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TMI Blog2016 (10) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to the business activity of the assessee co - operative society and hence, the assessee is eligible to claim the deduction u/s. 80P(2)(a)(ii) in respect of this income. 3 Whether the CIT(A) erred in law and on facts in not appreciating the facts of the case and also relying upon the decision of the High Court of Karnataka in M/s. Tumkur Merchants Souharda Credit Co- Operative Society in ITA No. 307 dated: 28.10.2014, and other decisions, ignoring the decision of the Hon'ble Supreme Court in the case of The Totgars Co-Operative Sale Society Ltd., [(322 ITR 283(SC)]. 3 Facts in brief relating to the impugned issues are that the assessee, a Rural Co-Operative Bank and its main activities are lending of money to its members and accepting deposits from them. It filed its return of Income for the A.Ys: 2010 - 11 & 2012 - 13 and claimed exemption u/s. 80P (2) (d) of the I T Act, 1961 (hereinafter called as an act). The A.O disallowed the same and brought to tax the declared income following the decision of the Supreme Court in the case of Totagar's Co-Operative Sale Society Ltd., vs. ITO, Sirsi, reported in 322 ITR 283 (SC). 4 Aggrieved assessee has preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sconceived and distinguishable on the facts of the case as under. M/s. Totagar's Co - Operative Sale Society, apart from providing credit facilities to members, was also in the business of marketing agricultural produce grown by its members. The sale consideration received from marketing agricultural produce from members was retained in many cases. The said retained amount payable to members was invested in short term deposit. Such amount which was retained by the society was a liability and it was shown as such, in the Balance Sheet on the liability side. Therefore to the extent, such interest cannot be said to be attributable either to Section 80P (2)(a)(i) of the Act or under section 80P(2)(a)(iii) of the Act. Therefore on the facts of the case, the Apex Court held that the AO was right in taxing the interest income, indicated above, u/s. 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of the case and can't be applied in general and it was not laying any law. The assessee has further based its grounds of appeal by taking recourse to the following decided case Laws. 1 Similar view as held by the above Apex court was taken in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso the written submissions of the assessee. The object of keeping or investing the surplus funds of a Co - Operative Society is intended to meet any unforeseen losses. The amount that is eligible for deduction under this section is the amount of profit attributable to the activity mentioned in Sec. 80P(2)(a) and the activity of the assessee falls under sub-clause (i), viz., providing credit facilities to its members. Thus it is the "Activity" that is the condition precedent for claiming deduction u/s. 80P of the Act and once it is proved beyond doubt that a particular income is "attributable" to only the activity/activities mentioned u/s. 80P(2)(a) of the Act, the whole of such income is eligible for deduction u/s. 80P of the Act. The interest income stems from the deposits made by a mandatory requirement for carrying on the activity of providing credit facilities to the members. If such deposits are not made as required as per the stature, then it would be an offence under the law and the assessee will not be in a position to carry on its business. Therefore the interest income earned from depo Industrial Co. Vs. CIT sits are incidental and inextricably linked with the activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO, i.e., Totagar's Co - Operative Sale Society and also other decisions and further held that the word "attributable to" is much wider when compared to "derived from" as held by another Apex Court decision (Cambay Electric Supply Industrial Co. Vs. CIT (1978) 113 ITR 84), squarely applies to the facts of the case and hold that the interest and dividend income earned by the assessee will qualify for deduction u/s. 80P (2) (d) of the interest and dividend earned from deposits with other co - operative banks or not. For this purpose it is necessary to go through the provisions of sec. 80P (2) (d). Sec. 80P (2) (d): In the case of Co-Op. Society engaged in, 1 Carrying on business of banking or providing credit facilities to its members, or 2 ----------------------------or 3 ----------------------------or 4 ----------------------------or 5 ----------------------------or 6 ----------------------------or 7 ----------------------------or The whole of the amount of profits and gains attributable to any one or more of such activities.................". The word "Attributable to" used in the said section is of great importance. From the above, it can be analysed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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