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TMI Blog2018 (1) TMI 1524X X X X Extracts X X X X X X X X Extracts X X X X ..... of law, whether the assessee-society is entitled to the benefit of Section 80P(2) on the interest earned on the deposits made by it to other cooperative banks and societies, be treated as business income or income from other sources. ITA.2752/Bang/2017 -A. Y.2011-12 : 02. The AO had reopened the assessment of the assessee for AY 2011-12 on the ground that the assessee on the ground that the assessee is not entitled to the benefit of section 80P(2) as the assessee is a cooperative society registered under the Cooperative Societies Act. Further as per the financial statements filed, the assessee is carrying on the activity of accepting the deposits and lending whereby it has income from both lending money and income from deposits. Assessee has shown the expenditure on payment of interest. The AO has wrongly held that the assessee was carrying on the banking activity and is therefore not entitled to the benefit of Section 80P(2) and therefore as held that the assessee is not eligible for deduction u/s.80P(2)(a)(i) and has also held that the assessee is not eligible for the interest earned on the deposits made with other cooperative societies /banks. 03. The assessee file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 35503689 Thus it is clear that the assessee is carrying on the activities only with the members and the loan disbursed by the assessee from the deposits accepted from the members of the assessee society. 06. It was submitted by the Ld. AR that once the CIT (A) held that if the assessee is carrying out the activities envisaged u/s.80P(2)(a)(i) as under : ( i) Carrying on the business of banking or providing credit facilities to its members, or ( ii) A cottage industry, or ( iii) The marketing of agricultural produce grown by its members, or ( iv) The purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or ( v) The processing, without the aid of power, of the agricultural produce of its members, or ( vi) The collective disposal of the labour of its members, or ( vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was 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 members, 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: 07. On the other hand the Ld DR had ably submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis that banking is the assessee s business either. 32. Mr. Bansal relied upon the judgment of the Karnataka High Court in Tumkur Merchants Souharda Credit Co-operative Ltd. v. ITO [2015] 55 taxmann.com 447 (Karn). In that case, the assessee-co-operative society provided credit facilities to its members and earned interest from short- term deposits with banks and from savings bank accounts. The interest income earned by the assessee by providing credit facilities to its members was deposited in banks for a short duration which earned interest. The question was whether this interest was attributable to the business of providing credit facilities to the members. The Division Bench held as follows : 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 co-operative society which is carrying on the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not immediately required by the assessee for lending money to the members, 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. A. P. State Co-operative Bank Ltd. reported in [2011] 336 ITR 516 (AP) ; [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. Appeal is allowed. ( The reproduction is from the original website of the Karnataka High Court). There is an important distinction. The Division Bench expressly held in paragraph 10 that interest income was attributable to the business of banking and, therefore, liable to be deducted under section 80P(2)(a)(i) of the Act. At the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned on the investment. It is also not disputed that the said interest was earned by the assessee society by making deposits in other cooperative societies / banks. What is disputed before us is that the issue is covered by the judgment of the Hon ble Supreme Court in Totgars Cooperative Sale Society (supra). In this regard it will be relevant to note that the Hon ble Supreme Court in the matter of Totgars ______ [(2010) 188 taxmann.182], at para 10 had recorded as under : - - - - - - - - From a perusal of the above, it is clear that the case before the Hon ble Supreme Court was in respect to the activities of the assessee which the assessee claims to be falling under 80P(2)(a)(i). Further the Hon ble Supreme Court in para 8 of the said judgment recorded that the assessee is a cooperative society and is providing credit facilities to its members, agricultural produce grown by its members and thereafter the Hon ble Supreme Court in para 10 had held that the interest income earned by the assessee society is not attributable to the activities mentioned in 80P(2)(a)(i) or 80P(2)(a)(iii). Whereas in the present case the core activities of the assessee is as rightly mentioned by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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