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TMI Blog2016 (12) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Revenue directed against the appellate order of the Ld. Commissioner of Income Tax (Appeals), Mangaluru ( CIT(A) for short), dated 25/02/2016, for the assessment year 2012-13, the appellate proceedings before the ld.CIT(A) arising from the assessment order dated 20/2/2015 passed by the Ld. assessing officer (in short the AO ) u/s 143 (3) of the Income-tax Act, 1961 (herein after the Act ). 2 . The Revenue has raised the following grounds of appeal in the Memo of Appeal filed with the Income Tax Appellate Tribunal, Panaji (hereinafter called the tribunal ):- 1. The order of the Ld CIT(A) is against law and facts of the case. 2. The Ld. CIT(A) erred in deleting the additions made treating the interest income earned from investments made in other banks / from non-members as other sources as per the prevailing provisions of 80P(2)(d) of I.T.Act, 1961. 3. The Ld.CIT(A) erred in allowing the deduction claimed u/s. 80P(2)(a)(i) treating the interest income earned from investments made in Nationalized and Scheduled Banks, through the basic nature of income earned does not fall under section 80P(2)(a)(i). 4. The Ld. CIT(A) erred in holding the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted facts which emerge are, certain sums of interest were earned from short-term deposits and from savings bank account. The assessee is a Co-operative Society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. 8. In this regard, it is necessary to notice the relevant provision of law i.e. section 80P(2)(a)(i):- 8OP Deduction in respect of income of co- operative societies:- (1) Where, in the case of an assesses being a co-operative society, the gross total income includes any income referred to in sub-section (2) there shall be deducted, 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 bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, the society cannot keep the said amount idle. If they deposit this amount, in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities 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. The ld.CIT(A) observed that the facts of the instant appeal are identical to the cases discussed above. The assessee is a co-operative society providing credit facilities to its members and deposits are also accepted from members. The assessee claimed that surplus funds were invested in banks and earned interest income. It is claimed as normal business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit facilitates to its members was also in the business of marketing of agricultural produce grown by its members while in the case of the assessee, the assessee is only providing credit facilities to its member. The Ld. counsel for the assessee relied upon the decision of the Coordinate Bench of this tribunal in the case of ITO v. M/s. Vyavasaya Seva Sahakari Bank Ltd . In ITA No.124/PAN/2016 decided on 21/09/2016 wherein the Tribunal has allowed the claim of the assessee by observing as under:- 4. On appeal, Commissioner of Income Tax (Appeals) allowed the claim of the assessee by observing as under:- I have gone through the submissions made by the assessee and also the assessment order of the AC. The decision quoted by the assessee that of Honorable High Court of Karnataka in the case of Tumkur Merchants Souhardha Credit Cooperative Society, the A P High Court s decision in the case of CIT vs. A.P.State Cooperative Bank Ltd., are all in favour of the assessee, whereas the AC relied more on Supreme Court s decision in the case of Totgar s Co-operative Society. This can t be accepted because the facts are different in this case. The Karnataka High Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06/02/2015) it was held that the restrictive interpretation given to co-operative society u/s.80P(2)(d) was not warranted. The ITAT, Bangalore Bench, in this case, through a detailed reasoning, came to the conclusion that the interest and dividend earned by the assessee from co-operative bank was eligible for deduction u/s 80P(2)(d) of the Act. In conclusion it is held that the interest income and dividend earned on deposits and investments made with other cooperative banks/society are fully deductible under section 80P(2)(d) from the income liable to tax. 5. The Departmental Representative relied on the order of the Assessing Officer. He could not point out any specific error in the above quoted order of the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act after following the principles laid down in the decision of the Hon ble Bombay High Court at Panaji in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT in Tax Appeals No. 22-24/2015 dated 17/04/2015, as also the decision of the Hon ble Karnataka High Court in the case of Tumkur Merchants Souh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. v. COMMISSIONER OF INCOME TAX , 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 attributable to the business of the specified industry (here generation and distribution of electricity) on which the Ld. Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression attributable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought, 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 the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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