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TMI Blog2017 (11) TMI 1558X X X X Extracts X X X X X X X X Extracts X X X X ..... head "income from other sources" instead of "income from business" - Held that:- It has not been disputed that interest income earned by the assessee were from deposits placed by it in banks. The contention of the assessee is that such interest should be considered only as part of its business income since the deposits were placed for meeting the requirements of statutory reserves under the Multi State Co-operative Societies Act, 2002. No doubt, in the case of Totgar's Co-operative Sale Society Ltd. (2010 (2) TMI 3 - SUPREME COURT) had held that interest received on deposits created out of sale proceeds received from the members not immediately disbursed to such members, was to be considered under the head "income from other sources". However, in the case before us, admittedly, the deposits were not out of sale proceeds from the members of the assessee-society. The Revenue has not rebutted the claim of the assessee that deposits on which interest was earned was for meeting investment requirement on statutory reserves under the Multi State Co-operative Societies Act, 2002. Clearly it was out of compulsions of business that the deposits were placed by the assessee in the banks. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bank. 4. Per contra, the learned authorised representative strongly supporting the order of the Commissioner of Income-tax (Appeals) submitted that the assessee was not a co-operative bank as per Part V of the Banking Regulations Act, 1949. As per the learned authorised representative, it was a multi State co-operative society registered under section 7 of the Multi State Co-operative Societies Act, 2002 and such registration was given by the Department of Agriculture and Co-operation of Government of India. The contention of the learned authorised representative was that mere acceptance of bank deposits and advancing loans to members would not convert the assessee to a co-operative bank, unless and until it was so declared by the Reserve Bank of India. 5. We have perused the orders and heard the rival submissions. Certificate dated March 16, 2004 issued by the Office of Central Registrar of Co-operative Societies under the Department of Agriculture and Co-operation of Government of India clearly states that the assessee is a multi State co- operative society registered under section 7 of the Multi State Co-operative Societies Act, 2002. It is not disputed that the earnings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business ; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,- (i) where such co-operative society is a consumers' co-operative society, one hundred thousand rupees ; and (ii) in any other case, fifty thousand rupees. Explanation.-In this clause, 'consumers' 'co-operative society' means a society for the benefit of the consumers ; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income ; (e) in respect of any income derived by the co-operative society from the letting of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t bank. The hon'ble Karnataka High Court in the case of CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot [2014] 369 ITR 86 (Karn) has clearly held that for a co-operative society to be considered as a co-operative bank, it was necessary that the Reserve Bank of India should have given such a classification to the said co-operative society. A similar view was taken by the hon'ble Gujarat High Court in the case of CIT v. Jafari Momin Vikas Co-op. Credit Society Ltd. [2014] 362 ITR 331 (Guj). In the circumstances, we are of the opinion that section 80P(4) had no application in the case of the assessee. We do not find any reason to interfere with the order of the Commissioner of Income-tax (Appeals) in this regard. Appeal of the Revenue is thus dismissed. 6. In the cross-objection of the assessee, the grievance raised is on the treatment of interest under the head income from other sources instead of income from business . The Assessing Officer, while doing the assessment, had considered interest earned by the assessee on bank deposits under the head income from other sources . The assessee had earned interest of ₹ 51,93,347 on bank deposits. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety. The Revenue has not rebutted the claim of the assessee that deposits on which interest was earned was for meeting investment requirement on statutory reserves under the Multi State Co-operative Societies Act, 2002. Clearly it was out of compulsions of business that the deposits were placed by the assessee in the banks. Earning of interest therefrom, in our opinion, could only be treated as income from its business. It is also interesting to have a look at the Circular dated November 2, 2015 (supra) issued by the Central Board of Direct Taxes which is reproduced hereunder : New Delhi, 2nd November, 2015 Subject : Interest from Non-SLR Securities of Banks-reg. It has been brought to the notice of the Board that in the case of Banks, field officers are taking a view that, 'expenses relatable to investment in non-SLR securities need to be disallowed under section 57(i) of the Act as interest on non-SLR securities is income from other sources'. 2. Clause (id) of sub-section (1) of section 56 of the Act provides that income by way of interest on securities shall be chargeable to Income-tax under the head Income from other sources , if, the income is not ..... 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