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TMI Blog2016 (7) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80P(2) of the Act. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's income from investment amounting to ₹ 8,42,219/- as income from other sources. The assessee had claimed the said income as income from business of banking and was eligible for deduction u/s 80P(2)(a)(i) of the I T Act. The AO placed reliance on the judgment of the Hon'ble Apex Court in the case of Totgar Cooperative Sale Society Ltd vs ITO reported in 322 ITR 283 in taking the above stand. The relevant findings of the AO in treating the interest income amounting to ₹ 8,42,219/- as 'income from other sources' read as follows: "It is also observed that apart from interest on loan it is getting interest from deposits with other banks. These cannot be categorized as providing credit facility as envisaged in 80P(4)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posit in any of the above organizations it at all there is an obligation it is to deposit in the District Cooperative societies. I therefore hold that the income from deposits in these societies is assessable under Other source. However only the net interest from deposits and investments amounting to ₹ 3,55,01,304/~ is taxed under the head "Income from other sources". This is determined at ₹ 827510/- worked out in the following manner (3550130 x 100 or 19.69% of the total income of ₹ 42,02,695/- of ₹ 82,7510/- 180317783 Other income of ₹ 6,25,736/-included in miscellaneous income is also assessed under other source. However, only the net income of only 14,709/- is assessed. Total income from oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g credit facility to its members or marketing of agricultural produce to its members. In the instant case although the appellant has tried to explain that the investment made by the assessee's cooperative society was statutorily required but no such breakup of investment or the exigencies by which it was required statutorily to put the surplus money in investments with the entities mentioned by the Assessing Officer in his assessment order has been established. Rather, the facts suggests that it is nothing but the surplus idle money which have been put for investment and interest income have been earned therefrom. In such a situation the Assessing Officer has correctly applied the ratio of the Apex Court pronounced in the case of Totaga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income assessed as I come from other sources (C) x (D) i.e (E) ₹ 8,27,510/- 7.1 From the above, it is clear that a major portion of the investment income was interest receipt from other cooperative societies. Section 80P(2(d) provides for deduction in respect of any income by way of interest or dividend derived by a cooperative society from its investment in another cooperative society. Therefore, interest income received from other cooperative societies are eligible for deduction u/s 80P(2)(d) of the act and cannot be assessed as "income from other source." 7.2 As regards the interest from treasury and banks, we find on identical facts, the Cochin Bench of the Tribunal in the case of the Muttom Service Cooperative Bank Ltd in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the discretion of the bank is one of the activities of the banking as per the Banking Regulation Act. Since the assessee co-operative society is in the 4 ITA No.372/Coch/2010 business of banking the investment in the state promoted treasury small savings fixed deposit certificate scheme is a banking activity, therefore, the interest accrued on such investment has to be treated as business income in the course of its banking activity. Once it is a business income, the assessee is entitled for deduction u/s 80P(2)((a)(i). therefore, this Tribunal is of the opinion that the judgment of the Larger Bench of the apex Court in Karnataka State Cooperative Apex Bank (supra) is applicable to the facts of this case. By respectfully following the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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