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TMI Blog2016 (7) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... interest to the tune of Rs. 15,36,248/-. After debiting the various expenses the assessee has claimed deduction u/s.80P(2)(a)(i) amounting to Rs. 10,41,382/-. The AO, therefore, asked the assessee to justify its claim of deduction u/s.80P(2)(a)(i) in respect of the interest income received from non cooperative banks as the said interest income is not attributable to the business of the assessee that of providing credit facilities to its members. According to the AO such income fall under the head "income from other sources" u/s.56 and not u/s.28 of the I.T. Act. 3. The assessee filed detailed submissions justifying its claim of deduction u/s.80P(2)(a)(i). However, the AO was not satisfied with the explanation given by the assessee. Relying on the decision of Hon'ble Supreme Court in the case of Totgar's Cooperative Sale Society Vs. ITO reported in 322 ITR 283 the AO held that income from interest of Rs. 15,36,248/- is not eligible for deduction u/s.80P(2)(a)(i). 4. In appeal the Ld.CIT(A) by following the decision of Hon'bvle Supreme Court in the case of Totgar's Cooperative Sale Society Ltd. (Supra) upheld the action of the AO. 5. Aggrieved with such order of the CIT(A) the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e referring to the decision of Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO reported in 55 taxmann.com 447 submitted that the Hon'ble High Court in the said decision has held that the assessee credit cooperative society which has earned interest from banks other than co-operative banks is entitled to deduction u/s.80P(2)(a)(i) of the I.T. Act, 1961. He also relied on the following decisions : 1. Mahesh Nagari Sahakari Patsanstha Ltd. - ITA No.2180/PN/2013 order dated 13-05-2015 2. Catholic Urban Cooperative Credit Society Ltd - ITA No.32/PN/2014 order dated 29-12-2014. 3. Gutigedera Credit Cooperative Society Ltd. reported in 60 taxmann.com 215 (Karnataka High Court) 4. Quepem Urban Cooperative Credit Society reported in 377 ITR 272 (Bombay High Court) He accordingly submitted that the order of the CIT(A) be set aside and the order of the AO be restored. 7. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 8. I have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. I ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the said interest is its business income eligible for deduction u/s.80P(2)(a)(i) of the I.T. Act. I find the Tribunal in assessee's own case in the immediately preceding assessment year has also decided identical issue and the appeal filed by the Revenue has been dismissed. The relevant observation of the Tribunal from para 6 onwards read as under : "6. At the time of hearing, it was a common point between the parties that an identical controversy has been considered by the Pune Bench of the Tribunal in the case of another co-operative society, namely, ITO vs. Niphad Nagari Sahakari Patsanstha Ltd. vide ITA No.1336/PN/2011 dated 31.07.2013 wherein the issue has been held in favour of the assessee after considering similar objection, which has been raised by the Assessing Officer in the present case. The learned Representative for the assessee has furnished a copy of the said order of the Tribunal dated 31.07.2013 (supra) and has also pointed out that the Tribunal has duly considered the decision of the Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd. (supra), which has been relied upon by the Assessing Officer in the present case. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2)(a)(i), i.e. income of a cooperative society engaged in carrying on the business of banking is eligible for deduction. 11.1 We find the Ahmedabad Bench of the Tribunal in the case of M/s. Jafari Momin Vikas Cooperative Credit Society Ltd. (Supra) after considering the decision of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) has observed as under : "17. We have carefully considered the submissions of the either party, perused the relevant records and also the case law on which the learned AR had reservation in it's applicably in the circumstances of the assessee's case. 18. It was the stand of the learned CIT (A) that the entire income was not exempt and that it was to be examined as to whether there was any interest income on the short term bank deposits and securities included in the total income of this society which has been claimed as exempt. According to the CIT (A), a similar issue to that of the present one was dealt with by the Hon'ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd v. ITO (supra). The issue before the Hon'ble Court for determination was whether interest income on short term bank depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in short term deposits; (b) that the surplus funds arose out of the amount retained from marketing the agricultural produce of the members; (c) that assessee carried on two activities, namely, (i) acceptance of deposit and lending by way of deposits to the members; and (ii) marketing the agricultural produce; and (d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3 In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4 While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities emerge, namely: (1) in the case of the assessee, the entire funds were utilized for the purposes of business and that there were no surplus funds; - in the case of Totgars, it had surplus funds, as admitted before the AO, out of retained amounts on marketing of agricultural produce of its members; (2) in the case of present assessee, it did not carry out any activity except in providing credit facilities to its members and that the funds were of operational funds. The only fund availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), the assessee co-operative society was to provide credit facility to its members and market the agricultural produce. The assessee is not in the business of banking. Therefore, this Tribunal is of the opinion that the judgment of the Apex court in Totgar's Co-operative Sale Society Ltd (supra) is not applicable in respect of the cooperative society whose business is banking. Admittedly, the assessee has invested funds in state promoted treasury small savings fixed deposit scheme. Since Government of India has withdrawn India Vikas Patra, as a small savings instrument, funds invested at 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various decisions cited before us. The only dispute to be decided in the grounds raised by the assessee is that whether the interest amounting to Rs. 25,01,774/- earned by the assessee on short term deposits with banks has to be treated as "income from other sources" u/s.56 or the assessee is eligible for deduction u/s.80P(2)(a)(i). We find the AO following the decision of Hon'ble Supreme Court in the case of The Totgar's Cooperative Sale Society Ltd. (Supra) treated the interest earned from such short term deposits as "income from other sources" and brought the same to tax which has been upheld by the CIT(A). 10. It is the case of the assessee that in view of the decision of Hon'ble Karnataka High Court in the case of Tumkur Merchants Souhards Credit Cooperative Ltd. (Supra) the interest earned from such short term deposits with bank is entitled to deduction u/s.80P(2)(a)(i). We find the Hon'ble High Court of Karnataka after considering the decision of Hon'ble Supreme Court in the case of Totgar's Cooperative Sale Society Ltd. (Supra) held that the interest earned by such cooperative societies on short term deposits with scheduled banks is eligible for deduction u/s.80P(2)(a)( ..... 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. 8. 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 receipts fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 member's, 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., [2011] 200 Taxman 220/12 taxmann.com 66. 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. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order:" 11. No doubt, a contrary decision to this effect was also cited by the Ld. Departmental Representative where the Hon'ble Delhi High Court in the case of Mantola Cooperative Thrift & Credit Society Ltd. (Supra) has held that where the assessee cooperative ..... X X X X Extracts X X X X X X X X Extracts X X X X
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