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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 ..... ) of the Act vide order dt.22.2.2013 wherein the income of the assessee was determined at Rs. 42,34,310 as against NIL income declared, due to the Assessing Officer denying the assessee's claim for deduction under section 80P(2)(a)(i) of the Act on the ground that since the assessee is a co-operative bank, the provisions of section 80P(4) of the Act are attracted. The Assessing Officer also observed that the assessee had claimed deduction under section 80P(2)(a)(i) of the Action respect of a sum of Rs. 3,90,246 which represents interest earned on fixed deposits and government bonds that was kept therein by the assessee out of surplus funds and has invoked the judgement of the Hon'ble Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., reported in 322 ITR 283. 2.2.1 Aggrieved by the order of the assessment for Assessment Year 2010-11 dt.22.2.2013, the assessee preferred an appeal before the CIT (Appeals) - II, Bangalore. The learned CIT(A) observed that the assessee is a credit co-operative society that carries on the business of providing credit facilities to its members. The learned CIT(A) held that the assessee cannot be regarded as a co-operative bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the costs." Revenue's appeal is disposed off as under :- 4. Ground No.1 of Revenue's appeal is general in nature and therefore no adjudication is called for thereon. 5.1 The Grounds at S.Nos.2 to 4 of Revenue's appeal relate to the only issue for consideration, i.e. whether the assessee is entitled to deduction under section 80P(2)(a)(i) of the Act and whether the restriction in the provisions of section 80P(4) are applicable or not in the assessee's case. The learned CIT(A) in the impugned order has held that the assessee is entitled to the deduction under section 80P(2)(a)(i) of the Act, placing reliance on various decisions of the Tribunal (supra) as it cannot be regarded as a co-operative bank. The learned CIT(A) held that the assessee merely carries on the business of providing credit facilities to its members and is thus entitled to the deduction. 5.2 At the outset of the hearings, the learned Authorised Representative brought to our attention the judgement of the Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha in ITA No.5006/2013 dt.5.2.2014. In the said judgement, their Lordships have held that the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable for tax. A co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural and rural development bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e. the purport of this amendment. ;therefore, as the assessee is not a co-operative bank carrying on exclusively banking business and as it does not possess a license from Reserve Bank of India to carry on business, it is not a co-operative bank. It is a co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society. Therefore, there was no error committed by the assessing authority. The said order was not prejudicial to the interest of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer in charging the said interest. The Assessing Officer is, however, directed to recompute the interest chargeable under section 234B of the Act, if any, while giving effect to this order. 10.1 Ground No.2 is the only ground of appeal for our consideration and relates to the exemption claimed under section 80P(2)(a)(i) of the Act in respect of interest income of Rs. 3,90,246 derived by the assessee from investments in fixed deposits and Govt. Securities out of its surplus funds. In the impugned order, the learned CIT(A) held that the assessee is not entitled to the said deduction in respect of the interest income in the light of the judgement of the Hon'ble Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., reported in 322 ITR 283 as the said income has to be taxed under the head "Other Sources". In the course of hearing, the learned Authorised Representative placed before the bench the decision of the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd., in ITA No.307 of 2014 dt.28.10.2014. In this judgement their Lordships have held as under at paras 6 to 10 thereof :- "6. From the aforesaid fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression 'derived from' been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General, it has used the expression 'derived from', as, for instance, in section 80J. In our view, since the expression of wider import, namely, 'attributable to', has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity." 8. Therefore, the word 'attributable to' is certainly wider in import than the expression 'derived from'. Whenever the legislature wanted to give a restricted meaning, they have used the expression' derived from'. The expression 'attributable to' being of wider import, the said expression issued by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A co- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. ; the said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT III, Hyderabad Vs. Andhra Pradesh State Co-operative Bank Ltd., reported in (2011) 200 Taxman 220/12. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order. Appeal is allowed." 6.2 Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. (supra), we hold that the learned CIT(A) was not correct in refusing to allow the assessee the deduction claimed u/s.80P(2)(a)(i) in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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