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TMI Blog2015 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... or For the Respondent : Shri V.G. Ginde Sushil V Modak ORDER Per R. S. Padvekar, JM:- In this appeal, the assessee has challenged the impugned order of the Ld. CIT(A), Kolhapur dated 06-12-2013 for the A.Y. 2010-11. 2. The first issue is in respect of treatment the interest income of ₹ 30,84,097/- and ₹ 32,077/- received by the assessee Co-operative Society treating the same as an income from other sources as against the business income and this issue arises from Ground Nos. 1, 2 and 3. The facts which revealed from the record are as under. The assessee society is a Co-operative Credit Society registered under Maharashtra Co- operative Societies Act, 1960. The main object of the assessee society is to provide credit facility to its members. It was noticed by the Assessing Officer that the assessee has claimed the deduction u/s. Sec. 80P(2)(a)(i) of the Income-tax Act in respect of the interest received from the SBI to the extent of ₹ 30,84,097/- as well as saving bank interest of ₹ 32,077/- from Sindhudurg District Central Co-operative Bank Ltd. (SDCCL). In the opinion of the Assessing Officer the interest income received by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which is having the trapping of the banking business. He submits that decision in the case of Totgar's Co-operative Sale Society (supra) has been considered by the ITAT, B Bench, Pune in the case of ITO, Ward-1(4), Nashik Vs. Niphad Nagari Sahakari Patshanshta Ltd., Nashik ITA No. 1336/PN/2011 order dated 31-07-2013. The Ld. Counsel also filed the copy of the said decision which is placed on record. He pleaded for allowing the grounds taken by the assessee. The Ld. DR supported the order of the Ld. CIT(A). 4. In this case it is not in dispute that the assesse is a Co-operative Credit Society which is engaged in providing credit facilities to its members. We find that the decision of the Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society (supra) has been considered in the case of another credit society i.e. Niphad Nagari Sahakari Patshanshta Ltd., Nashik (supra) by the ITAT, Pune and it is held as under: 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here 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 que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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