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TMI Blog2019 (8) TMI 1878X X X X Extracts X X X X X X X X Extracts X X X X ..... this and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 4. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 3. Shri M.R. Bhagwat appearing on behalf of the assessee submitted that the issue raised by the Revenue in appeal is identical to the one adjudicated by the Tribunal in Revenue's Appeal in ITA Nos. 454 to 456/PUN/2015 for the assessment years 2007-08, 2008-09 and 2010-11 decided on 22-12-2017. The Tribunal after considering the issue has dismissed the appeal by the Revenue for the respective assessment years. 4. On the other hand Mrs. Shabana Parveen representing the Department vehemently defended the assessment order. However, the ld. DR fairly admitted that single issue raised in the appeal by the Revenue has already been considered by the Tribunal in assessee's own case. 5. Both sides heard. Orders of the authorities below perused. In ground No. 1 of the appeal the Revenue has assailed the findings of First Appellate Authority in allowing assessee's cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to be eligible for deduction under section 80P(2)(a)(i) of the Act, irrespective of the source or head under which such income would fall. The Hon'ble Apex Court noted that the interest income arising on surplus investment in short term deposits and securities, which surplus was not required for business purpose, was to be taxed under section 56 of the Act. The Hon'ble Apex Court further noted that the assessee markets the produce of its members whose sale proceeds at times were retained by it and the tax treatment of such amount was the issue before them. The Hon'ble Apex Court held that where the interest on deposits / securities, where the funds were not immediately required for business purposes, was invested in specified securities, would be taxable as income under section 56 of the Act. It further held that where the assessee society regularly invests its funds not immediately required for business purposes, interest on such investment could not fall within the expression of profits and gains of business and the same could not be held to be attributable to the activities of the society i.e. carrying on of business of providing credit facilities to its members or marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee was a liability and it was shown in the balance sheet on liabilities side. Where the interest income was earned on such funds, then the same was held by the Hon'ble Apex Court to be treated under section 56 of the Act. However, the distinction was drawn by the Hon'ble High Court of Karnataka in para 10 and it was pointed out that in the case before them, the amount which was invested in banks to earn the interest was not an amount due to any member, it was not the liability and it was not shown as liability in their accounts. In fact, the amount was in the nature of profits and gains which was not immediately required by the assessee for lending money to the members as there were no takers and hence, was deposited in the banks so as to earn interest, such interest income earned by the assessee was held to be attributable to carrying on the business and therefore, same was liable to be deducted in terms of section 80P(1) of the Act. 19. Another decision referred to by the learned Authorized Representative for the assessee is Guttigedarara Credit Co-operative Society Ltd. Vs. ITO (supra), wherein the assessee was a co-operative society engaged in the activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be assessed in the hands of assessee is the net income and not the gross income as proportionate expenditure incurred is to be allowed in the hands of the assessee. However, we are not adjudicating this issue since we have already held the assessee to be eligible for claim of deduction under section 80P(2)(a)(i) of the Act. In view thereof, we also do not adjudicate the second alternate plea raised by the assessee that it is entitled to the claim of deduction under section 80P(2)(d) of the Act. However, the assessee is not entitled to the deduction under section 80P(2)(a)(i) of the Act relating to dividend received from UTI Mutual Funds and Sundaram Finance of Rs.87,087/- and Rs.88,519/-, which are to be included as income from other sources, on which the assessee is entitled to proportionate expenditure. Similarly, the profit of Rs.25,786/- from other activities and services is not entitled to the claim of deduction under section 80P(2)(a)(i) of the Act. Accordingly, we partly uphold the order of CIT(A). In view thereof, the grounds of appeal raised by the Revenue are partly allowed." 15. The Hon'ble Punjab & Haryana High Court in CIT Vs. Nawanshahar Central Co-operative B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The Hon'ble High Court further referred to section 71 of the Gujarat Co-operative Societies Act, 1961 permitting society to invest or deposit its funds in the State Bank of India. The Hon'ble High Court held that while investment in State Bank of India was permissible under section 71 of that Act, there was no statutory obligation upon the assessee to deposit the funds as part of its business. The said provision also permitted investment of funds in any Co-operative Bank or any banking company approved for this purpose by the Registrar. The Hon'ble High Court further held that the assessee could not avail the deduction under section 80P(2)(d) of the Act in this regard. Even in the case of Mantola Co-operative Thrift & Credit Society Ltd. Vs. CIT (supra) the issue before the Hon'ble High Court was in respect of interest income earned from FDRs out of surplus funds and applying the principle laid down in Totgar's Co-operative Sale Society Ltd. Vs. ITO (supra), the Hon'ble High Court held the assessee not to be entitled to claim the deduction. 18. We find that the facts of the present case are at variance to the facts before the Hon'ble High Court of Gujarat (supra). Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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