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TMI Blog2015 (3) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 995 - KARNATAKA HIGH COURT), we hold that the assessee is entitled to deduction under section 80P(2)(a)(i) of the Act in respect of the interest income earned on fixed deposit and government securities as well, as it forms part of the business income earned by the assessee and the same is not to be taxed under the head “ Other Sources.” In this view of the matter, the deduction claimed by the assessee under section 80P(2)(a)(i) of the Act in respect of interest of 3,90,246 earned from investments in fixed deposits and government securities out of surplus funds from business is allowed. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Hon'ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. (supra). 3. Aggrieved by the impugned order of the CIT (Appeals) - II, Bangalore dt.2.7.2013, both the assessee and revenue are in appeal before us in respect of the findings of the learned CIT (A) that have gone against them. These cross appeals are disposed off, hereunder :- ITA No.1361/Bang/2013 - Revenue's appeal for Assessment Year 2010-11. 3.1 The grounds raised by revenue in its appeal are as under :- " 1. The orders of the authorities below inso far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT (Appeals) is not justified in holding that the appellant is not entitled to the deduction under Section 80P(2)(a)(i) of the Act in respect of the sum of ₹ 3,90,246 being the interest received by the appellant on government securities under the facts and in the circumstances of the appellant's case. 3. Without prejudice to the right to seek waiver with the Hon'ble CCIT /DG, the appellant denies itself liable to be charged to interest under Section 234B of the Act, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the assessee is a co-operative society, which provides credit facilities. Section 80P of the Act deals with the deduction of income of a society. In the case of any assessee being a co-operative society, the whole of the amounts of profits and gains of business attributable to any of other activities referred to sub-section (2) of section 80P shall be deducted in computing the total income of the assessee. In other words, the said income is not taxable. It is a benefit given to the co-operative society. Section 80P(4) was introduced by Finance Act, 2006 with effect form 1.4.2007 excluding the said benefit to a co-operative bank. The said provision reads as under :- " (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 ( 10 of 1949) ; (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as under :- "1. The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT (Appeals) is not justified in holding that the appellant is not entitled to the deduction under Section 80P(2)(a)(i) of the Act in respect of the sum of ₹ 3,90,246 being the interest received by the appellant on government securities under the facts and in the circumstances of the appellant's case. 3. Without prejudice to the right to seek waiver with the Hon'ble CCIT / DG, the appellant denies itself liable to be charged to interest under Section 234B of the Act which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 4. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs." 8. Ground Nos.1 and 4 of the assessee's appeal are general in nature and not being u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deduced, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely : (a) in the case of co-operative society engaged in - (i) carrying on the business of banking or providing credit facilities toits members, or (ii) xxx (iii) xxx (iv) xxx (v) xxx (vi) xxx (vii) xxx the whole of the amount of profits and gains of business attributable to any one or more of such activities." 7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. Vs. CIT, Gujarat-II reported in ITR Vol. 113 (1978) Page 842 at page 93 as under : " As regards the aspect emerging from the expression 'attributable to' occurring in the phrase 'profits and gains attributable to the business of' the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety and is liable to be deducted from the gross total income under Section 80P of the Act. 9. 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-Co-operative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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