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TMI Blog2016 (5) TMI 1620X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We further find that this Tribunal again in the case of Chattisgarh Urban Sahakari Sanstha Maryadit [ 2015 (5) TMI 1088 - ITAT NAGPUR ] held that the submissions of the assessee s counsel is that the assessee society is maintaining operational funds and to meet any eventuality towards repayment of deposit the cooperative society is maintaining some liquidated funds as short term deposits with banks. Hence adhering to the doctrin stair desises, we hold that the assessee should be granted benefit of deduction u/s 80P(2)(a)(i). Accordingly, the interest on deposits would qualify for deduction under the said section. Accordingly, we set aside the orders of authorities below and decide the issue in favour of the assessee. - SHRI MUKUL K. SH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . in Torgar s Cooperative Sales Society Ltd. Vs. ITO, 322 ITR 283 (SC) was squarely applicable to the facts of the case ? 4. Whether on the facts and circumstances of the case in law, the learned CIT(Appeals) has erred in not considering the fact that the employees are not the members of the assessee society and as such the interest income of Rs.76,125/- on loans advanced to such employees was not deductible u/s.80(2)(a)(i) of the I.T. Act, 1961? 2. Apropos Ground No.1 to 3- Treatment of interest income earned by the assessee on account of investment in Bank FDRs. Upon hearing both the counsel and perusing the records, we find that the above issues is covered in favour of the assessee by the decision of this ITAT, referred by the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and securities which surplus was not required for business purposes? The assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is whether interest on such deposits/securities, which strictly speaking accrues to the members account, could be taxed as business income under section 28 of the Act? In our view, such interest income would come in the category of income from other sources , hence, such interest income would be taxable under section 56 of the Act, as right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the members; and (ii) marketing the agricultural produce; and (d)that the surplus had arisen emphatically from marketing of agricultural produces. 19.3. In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4. While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities emerge, namely: (1) in the case of the assessee, the entire funds were utilized for the purposes of business and that there were no surplus funds; - -in the case of Totgars, it had surplus funds, as admitted before the AO, out of retained amounts on marketing of agricultural produce of its members; (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly. 5. Respectfully following the above decision of the Co-ordinate Bench, we hereby hold that the benefit of deduction u/s.80P(2)(a)(i) was rightly granted by ld.CIT(A), however, he has wrongly held that the interest income is taxable u/s.56 of the Act so do not fall under the category of exempted income u/s.80P of the Act. The adverse portion of the view, which is against the assessee, of ld.CIT(A) is hereby reversed following the decision of the Tribunal cited supra, resultantly ground is allowed. 8. We find that the ratio of above case also applies to the present case. As observed in the above case law, in this case also the submissions of the assessee s counsel is that the assessee society is maintaining operational funds and to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the Legislature has consciously used the words attributable to in contrast to the words derived from , we find that the nature of income referred to in the ground of appeal raised by the revenue is incidental to the business of the assessee of providing credit facilities to its members. Advancing loans to the employees is incidental to the carrying on of the business of the assessee of advancing credit facilities to its members. Similarly, interest on NPA is nothing but interest received from members though not regularly. It has been pointed out earlier that the assessee has reflected interest from members under two categories one is interest regularly received from members and another category is of interest from defaulting memb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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