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TMI Blog2024 (12) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 2nd December, 2021 passed by the Income Tax Appellate Tribunal, SMC Bench, Ahmedabad (for short "the Tribunal") in ITA No. 1085/Ahd/2019 for the Assessment Year 2016-17 proposing the following substantial questions of law: "(i) Whether on the facts and circumstance of the case and in law, the Hon'ble Tribunal erred in deciding that the interest income earned on deposits with Nationalized banks by the Appellant does not fall into the ambit of deduction under Section 80P (2) (a) (i) of the Income Tax Act, 1961 ? 2.1 The brief facts of the case are that the Appellant -Assessee which is a Co-operative Society was engaged in the business of providing credit facilities to its members. The Appellant -Assessee filed its return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fixed deposit placed with the nationalized bank. 4. The appellant-assessee therefore preferred an appeal before the Tribunal challenging the order passed by the CIT (Appeals) disallowing the interest income of Rs. 16,80,845/- received by the assesseee from the nationalized bank. 5. The Tribunal however, considering the rival contentions of both the sides and after perusal of the order of the CIT (Appeals) referred to and relied upon the decision of this Court in case of State Bank of India (SBI) [Supra] as well as the decision of the Apex Court in case of Mavilayi Service Co-operative Bank Limited Vs. CIT reported in (123 taxmann.com 161) wherein the Apex Court has held that the primary agricultural credit societies are entitled to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) and Tribunal ought to have allowed the interest income earned by the assessee from the nationalized bank on the operational funds. 7. Having heard the learned advocate for the appellant-assessee, it would be germane to refer to the provision of Section 80P & 80P (2) (a) (i) as under :- 80P. [Deduction in respect of income of co-operative societies. " (1) Where, in the case of an assessee being a co-operative society,the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: (a) in the case of a cooperative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of the agricultural produce of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-society earned interest on funds which were not required for business purpose at the given point of time. Therefore, in the facts and circumstances of the case, the court was of the view that, such interest income falls in the category of "Other income" which had rightly been taxed by the Department under section 56 of the Act. 13. In the opinion of this court, in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall in any of the categories mentioned under section 80P (2) (a) of the Act. In the case of Totgars Co-operative Sale Society (supra), as rightly submitted by the learned counsel for the respondent, the court was dealing with two kinds of activities: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of agricultural produce of its members. The court has held that when the assessee society provides credit facilities to its members, it earns interest income. The interest which accrues on funds not immediately required by the assessee for its business purposes and which has been invested in specified securities as "investment" are ineligible for deduction under section 80P (2) (a) (i) of the Act. For the above reasons, this court respectfully does not agree with the view taken by the Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. v. Income Tax Officer Ward-V, Tumkur (supra) that the decision of the Supreme Court in Totgars Co-operative Sale Society (supra) is restricted to the sale consideration received from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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