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TMI Blog2022 (10) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of the word profits and gains of business attributable to the activities of the assessee in a way that it has been considered when the assessee is in the business of providing credit facilities and earning interest from its members, the basic premise of that fund arises from the said business activity of the assessee society only. In the absence of that business, there would not have been any question of having surplus fund. Once that surplus fund is accumulated, those are given on investment for short term basis in nationalized banks and interest earned therefrom. This activity is, therefore, held as not alien or foreign to the primary business activity of the assessee society. Set aside the order of ld. NFAC and direct the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, it is ascertained that out of total interest received of Rs. 54,89,421/-, an amount of interest of Rs. 1,98,659/- was received from the banks other than Co-operative society and other Co-operative banks. The details are as under: 1. IDBI Bank Saving Account Rs. 35,788/- 2. Kottak Mahendra Bank Saving Account Rs. 88,349/- 3. Yes Bank Saving Account Rs. 74,522/- Total Rs. 1,98,659/- 4. That before the AO it was contended by the assessee that as per provisions of section 80P(2)(a)(i) of the Act, income earned from the activity which is attributable to the business of the assessee, then deduction is allowable under the said provision. In this case, it is undisputed that the assessee is a credit co-operative society and the business is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(a)(i) of the Act. In this case, therefore, the interest on investments earned from Nationalized banks by the assessee society was therefore held to be not allowed as deduction u/s 80P(2)(a)(i) of the Act and the addition was confirmed in the hands of assessee. 5. The ld. DR supported the orders of subordinate authorities. Per contra, the ld. AR submitted that the provisions of section 80P(2)(a)(i) are absolutely clear that the deduction will be allowed on the whole of the amount of profits and gains of business attributable to the business activities of assessee and in this case, the assessee falls within section 80P(2)(a)(i) of the Act i.e. carrying on the business of banking or providing credit facilities to its members. The contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-members and from the banks other than the co-operative banks or societies. It is the contention of the Department that the provision being unambiguous, it is only the income earned through the business activity from the members of the co-operative society that such deduction is allowable, if it is from outside the members, such income would not fall within purview of said provision. On the other hand, the assessee has contended that there is no dispute that the assessee is a credit co-operative society providing credit facilities to its members. So, therefore, the amount of money earned is an extension of its business activity and therefore attributable to the business of the assessee society and thus, an allowable deduction. 7. I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Society Ltd. (supra). No direct judgment from the Hon ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). I, therefore, overturn the impugned order on this score and allow the deduction. 8. In the aforesaid decision, the Tribunal relied on the decision of Hon ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (2015) 230 Taxman 309 (Kar) allowing deduction u/s 80P(2)(a)(i) of the Act on interest income in the identical facts and circumstances. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment Bank Ltd. 389 ITR 68 and the Hon ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s. 80P(2)(a)(i) of the Act. However, the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon ble Telangana and Hon ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [(2017) 396 ITR took a view that such interest income is attributable to the activities of the soci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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