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TMI Blog2015 (7) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... dit Co-operative Society Ltd. (supra). We find that the facts of the case on hand to be similar to the facts of the aforesaid case decided by the Hon'ble High Court of Karnataka. Thus we hold that the assessee is entitled to deduction under Section 80P(2)(a)(i) of the Act in respect of interest income earned on fixed deposits with banks out of surplus funds from business, 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 earned form investment in fixed deposits with banks and government securities out of surplus funds from business is allowed. - Decided in favour of assessee. - I.T.A. Nos.100 & 101/Bang/2015 - - - Dated:- 29-6-2015 - Shri N.V. Vasudevan and Shri Jason P. Boaz, JJ. For the Petitioner : Shri V. Srinivasan, C.A. For the Respondent : Shri N. Balakrishnan, JCIT (D.R) ORDER Per Shri Jason P. Boaz, A.M. : These appeals by the assessee are directed against the common order of the Commissioner of Income Tax (Appeals), Mysore dt.17.10.2014 for As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of assessment for Assessment Years 2009-10 dt.11.11.2011 and 2010-11 dt.21.3.2013 respectively, the assessee preferred separate appeals before the CIT (Appeals), Mysore. The learned CIT(A) observed that the assessee is a credit cooperative society that carries on the business of providing credit facilities to its members and it was entitled to deduction under Section 80P(2)(a)(i) as per the decision of the Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot in ITA No.5006/2013 dt.5.2.2014 and allowed the deduction claimed by the assessee for Assessment Year 2010-11. However, while doing so, the learned CIT(A) observed that the assessee has earned interest income on fixed deposits kept with banks amounting to ₹ 5,95,037 for Assessment Year 2009-10 and ₹ 7,58,464 for Assessment Year 2010-11 and this interest was not earned from members to whom loans were advanced. The learned CIT (Appeals) held that the assessee cannot be allowed deduction in respect of interest income earned from the banks as the same was covered by the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits was in order. The learned Authorised Representative submitted that 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 judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (supra) as the said income is to be brought to tax under the head Other Sources . The learned Authorised Representative, however, submitted that the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. in ITA No.307/2014 dt.28.10.2014, after considering the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (supra) have held that the interest income earned by a co-operative society engaged in the business of providing credit facilities to its members has to be regarded as income eligible for deduction under Section 80P(2) of the Act. 5.2 The learned Departmental Representative submitted that the issue decided by Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Cooperative Society Ltd. (supra) was different and the said judgment was not applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub-section (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 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to its members by a co-operative society 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. Totagars 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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