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TMI Blog2015 (10) TMI 2172X X X X Extracts X X X X X X X X Extracts X X X X ..... dit facilities and therefore, any income earned by carrying out the said activities qualifies for claim of deduction u/s 80P of the Act. 3. Alternatively and without prejudice to the above, both the lower authorities ought to have allowed expenditure incurred for earning such income and ought to have taxed only the net income instead of gross receipt as has been done. 4. The ld. CIT(A) has erred both in law and on the facts of the case in not granting standard deduction u/s 80P(2)(c) of the Act. 5. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanation and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and principle of natural justice and therefore deserves to be quashed. 6. The ld. CIT(A) has erred both in law and on the facts of the case in confirming action of the ld. AO in levying interest u/s 234B/D of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the AO in the assessment order as well as the contention raised by the AR of the appellant in the written submission. The short point have to be decided is whether the interest income earned by the appellant from other than Co-operative banks is allowable deduction u/s 80P(2)(d) of the Act. I have perused the findings of the AO in the assessment order. The AO has discussed the issue in para 4.2 to 4.4 of the assessment order. What he has observed is that the appellant had earned from various sources including interest income from other than Co-operative bank. According to the AO such interest income is not exempted u/s 80P(2)(d) of the Act. On the other hand the ld. AR made exhaustive submission as narrated in para 4.2 of this order. I have carefully considered the submission of the ld. AR along with the case laws relied upon by him. Section 80P(2)(d) of the Act stipulates that the whole of the interest or dividends derived by a co-op. society from its investments with any other co-op. society. It is also well settled that the word 'investments' is a word of very wide import. In the instant case the AO has disallowed and charged to tax on the interest income derived from othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds to FDR, v) immediate encashment of FDRs as and when needed. Therefore, he Ld. AR. pleaded that the a/c with the ICICI bank was with a motive of maximum utilization of working capital/surplus funds so as to ultimately improve credit worthiness of the appellant and was incidental to the objective of providing credit facility to its members. I have carefully considered the facts and circumstances of the case. There is no dispute that the appellant has an a/c with the ICICI bank and the surplus is deposited in FDRs which earned interest income to the appellant. The appellant did not bifurcate the interest towards FDRs and from saving a/c. The provision of the Act is very clear as pointed by the A.O. that the benefits u/s. 80P(2)(d) is for the income from the Co-operative banks. In this regards, the judicial decisions including the decisions of SC is very clear. Therefore, the interest earned from the FDRs in ICICI bank is outside the scope of deduction u/s. 80P(2)(d) and not available to the appellant. But in the interest of justice the appellant to furnish before the A.O. the bifurcation of interest income from FDRs and saving a/c and the A.O. is directed to limit the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. and accordingly the deduction under section 80 P was denied. Ld. A.R. submitted that the investments with ICICI bank were made with multiple objectives which included immediate credit of outstation cheques, saving of bank charges on clearance of outstation cheques, maximum utilization of funds on immediate credit of outstation cheques, immediate transfer of surplus fund to fixed deposits and immediate encashment of fixed deposits as and when needed. The key intention behind making the investments was optimum utilization of working capital so as to improve creditworthiness of the assessee and thus the same was incidental to the object of providing credit facility to the members. He therefore, submitted that the interest income on investments with ICICI bank is attributed to the business of the assessee and is therefore eligible for deduction under section 80 P. He further submitted that if the funds which are not immediately required to be lent to the members are invested in bank to earn interest then such interest earned on deposits is attributable to carrying on the business and hence, such interest is eligible for deduction under section 80 P. He also placed reliance on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) which has been decided by Hon'ble Karnataka High Court and therefore considering the facts of the present case in the light of the aforesaid decision of Hon'ble Karnataka High Court and in the absence of any contrary binding decision pointed out by Revenue, we are of the view that the interest earned by the assessee is eligible for deduction under section 80 P. We therefore set aside the order of A.O. In the result the ground of the assessee is allowed." 3. From perusal of the order of the co-ordinate Bench as referred above, ld. AR was able to convince us that assessee is in appeal on identical grounds vis-à-vis the grounds dealt by the co-ordinate Bench for AYs 2006-07 & 2007-08. 4. On the other hand, the ld. DR relied on the orders of lower authorities and also relied on the judgment of Hon'ble Supreme Court in the case of M/s The Totgar's Co-operative Sale Society Ltd. vs. ITO, Karnataka, 322 ITR 283 (SC).. 5. We have heard the rival contentions and gone through the facts and circumstances of the case as well as gone through the judicial pronouncements referred to herein above by ld. AR and ld. DR. As far as submissions made by ld. AR we are of the view that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, which strictly speaking accrues to the members' account, could be taxed as business income under section 28 of the Act? in our view, such interest income would come in the category of 'income from other sources', hence, such interest income would be taxable under section 56 of the Act, as rightly held by the assessing officer..." 19.1 However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon'ble Supreme Court - "(On page 286) 7............Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 and not under section 56 of the Act and, consequently, the assessee(s) was entitled to deduction under section 80P(2)(a)(i) of the Act. The argument was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.6 In overall consideration of all the aspects, we are of the considered view that the ratio laid down by the Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd (supra) cannot in any way come to the rescue of either the Ld. CIT (A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT (A) was not justified in coming to a conclusion that the sum of Rs. 9,40,639/- was to be taxed u/s 56 of the Act. It is ordered accordingly." 6. From going through the above discussion it is amicably clear that assessee's case is squarely covered by the decision of the Coordinate Benches in assessee's own case for AYs. 2006-07 and 2007-08 and further the decision of Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd (supra) will not apply on the assessee due to different facts. The Revenue has not been able to bring any material on record to prove that assessee society had retained any amount out of the agricultural sale proceeds which were payable to its members and were held as a liability in the books of assessee society for short span of time and interest income have been earned by the assessee society on such surplus funds. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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