9911796707
TMI Blog2015 (7) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... elected for scrutiny and the assessment was concluded under Section 143(3) of the Act vide order dt.11.11.2011 wherein the assessee's income was determined at Rs. 5,95,035. For Assessment Year 2010-11, the assessee filed its return of income on 30.9.2010 declaring NIL income after claiming deduction under Section 80P(2) of the Act. The case was selected for scrutiny and the assessment was concluded under Section 143(3) of the Act vide order dt.21.3.2013 wherein the income of the assessee was determined at Rs. 18,43,090. 2.2 While concluding the above assessments, the Assessing Officer allowed deduction under Section 80P(2) of the Act to the extent of Rs. 13,33,172 for Assessment Year 2009-10 in respect of the business income as assessed by him, but denied the assessee's claim for deduction under Section 80P(2)(a)(i) of the Act in respect of the interest income earned from banks amounting to Rs. 5,95,037. The Assessing Officer observed that the assessee had earned this interest income of Rs. 5,95,037 on fixed deposits kept with banks out of surplus funds and had relied on the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 earned by the appellant form the funds invested in banks is not allowable as a deduction under Section 80P(2)(a)(i) of the Act on the basis of the decision of the Hon'ble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. V. ITO (322 ITR 283) (SC) is applicable to the facts of telecommunication expenses appellant's case without appreciating that the facts of the said case are distinguishable from the facts of the appellant's case. 3. 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." 4. Grounds at S. Nos. 1 & 3 are general in nature and not being urged before us, are dismissed as infructuous. 5.1 Ground No.2, remains the only effective issue in this appeal that arises for our consideration. It was contended by the learned Authorised Representative that the assessee had placed surplus funds raised from the members for carrying on the business of providing credit facilities to its members, in fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion that the interest income earned by the co-operative societies from bank deposits cannot be regarded as income earned from business of providing credit facilities to its members and are therefore not entitled to deduction under Section 80P(2)(a)(i) of the Act. We, however, find that the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. (supra) has observed that the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (supra) was confined to the facts of that case and there was no law laid down by the Hon'ble Apex Court that interest income has to be assessed under the head 'Other Sources'. The relevant observations of the Hon'ble High Court at paras 6 to 10 of its order are extracted hereunder :- "6. From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the sum of Rs. 1,77,305 represents the interest earned form short term deposits and from savings bank account. The assessee is a co-operative society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-operative society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the aid amount idle. If they d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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." 5.3.2 Respectfully following the order of the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. (supra), we hold that the learned CIT (Appeals) erred in refusing to allow the assessee's claim for deduction under Section 80P(2)(a)(i) of the Act in respect of interest income of Rs. 5,95,037 for Assessment Year 2009-10 and Rs. 7,58,464 for Assessment Year 2010-11 earned by the assessee. The judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (supra) relied on by the learned CIT (Appeals) has been conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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