9911796707
TMI Blog2015 (7) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to as 'the Act'). The case was selected for scrutiny and the assessment was concluded under Section 143(3) of the Act vide order dt.5.3.2013, wherein the income of the assessee was determined at Rs. 18,48,220. While doing so, the Assessing Officer observed that the assessee had earned interest income of Rs. 26,16,800 from banks on fixed deposits that were kept out of surplus funds, brought the same to tax under the head 'Income from Other Sources' and denied the assessee's claim for deduction under Section 80P(2)(a)(i) of the Act. In this regard, the Assessing Officer placed reliance on the decision of the Hon'ble Apex Court in Totagars Co-op Sales Society 322 ITR 283 (SC). The Assessing Officer allowed NIL deduction under Section 80P(2) of the Act as the assessee's business income assessed by him was a loss. In this manner, the total income of the assessee was determined at Rs. 18,48,200 after setting of losses under the head 'Business'. 2.2 Aggrieved by the order of assessment for Assessment Year 2010-11 dt.5.3.2013, the assessee preferred an appeal before the CIT (Appeals), Mysore. The learned CIT(A) observed that the assessee is a credit co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative Sale Society Ltd. (supra) and held that interest earned on short term deposits in banks made out of amounts not immediately required for lending to members constituted income attributable to the activity of providing credit facilities to its members by a co-operative society and, therefore, was eligible for deduction under Section 80P(2)(a)(i). 4. Without prejudice to the above, the learned CIT (Appeals) ought to have taken note of rule 28 of the Karnataka Co-operative Societies Rules, 1960 and the order passed by the Registrar of Co-operative Societies thereunder requiring credit co-operative societies to maintain not less than 3% of the deposits received from members in savings bank account and not less than 10% of such deposits in banks and accordingly, ought to have held that the interest received by the appellant on short term deposits with Syndicate Bank made in compliance with statutory provisions to enable it to carry on business constituted its income from the business of providing credit facilities to the members. 5. The learned Commissioner (Appeals) ought to have taken cognizance of Rule 23 of the Karnataka Co-operative Societies Rules, 1960 which requires c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant before him. 14. The assessment of the appellant having been made by the Assessing Officer in the status of an Association of Persons, the learned Commissioner (Appelas) ought to have annulled the same. 15. The learned Commissioner (Appeals) failed to take note of the facts of the case and the weight of evidence on record. 16. The order of the learned Commissioner (Appeals), in so far as it is against the appellant, is opposed to law and facts of the case. 17. The learned Commissioner (Appeals) erred in passing the order in the manner he did. 18. For these and other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed." 4. The Grounds at S.Nos.13 to 18 being general in nature and not being urged before us, are dismissed as infructuous. 5. In the Grounds at S.Nos.10 to 12, the assessee denies itself liable to be charged interest under Section 234B and 234C of the Act. The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala (252 ITR 1) and we, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome earned by the assessee was not from short term deposits and hence the ratio of the said judgment is not applicable to the facts of the assessee's case. 6.3.1 We have heard the rival submissions on the issue before us and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. We find that both the authorities below have placed reliance on the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (supra) and held that the interest income earned by co-operative societies from bank deposits cannot be regarded as income earned from the business of providing credit facilities to its members and thereby, are not entitled to deduction under Section 80P(2)(a)(i) of the Act. However, 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 that there was no law laid down by the Hon'ble Apex Court that interest income has to be assessed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to' and not the expression 'derived from'. It cannot be disputed that the expression 'attributable to' is certainly wider in import than the expression 'derived from'. Had the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount 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." 6.3.2 Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Tu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
