC AS WELL. ALL THIS IS DONE WITHOUT ANY APPROVAL FROM THE REGISTRAR OF THE SOCIETIES. WITH INDULGENCE IN SUCH KIND OF ACTIVITY BY THE APPELLANT, IT IS REMARKED BY THE ASSESSING OFFICER THAT THE ACTIVITY OF THE APPELLANT IS IN VIOLATION OF THE CO - OPERATIV E SOCIETIES ACT. MOREOVER, IT IS A CO - OPERATIVE CREDIT SOCIETY WHICH IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 26) IT IS IN THIS BACKGROUND, A SPECIFIC FINDING IS ALSO RENDERED THAT THE PRINCIPLE OF MUTUALITY IS MISSING IN THE I NSTANT CASE. THOUGH THERE IS A DETAILED DISCUSSION IN THIS BEHALF IN THE ORDER OF THE ASSESSING OFFICER, OUR PURPOSE WOULD BE SERVED BY TAKING NOTE OF THE FOLLOWING PORTION OF THE DISCUSSION: AS VARIOUS COURTS HAVE OBSERVED THAT THE FOLLOWING THREE COND ITIONS MUST EXIST BEFORE AN ACTIVITY COULD BE BROUGHT UNDER THE CONCEPT OF MUTUALITY; ITA NO. 2703 / CHNY /201 8 : - 8 - : THAT NO PERSON CAN EARN FROM HIM; THAT THERE A PROFIT MOTIVATION; AND THAT THERE IS NO SHARING OF PROFIT. IT IS NOTICED THAT THE FUND INVESTED WITH BANK WHICH ARE NO T MEMBER OF ASSOCIATION WELFARE FUND, AND THE INTEREST HAS BEEN EARNED ON SUCH INVESTMENT FOR EXAMPLE, ING MUTUAL FUND [AS SAID BY THE MD VIDE HIS STATEMENT DATED 20.12.2010]. [THOUGH THE BANK FORMED THE THIRD PARTY VIS - A - VIS THE ASSESSEE ENTITLED BETWEEN CONTRIBUTOR AND RECIPIENT IS LOST IN SUCH CASE. THE OTHER INGREDIENTS OF MUTUALITY ARE ALSO FOUND TO BE MISSING AS DISCUSSED IN FURTHER PARAGRAPHS]. IN THE PRESENT CASE BOTH THE PARTIES TO THE TRANSACTION ARE THE CONTRIBUTORS TOWARDS SURPLUS, HOWEVER, TH ERE ARE NO PARTICIPATORS IN THE SURPLUSES. THERE IS NO COMMON CONSENT OF WHATSOEVER FOR PARTICIPATORS AS THEIR IDENTITY IS NOT ESTABLISHED. HENCE, THE ASSESSEE FAILS TO SATISFY THE TEST OF MUTUALITY AT THE TIME OF MAKING THE PAYMENTS THE NUMBER IN REFERRED AS MEMBERS MAY NOT BE THE MEMBER OF THE SOCIETY AS SUCH THE AOP BODY BY THE SOCIETY IS NOT COVERED BY CONCEPT OF MUTUALITY AT ALL. 27) THESE ARE THE FINDINGS OF FACT WHICH HAVE REMAINED UNSHAKEN TILL THE STAGE OF THE HIGH COURT. ONCE WE KEEP THE AFORES AID ASPECTS IN MIND, THE CONCLUSION IS OBVIOUS, NAMELY, THE APPELLANT CANNOT BE TREATED AS A CO - OPERATIVE SOCIETY MEANT ONLY FOR ITS MEMBERS AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS. WE ARE AFRAID SUCH A SOCIETY CANNOT CLAIM THE BENEFIT OF SECTION 80 P OF THE ACT . CONSIDERING THE VIEW TAKEN BY HON BLE APEX COURT ON THE EXTENT OF APPLICABILITY SEC. 80P(2)(A)(I) OF THE ACT, ON A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF JALWAR SAHKARI BHOOMI VIKAS BANK LTD (SUPRA) RELIED ON BY THE LD. AUTHORISED REPRESENTATIVE, IN MY OPINION PALES INTO INSIGNIFICANCE. 7 . COMING TO THE QUESTION OF AVAILABILITY OF SUCH DEDUCTION ON INTEREST EARNED FROM DEPOSITS WITH SAVINGS BANK ACCOUNT, CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE IS THAT INTEREST INCOME RECEIVED FROM SAVINGS BANK ACCOUNT SHOULD BE TREATED DIFFERENTLY SINCE DEPOSITS THEREIN ARE FROM TEMPORARY SURPLUS INTENDED FOR USE IN ITS BUSINESS OF PROVIDING CREDIT FACILITIES T O ITS MEMBERS. EXCEPT FOR STATING THAT THE BANK ACCOUNT ON WHICH IT HAD EARNED INTEREST WAS MAINTAINED WITH SCHEDULE BANK TO ENABLE IT TO CARRY OUT DAY TO - DAY BUSINESS, NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SHOW HOW SUCH BANK ACCOUNT WA S USED FOR ITS BUSINESS. WHAT I NOTICE IS THAT INTEREST WAS EARNED WAS SAVINGS BANK ACCOUNT AND SAVING BANK ACCOUNTS ARE NOT GENERALLY USED FOR REGULAR BUSINESS ACTIVITY. ASSESSEE WAS ALSO UNABLE TO D EMONSTRATE THAT WHAT WAS PARKED BY IT IN ITS SAVING BANK ACCOUNT WAS ONLY TEMPORARY SURPLUS. COMING TO THE DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. KPTC & HESCOM EMPLOYEES CO - OP CREDIT SOCIETY LTD (SUPRA) STRONGLY RELIED ON BY THE LD. AUTHORISED REPRESENTATIVE, MONEY WHICH WAS DEPOSITED WAS SURPLUS REMAINING WITH THE CONCERNED ASSESSES SINCE THERE WERE NO TAKERS FOR LOANS. AGAINST THIS, AS MENTIONED BE ME NOTHING WAS BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT DEPOSITS IN THE SAVINGS BANK WERE MONEY MEANT FOR LENDING REMAINING SURPLUS BECAUSE THERE WERE NO ITA NO. 2703 / CHNY /201 8 : - 9 - : TAKERS. IN THE CIRCUMSTANCES, I DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON BOTH THE ISSUES RAISED BY THE ASSESSEE. GROUNDS RAISED ARE DISMISSED. 4. WE CONSIDERED THE ASSESSEE S PLEA . S INCE, THIS TRIBUNAL IN THE ASSESSEE S OWN CASE RELYING ON THE DECISION OF HON'BLE SUPREME COURT RENDERED THE ABOVE DECISION INCLUDING THE CASE LAW RELIED ON BY THE ASSESSEE AND SINC E, THERE IS NO CHANGE IN THE FACT AND LAW , FOLLOWING THE JUDICIAL DISCIPLINE, WE FOLLOW THE ABOVE ORDER AND DISMISS THE ASSESSEE S APPEAL. 5 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBE R , 2019 IN CHENNAI. SD/ - SD/ - ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( . ) ( S. JAYARAMAN ) / ACCOUNTANT MEMBER / CHENNAI, / DATED: 23 RD OCTOBER , 2019 . EDN, SR. P.S / COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR 6. / GF