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TMI Blog2018 (11) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... CHATURVEDI, AM : 1. These two appeals filed by the assessee are emanating out of separate orders of Commissioner of Income Tax (A) 7, Pune dt. 19.07.2017 for A.Ys. 2012-13 and 2013-14. 2. Before me, at the outset, both the parties submitted that though the appeals filed by the assessee are for different assessment years but the facts and issues involved in both the appeals are identical except the assessment years and the amounts involved and therefore the submissions made by them while arguing one appeal would be equally applicable to the other appeal also and thus, both the appeals can be heard together. In view of the aforesaid submissions of both the parties, I, for the sake of convenience, proceed to dispose of both the appeals by a consolidated order but however, proceed with narrating the facts in ITA No.2537/PUN/2017 for assessment year 2012-13. 3. The relevant facts as culled out from the material on record are as under :- Assessee is a Co-operative Society engaged in the business of providing credit facilities to its members. Assessee electronically filed its return of income for A.Y. 2012-13 on 20.09.2012 declaring total taxable income of Rs.Nil. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit facilities to its members, it was in the nature of income from other sources which was required to be taxed u/s 56 of the Act and it was also ineligible for deduction u/s 80P(2)(a)(i) of the Act. The assessee was show caused and asked to explain as to why deduction claimed on such interest income not be disallowed. The submissions made by the assessee were not found acceptable to the AO. He thereafter considered the interest income earned aggregating to ₹ 4,39,469/- as income from other sources u/s 56 of the Act and denied the claim of deduction u/s 80P(2)(a)(i) of the Act. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who upheld the order of AO by observing as under : 6.2 The identical issue has been decided by the ITAT Bangalore in case of Sri Basaveshwara Credit Co-operative Society Ltd. (supra.) and the Delhi High Court in case of Mantola Co-Operative Thrift Credit Society Ltd. (supra.) and the Hon'ble Supreme Court in the case of Totgar Co-operative Sale Society Ltd. (supra.). These decisions are squarely applicable to the case of the appellant. The decision of Laxmi Narayan Nagar Sahakari Pat Sanstha Vide ITA No.604/P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully following the Delhi High Court decision and Supreme Court decision which is directly on the issue involved on interest from the bank is to be treated as income from other sources and appellant is not eligible for 80P the appellant has received interest of ₹ 4,39,469/- from the banks which cannot be characterized as income from business of providing credit facility to members of the society. Therefore, action of the Assessing Officer in treating ₹ 4,39,469/- as income from other sources is upheld and ground No.1, 2 and 3 of the appeal are dismissed. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal. 9. Before me, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A). Ld.A.R. further submitted that the issue in the present case is directly covered by the decision of Pune Tribunal in the case of Chandraprabhu Gramin Bigar Sheti Sahkari Patsantha Maryadit Vs. ITO (ITA No.1576/PN/2016 dt.26.08.2016.) She placed on record the copy of the aforesaid decision. She further submitted that the facts of the appeal for the year under consideration are identical and to the case of Chandraprabhu Gramin Bigar Sheti Sahkari Patsantha Maryadit (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such interest income has to be treated as income from business in view of the plethora decisions of the Coordinate Benches of the Tribunal. 9. I find an identical issue had come up before the Tribunal in the case of Chandraprabhu Gramin Bigar Sheti Sahkari Patsantha Maryadit Vs. ITO, Pandharpur vide ITA No.1352/PN/2016 order dated 29-07-2016 for A.Y. 2010-11. After considering the various decisions made by both the sides, I have decided the issue in favour of the assessee by holding that the assessee is entitled to deduction u/s.80P(2)(a)(i) on the interest income kept with various banks other than cooperative banks/societies. The relevant observation of the Tribunal from para 8 onwards read as under : 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 have also considered the various decisions cited before me. I find the assessee in the instant case is a cooperative society and has earned interest income of ₹ 15,36,248/- from its investment with different banks which it claimed as deduction u/s.80P(2)(a)(i) of the I.T. Act, 1961. The AO, following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 learned Departmental Representative has neither controverted the above matrix and nor referred to any contrary decision and therefore for the sake of maintaining consistency we follow the decision of our co-ordinate bench in the case of Niphad Nagari Sahakari Patsanstha Ltd. (supra) and uphold the plea of the assessee. However, before parting, we may reproduce hereinafter the following p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved 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 Coop. Sale Society Ltd v. ITO (supra). The issue before the Hon'ble Court for determination was whether interest income on short term bank deposits and securities would be qualified as business income u/s 80P (2)(a)(i) of the Act. 19. The issue dealt with by the Hon'ble Supreme Court in the case of Totgars (supra) is extracted, for appreciation of facts, as under: What is sought to be taxed under section 56 of the Act is the interest income arising on the surplus invested in short term deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 available with the assessee was deposits from its members and, thus, there was no surplus funds as such; - in the case of Totgars, the Hon'ble Supreme Court had not spelt out anything with regard to operational funds; 19.5 Considering the above facts, we find that there is force in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r's Co-operative Sale Society Ltd (supra) is not applicable in respect of the co-operative 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 cooperative 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 Court in Karnataka State Co- operative Apex Bank (supra) is applicable to the facts of this case. By respectfully following the judgment of the Apex court in Karnataka State Co-operative Bank (supra), the order of the Commissioner of Income-tax(A) is upheld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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)(i). The relevant observation of the Hon ble High Court from para 6 onwards read as under : 6. From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the sum of ₹ 1,77,305/- represents the interest earned from short-term deposits and from savings bank account. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 society was engaged in providing credit facilities to its members earns interest income on surplus funds deposited as fixed deposits, such interest income would be assessable as income from other sources and thus not eligible for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal against the order of Tribunal in the case of Chandraprabhu Gramin Bigar Sheti Sahkari Patsantha Maryadit (supra), and that the higher Judicial Forum has set aside / stayed the aforesaid order. Further, Revenue has neither pointed out any distinguishing feature in the facts of the present case and in the case of Chandraprabhu Gramin Bigar Sheti Sahkari Patsantha Maryadit (supra), I therefore, relying on the decision of the Tribunal in Chandraprabhu Gramin Bigar Sheti Sahkari Patsantha Maryadit (supra), and for similar reasons hold that assessee is entitled to deduction u/s 80P(2)(a)(i) of the Act on the interest income on fixed deposits kept with nationalized banks and private sector banks. Thus, the ground of the assessee is allowed. 12. In the result, the appeal of assessee in ITA No.2537/PUN/2017 for A.Y. 2012-13 is allowed. 13. As far as the grounds raised in appeal in ITA No.2538/PUN/2017 for A.Y. 2013-14 is concerned, in view of the submissions of both the parties that the facts of the case in the year being identical to the facts and issue of the case in ITA No.2537/PUN/2017 for A.Y. 2012-13, I therefore for the reasons stated herein while disposing of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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