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TMI Blog2024 (5) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has received interest from other co-operative bank on its investments. In this regard, the Ld.CIT(A) has not given benefit of deduction u/s. 80P(2)(d) as per the judgment of the Jurisdictional High Court 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] . The revenue authorities have considered the entire interest as income from other sources u/s. 56 and no cost of expenses u/s. 57 has been allowed to the assessee. While calculating the income, the net income should be considered as taxable income after reducing the expenditure incurred towards earning of such income. Therefore relying on the judgment of Totgars Co-operative Sales Society Ltd. [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] assessee is eligible for claim of its cost of funds on the entire interest income. Reliance is also placed on the judgment of The West Coast Paper Mill Employees Souhardha Credit Co-op. Ltd. [ 2023 (8) TMI 1110 - ITAT BANGALORE] . Accordingly, the assessee is directed to provide the details of cost of funds before the assessing officer. Therefore for allowing cost of funds, we are remitting this issue to the assessing officer for determining the cost of funds for earning interest income. Appeals of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding credit facilities to its members. Accordingly he partly allowed the appeal of the assessee. Aggrieved, the assessee is in appeal before the ITAT. 6. The ld. AR has filed written synopsis and financial statements. The written synopsis is as under:- "4) The expression 'profits and gains of business' in section 80P is wider in scope and encompasses not only the income under the head 'Profits and gains of business or profession' but also other incomes which have some relationship with the business, though not arising directly from the carrying on of the business. Further, the term 'gain' is of wider importance than the word 'profit'. Thus, the expression 'profits and gains' in section 80P(2) also includes other items of income (as covered by 'gains') which have some relationship with the business of banking, even though they do not fall under the head of business income. 5) In the case of credit co-operative societies, generally, they don't carry out any activity except in providing credit facilities to its members and the funds are operational funds. The only fund available with the pure credit societies is deposits from its ..... 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. 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 Commissioner Of Income-Tax ill, Hyderabad Vs. Andhra Pradesh State Cooperative Bank Ltd., reported in (2011)200 TAXMAN 220/12. 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". In the case of the Appellant, the amount which was invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction under Sec.80P(2)(d) of the Act. The Hon'ble Chennai ITAT in the case of Income Tax Officer v M/s Irula Snake Catchers Industrial Co-operative Society Limited [TS- 5808-ITAT-2022(Chennai)-0] held that co-operative banks are first cooperative society and thereafter they are converted into banks. 9) Without prejudice to the above and assuming without admitting that the interest received from co-operative banks is not eligible for claiming deduction u/s 80P(2)(d), it is submitted that the proportionate expense incurred in connection with the interest received ought to have been allowed as a deductible expenditure u/s 57. An identical claim was made before Hon'ble Supreme Court in the case reported as Totgars Co-operative Sale Society Ltd. Vs. ITO (2010) 188 taxmann.com 282 and the Hon'ble Supreme Court, had restored the question raised by the Assessee to the file of Hon'ble High Court of Karnataka. Consequent thereto, the Hon'ble High Court of Karnataka has passed the order in the case reported in 58 taxmann.com 35 and held that the Tribunal was not right in coming to the conclusion that the interest earned by the Assessee is an income from other sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. AR submitted that in fact, this amount which is in the nature of profits and gains, was not immediately required by the Appellant for lending money to the members, as there were no takers. The said interest and dividend income from the bank is therefore attributable to carrying on the business and therefore it is eligible to be deducted in terms of Section 80P(2)(a)(i) of the Act. Further, the assessee submitted that the investments were made in co-operative banks which are co-operative society. Therefore the interest received on such investments are to be allowed for deduction u/s. 80P(2)(d). The amount was kept idle because there was no takers and amount was invested into the bank for earning interest. Here the assessee's motive is to earn interest income on such idle fund. Therefore, the interest income received on such investments from co-operative bank is not attributable to main business of the appellant, hence needs to be assessed as 'income from other sources". The issue regarding the word "attributable" has been discussed elaborately by the Hon'ble Apex Court in the case of M/s Totgar's Co-operative Sales Society (2010) reported in [2010] 188 Taxman 282 (SC) where it i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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