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TMI Blog2018 (8) TMI 1844X X X X Extracts X X X X X X X X Extracts X X X X ..... h interest income either from nationalized or cooperative bank will not change nature and character of the income. On perusal of the provision of section we observe such deduction is pertinent to the operational income earned by the cooperative society from the activities in which it is engaged and not the other income which accrues to the society in the form of interest from investment of surplus funds with the cooperative bank. After considering the facts and legal finding, we do not find any merit in the appeal of the assessee, therefore, the same is dismissed. However as decided in the various decision of the Co-ordinate Benches of ITAT Ahmedabad we direct the assessing officer to allow pro rata expenses in respect of interest earned from deposit held with nationalized bank to the assessee for computing the deduction u/s. 80P after examining/verification and affording adequate opportunity to the assessee. Therefore, the appeal of the assessee is partly allowed for statistical purposes. - ITA No. 1992/Ahd/2017 1313, 1314, 1295, 1296/Ahd/2018 - - - Dated:- 29-8-2018 - Shri Rajpal Yadav And Shri Amarjit Singh, JJ. Shri V.K. Singh For The Appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) in respect of aforesaid interest income derived from investment in fixed deposit with commercial banks and cooperative banks. The assessing officer observed that exemption u/s. 80P(2)(a)(i) is available on income which is attributable to business operation of the assessee co-operative society and the interest earned on the fund invested with the commercial bank and cooperative bank is not operational income from providing credit facilities to its members. Consequently, he has treated the interest income of ₹ 1,33,22,271 as income from other sources u/s. 56 of the act and disallowed the claim of deduction u/s. 80P on the aforesaid interest income. 5. Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has sustained the disallowance after placing reliance on the decision of jurisdictional Hon ble High Court of Gujarat in the case of SBI vs. CIT (2016) 72 taxmann.com 64 6. During the course of appellate proceedings before us, the contention was raised by the assessee that interest income earned from surplus amount invested in fixed deposit maintained with co-operative bank is to be allowed deduction u/s. 80P(2)(d) of the act. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017) 83 taxmann.com 140 (Kar) Principal CIT vs. Tatagars Co-operative Sale Society on identical issue and facts is reproduced as under:- Admittedly and undoubtedly, the assessee is a co-operative Society engaged mainly in the activity of marketing of agricultural produces grown by its members. The assessee co-operative society also accepts deposits from its members and provides credit facility to its members, runs Kirana Stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods carriage, etc. [Para 10] The assessment years involved in the instant appeals are assessment years 2007-08 to 2011-12. The bone of contention is that the deduction under section 80P(2) is now claimed by the assessee under section 80P(2)(d) and not under section 80P(2)(a) of the Act. The reason is that now the investments and deposits after the Supreme Court's decision against the assessee in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC), the assessee herein has shifted the deposits and investments from Schedule Banks to Co-operative Bank and such Cooperative Bank is essentially a Co-operative Society a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The words used in section 80P(4) are significant. They are: 'The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society .' The words 'in relation to' can include within its ambit and scope even the interest income earned by the assessee, a co-operative society from a Co-operative Bank. This exclusion by section 80P(4) even though without any amendment in section 80P(2)(d) is sufficient to deny the claim of the assessee for deduction under section 80P(2)(d). The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural credit society. [Para 14] The amendment of section 194A(3)(v) excluding the Co-operative Banks from the definition of 'Co-operative Society' by Finance Act, 2015 and requiring them to deduct tax at source under section 194A also makes the legislative intent clear that the cooperative banks are not that specie of genus co-operative society, which would be entitled to exemption or deduction under the special provisions of chapter VIA in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from its business operations, which made it ineligible for deduction under section 80P of the Act. [Para 23] In view of the aforesaid, the appeal filed by the revenue deserves to be allowed.: [Para 24] In the light of the above facts and legal findings we consider that the income by way of interest earned by deposit or investment of idle or surplus does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus clause (d) of section 80P(2) of the act would not apply in the facts and the circumstances of the present case. The assessee has earned interest income on surplus funds deposited with nationalized bank and the cooperative Bank and the same is not attributable to business operation of the assessee co-operative society as interest earned on the fund invested with the commercial bank is not operational income from providing credit facilities to its members. We consider that earning of such interest income either from nationalized or cooperative bank will not change nature and character of the income. On perusal of the provision of section we observe such deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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