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TMI Blog2016 (8) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... f CIT(A)-XX, Kolkata, relating to AY 1997-98 to 2001-2002. The Assessee has filed C.O.No.36 to 40/Kol/2011 challenging the correctness of the order of CIT(A)-XX, Kolkata, for AY 1996-97 to 2000-01, in so far as the said order rejecting the claim of the Assessee that initiation of reassessment proceedings u/s.147 of the Income Tax Act, 1961 (Act), by the AO for the aforesaid assessment years was invalid. Since common issues are involved in all these appeals, they were heard together and we deem it convenient to pass a common order. 2. The only common issue involved in the appeal by the revenue is as to whether the CIT(A) was justified in allowing deduction u/s.80P(2)(a)(i) of the Act on interest income earned from transactions with non-members and nominal members and interest income earned from non-SLR (Statutory Liquidity Ratio) investments, i.e., investments made not owing to any compulsion of Reserve Bank of India regulations to maintain Statutory Liquidity Ratio (SLR). The relevant provisions of Sec.80P(2)(a)(i) of the Act reads thus: Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of 8 % on such investment in bonds, the AO estimated the interest income from non-SLR investment and held that it was not eligible for deduction u/s 80P. 4. Aggrieved by the orders of AO, the Assessee preferred appeal before CIT(A). Before CIT(A) it was submitted that in ITA Nos. 28,29, 30/Kol/2008, the Hon ble ITAT D Bench, Kolkata by order dt. 29.02.2008 for A.Ys.2002-03 to 2004-05 the Tribunal held that similar interest income disputed by the AO as not eligible for deduction u/s 80P(2) (a)(i) of the Act, was eligible for such deduction. The following were the relevant observations of the ITAT in the aforesaid order: 9. On consideration of the rival submissions, we find force in the counter arguments of the Ld. A.R. factually as well as legally. The case laws cited by him are analysed hereunder ;- Mehsana District Central Co-Opt. Bank Ltd. vs. ITO [2001) 251 ITR 522 (SC) Held, (i) that the assessee was entitled to deduction u/s. 8P(2)(a)(i) of the Income-tax Act, 1961, in respect of the interest earned from funds utilised for the statutory reserves. (ii) That provision of safe deposit vaults was part of the ordinary banking business of a bank as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction under this section. As both factually as well as legally the counter arguments of the Ld. A.R. are appeared to be sound and reasonable backed by the aforesaid case laws, we do not have any hesitation to reject the grounds of the appeal. Accordingly, the grounds in appeals for all the three years are hereby rejected. 5. The CIT(A) after considering the above submissions of the Assessee held that the Assessee was entitled to deduction u/s.80P(2)(a)(i) of the Act on the interest income in question. The following were the relevant observations of the CIT(A): 13. I have perused the assessment order and the relevant appellate orders. I have also considered the submissions of the appellant and the material on record. I find that the issues raised in this appeal regarding allowability of deduction u/s 80P in respect of interest income from non-members and nominal members, and, that on non-SLR investment are covered by the orders of the appellate authorities in appellant's own case for different assessment years. In particular, the issues are covered by the decision of the jurisdictional ITAT. In view of the facts of the case, and, the principles laid down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 2000-01. The same was rejected by the CIT(A). Aggrieved by the order of the CIT(A) in rejecting the claim of the Assessee, the Assessee has filed Cross-objections in the appeals filed by the Revenue for AY 1996-97 to 2000-01. 8. The grounds of appeal raised by the revenue in all its appeals are identical. For the sake of ready reference, we give below the grounds raised by the Revenue in the appeal relating to AY 1996-97. 1.On the facts and in the circumstances of the case, the Ld. CIT(A) was perverse in holding that every income of the Co-operative Bank is eligible for deduction u/s. 80P (2)(a)(i). 2. That the Ld. CIT(A) erred in interpreting Sec.80P(2)(a)(i) to mean that every income earned from non-members of the Co-operative Bank is eligible for deduction u/s. 80P. 3. That the learned CITCA) was perverse in the sense that the principle of mutuality cannot be extended to non-members of the society. 4. That the learned CIT(A) erred in understanding the provisions of mutuality, and extending it to the general public who are not members of the co-operative. While no one can make profit from oneself on the principle of mutuality, the learned CIT(A) faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature has not given deduction to all banks but to such co-operative banks to promote target area and group for up-liftment and in such situation, activities other than such activities not be given the benefits of deduction unless the income is in conformity with the aims and objectives of the West Bengal Co-operative Societies Act , 1973 and bye-laws of the society itself. 10. That the learned CIT(A) erred in routinely applying the decisions in the cases of Mehsana District Central Co-operative Bank Ltd. Vs ITO (2001) 251 ITR 522 (SC); CIT vs. Baroda Peoples Co-operative Bank Limited [2006} 280 ITR 282 (Guj.) and Milli Co- operative Urban Bank Ltd. Vs. ITO [2007] 291 ITR (AT) 163 (Hyd.) to the facts of the case while ignoring the recent decisions of the Hon'ble Supreme Court ,in the case of Totgars' Co-operative Sale Society Ltd-Vs- Income Tax Officer, Karnataka, [2010), 188 Taxman 282. 11. That the learned CIT(A) erred in ignoring the decisions in U.P. Co-operative Cane Union Federation Ltd. Vs. CIT 237 ITR 574 (All.) as well as Assam Co-operative Apex Marketing Society Ltd. Vs. CIT 201 ITR 332 while granting tax exemption to income earned from non-members. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deduction u/s 80P(2(a) (i) of the Act on interest income arising from Savings Bank A/C. and Recurring Deposit(RD) Account which was made by the Assessee from and out of the RD Account made by its members with the Assessee. The Revenue took the view that as per the decision rendered by the Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Ltd vs ITO 322 ITR 283 (SC) interest earned on deposits had to be regarded as income under the head Income from other sources and therefore deduction u/s 80P(2)(a)(i) of the Act ought not to have allowed to the assessee as only the whole of the amount of profits and gains of business attributable to carrying on the business of banking or providing credit facilities to its members is allowed as deduction under the said provision. On further appeal by the Assessee before the Tribunal, the Tribunal held as follows: 6. At the time of hearing of this appeal the ld. Counsel for the assessee filed before me a copy of the decision rendered by ITAT, Kolkata Bench in the case of S.E., S.E.C. E.Co. Railways Employees Co-operative Credit Society ltd. Vs ACIT in ITA NO.1693/Kol/2012 order dated 30.10.2014. In the aforesaid case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance made in those assessment years and it was held that the interest earned by the assessee cooperative society from its short term and fixed deposits with the bans and other institutions were disallowed on the ground that this income was not business profit of the assessee society but was income from other sources. The Ld.Tribunal has also held that income from investment in banks and other financial institutions is the business income of the assessee society and it is eligible to get deduction under Section 80P(2)(a)(i). The Tribunal has overruled the decisions rendered against the assessee in relation to assessment years 1995-96 and 1996-97 on the same issue in relation to subsequent years. It was found by the Tribunal while affirming the order of the Commissioner of Income Tax (Appeal) that there is no change in the facts and circumstances of this case and it was held that the assessee was eligible for deduction under Section 80P(2)(a)(i) on interest on investment amounting to ₹ 1,18,07,645/- in this assessment year also. Since the Tribunal found that this decision of the Tribunal was followed by CIT(A) there is no reason to take a different view. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and since funds created by such retention were not required immediately for business purposes, it invested same in specified securities and earned interest income. In these circumstances the Hon ble Apex Court had held that interest earned would come in category of Income from other sources taxable u/s 56 of the Act and would not qualify for deduction as business income u/s 80P(2)(a)(i). From the above it is amply evident in the present case the assessee has not retained any amount due to its members and instead of paying the same had invested the same and earned interest. Thus this case law is not applicable on the facts of the present case. 7.4. As regards the decision of Hon ble Patna High Court in the case of Bihar Rajya Sahkari Bhoomi Bikash Co-op.Bank Ltd. (supra) the same is also not applicable to the facts of the present case. In that case the question was the treatment of interest earned on provident fund and rental income as attributable to banking business and this qualifying for deduction u/s 80P(2)(a)(i) of the Act. 7.5. In the background of the aforesaid discussion and precedent we hold that the issue is squarely covered in favour of the assessee by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inly 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.' 10. 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 is used by the legislature whenever they intended to gather ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 its 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 v. Andhra Pradesh State Co-operative Bank Ltd. 336 ITR 516(AP). 13. 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 .. 13. In view of the aforesaid judicial pronouncements, we are of the view that the objections raised by the revenue in the grounds of appeal before us, cannot be sustained. Respectfully following the precedent available on the issue, we confirm the orders of the CIT(A). 14. As far as the cross-objections of the Assessee are concerned, since we have upheld the order of the CIT(A) on merits, we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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