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TMI Blog2019 (12) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding interest expenses as well. Learned CIT-DR is equally fair that the instant netting issue sought to be raised at the assessee s behest, be restored to the Assessing Officer for appropriate computation. We therefore direct the Assessing Officer to compute the impugned section 80P(2)(a)(i) disallowance in assessee s case going by the netting method within three effective opportunities of hearing. - I.T.A No.240/Kol/2018 (Assessment Year: 2014-15) - - - Dated:- 18-10-2019 - SHRI J. SUDHAKAR REDDY, AM AND SHRI S. S. GODARA, JM Appellant by: Dr. A. K. Nayak, CIT-DR Respondent by: Shri Anil Kochar, Advocate ORDER Per Shri S. S. Godara: This Revenue s appeal for assessment year 2014-15 arises against the Commissioner of Income Tax (A) - 10, Kolkata dated 30.11.2017 passed in Case No.227/CIT(A)-10/Wd.-35(3)/14-15/16-17/Kol involving proceedings u/s 143(3) of the Income Tax Act, 1961 (in short the Act ). Heard both the parties. Case file perused. 2. The Revenue s sole substantive grounds raised in the instant appeal seeks to reverse the CIT(A) ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows :- Other than the judgment of the jurisdictional High Court, as followed by the Hon ble Jurisdictional ITAT, I find that there are a catena of judgments wherein the case of Totgars Co-operative Sale Society Ltd. (supra) has been clearly distinguished on facts, and it has been held that the interest earned by assesses., such as the one at hand, namely a Credit Co-operative Society that carries on the business of providing credit facilities to its members and earned interest by deposits made in nationalized banks, would be eligible for the deduction envisaged under Sec 80 P of the Income tax Act, 1961. The Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. in ITA No.307 of 2014 dt.28.10.2014, wherein their Lordships after considering the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (supra), have held that the interest earned by a co-operative society engaged in the business of providing credit facilities to its members has to be regarded as income eligible for deduction under Section 80P(2) of the Act. The Revenue, being aggrieved, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by any of the parties before this Court. Following this the appeal of the Revenue had been dismissed. 3.1. The ITAT 'C' Bench, Kolkata, in the case of S.E., S.E.C E. Co. Railways Employees' Cooperative Credit Society Ltd., Kolkata vs. A.C.I.T., Circle-28, Kolkata in ITA No. 1693/Ko1/2012 for Assessment Year 2008-09, order dt. 30/10/2014 at para 7.2 to 7.5 held as follows: 7.2. Considering the above we find that this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in assessee's own case. In this regard we would like to place reliance upon the. decision of the Hon'ble Apex Court in the case of CIT vs Excel Industries 358 ITR 295 wherein the principle of consistency has been reiterated. Hence when the issue has been decided by the Jurisdictional High Court no convincing reason has been pointed to take a different view, any deviation is not permitted. 7.3. Now we come to the case laws relied upon by the Id. CIT(A). As regards the decision of the Hon 'ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respectfully following the same we direct the AO to allow the deduction as claimed by the assessee u/s 80P(2)(a)(i) of the Act. 4. We have given our thoughtful consideration to the rival contentions. The Revenue s case is that the Assessing Officer had rightly disallowed the assessee s impugned section 80P(2)(a)(i) deduction claimed since its interest income had been derived from fixed deposits with nationalized bank here only. It quotes Hon ble jurisdictional high court s decision in [2017] 390 ITR 524 (Calcutta) CIT vs. South Eastern Railway Employees Co-op Credit Society Ltd. holding such an income to be not eligible for the impugned deduction. The assessee on the other hand quotes the tribunal s coordinate bench s order in its own cases in Assessment Year 2012-13 and 2013-14 dated 18.10.2017 and 01.03.2018; respectively. It fails to dispute that the said two orders in its favour nowhere take into consideration the hon ble jurisdictional high court s decision (supra). We find that this tribunal s yet another coordinate bench s decision in ITA No.1868/Kol/2017 ACIT vs. Central Bank of India Employees Co-operative Society Ltd. decided on 30.11.2018 holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputed factual position that similar issue arose before the Commissioner of Income Tax (Appeal) in relation to the assessment year 1998-99 to 2002-2003 as also for the assessment year 1995-96 and 1996-97- Then again in relation to the assessment years 2003-04 and 2004-05 a similar point arose. The Learned Tribunal in relation to the assessment years 1998-99 to 2002-03 by order dated 10.11.2006 in ITA Nos.840 to 844/Kol/2006 and again by order dated 29.12.2006 in relation to assessment years 2003-04 and 2004-05 has deleted the disallowance made in those assessment years and it was held that the interest earned by the assessee cooperative society from its short term and fixed deposits with the banks and other institutions were disallowed on the ground that this income was not business profit of the assessee society but was income from other sources. The Ld. tribunal has also has held that income from investment in banks and other financial institutions is the business income of the assessee society and it is eligible to get deduction under Section 80P(2)(a)(i). The Tribunal has overruled the decisions rendered against the assessee in relation to assessment years 1995-96 and 1996-97 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Hon'ble jurisdictional high court s answers Revenue s substantial question of law as follows:- 7. We have not been impressed by the first submission advanced by Mr.Saraf. If the Multi-State Cooperative Societies At, 2002 does not provide for the consequences of an omission to act in accordance with section 63 thereof, that is no valid reason why the mandate of law should not be followed. When law requires a business to be done in a particular manner the business can be done only in that manner or not at all. 8. We are also not impressed by the submission advanced by Mr. Khaitan that the interest earned by the assessee from the investments made, to the extent of a sum of ₹ 99 lakhs during the assessment year 2003-004 and a sum of ₹ 1.12 crores during the assessment year 2004-05, should be attributable to the business of providing credit facilities to it members Section 80P, it is true provides that in the case of a cooperative society engaged n carrying on the business... providing credit facilities to its members .... the whole of the amount of the profits and gain of business attributable to any such activity shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude profits and gains. This sub-section is an inclusive provision. Parliament has included specifically business profits into the definition of the words income . Therefore, we are required to give a precise meaning to the words profits and gains of business mentioned in section 80P(2) of the Act. In the present case, as stated above, the assesseesociety regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression profits and gains of business . Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its embers or marketing of the agricultural produce of its member. When the assesseesociety provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under section 80P(2)(a)(i) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s) for its business purposes and which have been only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion appearing in sub-section (1) of section 80P, that only an income referred to in subsection (2) was deductible, was not taken into account. The subsection (2) provides for only the income attributable to the business of advancing credit facilities to its members. Income arising from any other source including investment of capital if not immediately required to be lent to the member was not contemplated. The assessee cannot claim any deduction which is not provided for by the section. Moreover the judgment in the case of Totgar s Cooperative Sale Society Ltd. (supra is a binding authority for the preposition that interest income arising on the surplus invested in short-term deposits and securities... would come in the category of income from other sources. Realising his difficulty, MR. Khaitan submitted that the assessee was under the impressions that the income arising out of investments is also attributable to the business of providing credit facilities to its members and on that basis, the assessee did not separately provide for the expenditure incurred for the purpose of earning ₹ 99 lakhs during the assessment year 2003-04 and ₹ 1.12 crores during the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest paid to the members for the purpose of earning the sums of ₹ 99 lakhs and 1.2 crores on account of interest from investments. Such interest shall be deducted from the expenses of eligible business. Consequent increased amount of profits of eligible business as discussed above shall be the amount of deduction available to the assessee under section 80P. 8. We deem it appropriate to conclude in these peculiar facts and circumstances that assessee s impugned interest income derived from investment is not eligible for u/s 80P(2)(a)(i) deduction per se. Its reliance on learned co-ordinate bench s decision in its own case dated 01.03.2018 (supra) is not very well founded since going against the hon'ble jurisdictional subsequent judgment on the very issue. We therefore treat learned co-ordinate bench s earlier order to be per inquriam as per the CIT vs. B.R. Constructions (1993) 202 ITR 222 (AP)(F.B) since not taking into consideration the law settled by hon'ble jurisdictional high court. The Revenue therefore succeeds in its sole substantive ground in principle. 9. This leaves us with the equally significant aspect of computation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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