Case Law Details
Brief of the Case
ITAT Bangalore held in the case of ACIT vs. M/s Tumkur Veerashiva Co-operative Bank Ltd. that from the facts, it is clearly shows that the amount spent out of members benevolent fund and members death relief fund are spent for the welfare of the members. It is also clear from the facts that these funds are created out of appropriation of profits. The Karnataka Co-Operative Society Act, 1959 mandates the Societies to appropriate certain percentage of its profit before declaration of dividends to its members but, the said two funds are not covered under the said act. Therefore, it is amply clear that the said funds are created to achieve the objects of the society through the bylaws for the welfare of the members out of the profits of the society. The Society is having liberty to create any funds for the welfare of its members within the frame work of by-laws but, the Income-tax Act does not provide for any deduction towards these expenditures under specific provisions. Further, it cannot be claimed under general category by virtue of section 37, because it is not incurred exclusively for the purpose of business and also there is an element of personal in nature, because the benefit was given to members being owners of the society. Therefore, the amount spent by the assessee for the welfare of its members out of the earmarked funds cannot be deductible as expenditure wholly and exclusively incurred for the purpose of business.
Facts of the Case
The assessee is Co-operative Bank which is engaged in the business of banking, filed its return of income for the A.Y. 2010-11 declaring total income of Rs. 2,88,16,767/-. The case was selected for scrutiny assessment by issuing statutory notice u/s 143(2) along with notice u/s 142(1) calling for details. The Assessing Officer completed the assessment u/s 143(3) and determined the total income of Rs. 3,30,70,554/- after making additions being disallowances of amount spent out of members benevolent fund amounting to Rs. 12,60,537/- and members death relief fund amounting to Rs. 4,60,000/-. Besides, the AO, disallowed the amortisation of premium paid on Govt. securities of Rs. 9,93,550/-.
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