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TMI Blog2016 (6) TMI 1499X X X X Extracts X X X X X X X X Extracts X X X X ..... treated the interest on FDR with banks as income from other sources, not eligible for deduction under section 80P(2) (a)(i). On an appeal before ld. CIT(A), the deduction under section 80p (2) (A) (i) was allowed, which was reversed by this Tribunal subsequently. 2. Aggrieved by the order of this tribunal, the assessee filed an appeal before Hon'ble jurisdictional High Court. Hon'ble Delhi High Court, vide order dated 27/08/2014 in ITA No. 569/2013, held vide para 11& 12, as under:- "11.at this stage, Ld. counsel for the appellant-SEC has pointed out that the Commissioner of income tax (appeals) had decided the issue in their section 57 (3) that is availability of expenditure having exes with earning of the said income was not examined. This ground/argument was an alternative. Ld. counsel for the revenue submits that this question may be remitted to the Ld. Commissioner of income tax (appeal) as he had not decided the said question having allowed the appeal in entirety holding that the entire interest was exempt under this section 80P. We appreciate the stand taken by the Ld. counsel for the revenue and accordingly the matter is remitted on the said aspect to the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83/Del/13 "1. That on the facts and circumstances of the case, the CIT(A) erred in law in not holding that the reassessment order dated 30.12.2011 passed by the assessing officer under section 147/143(3) of the Income-tax Act, 1961 ("the Act") was without jurisdiction, bad in law and void ab initio. 1.1 That on the facts and circumstances of the case, the CIT(A) erred in law in not holding that the statutory pre-conditions prescribed under section 147 of the Act for assumption of jurisdiction by the AO, having not been satisfied, initiation of reassessment as well as the impugned reassessment order was impermissible in law. 2. That on the facts and circumstances of the case, the CIT(A) erred in law in holding that interest income of Rs.97,28,027 earned by the appellant on funds deposited with commercial and co-operative banks was not eligible for deduction under section 80P of the Act. 2.1. That on the facts and circumstances of the case, the CIT(A) erred in law in upholding the conclusion of the assessing officer that (a) the appellant was not engaged in "business of banking" and (b) that the aforesaid interest income was assessable under the head "income from other source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2008-09 is against the consequential order passed by the lower net CIT (A) pursuant to the order of Hon'ble Delhi High Court in assessee's own case which are as under: ITA No. 2828/Del/15 1. That the CIT(A) erred on facts and in law in holding that the appellant is not eligible to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961 ('the Act'), on the interest income of Rs.29,299 from investments made in Delhi State Co-operative Bank (' DSCB '), on the ground that DSCB was not a member of the appellant society. 1.1 That the CIT(A) erred on facts and in law in holding that since DSCB is a cooperative bank not entitled to deduction under section 80P in terms of section 80P(4) of the Act thereof, interest income earned from such Bank is not even eligible for deduction under section 80P(2)(d) of the Act in the hands of the appellant society. 1.2 Without prejudice to the above, the CIT(A) erred on facts and in law in not allowing deduction of expenditure incurred in relation to earning of the aforesaid interest income from the co-operative banks. 2. That the CIT(A) erred on facts and in law in denying deduction of expenditure amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to profit and gains of business. It was observed that interest receipt from members for providing credit facilities to them was exempt. Further anything attributable to the said income would also be covered under section 80p. It was highlighted that exemption is partial and not complete, that is the whole income of the co- operative society does not get exemption. In the facts of the said case, it was observed that the deduction being in respect of certain incomes, the interest income earned out of surplus fund, would not qualify for deduction as it was assessable under the head income from other sources 8. The present case is surplus funds, which were not required for carrying on business of providing credit facilities to members. Half of the funds mobilised/collected from the members could be used for providing credit to the members. The balance amount had to be retained and used for specified purposes, other than providing credit facilities to members. This amount was deposited in FDR's for an average period of 500 days. By- laws of the appellate co-operative Society prescribed that 50% of the amount mobilised/collected would not be given on credit to the members. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-operative societies whether or not their main businesses is banking and credit facilities to the members. He submits that the assessing officer has himself admitted that the interest earned on deposits with other co- operative society is eligible for deduction under section 80P(2)(d), however while computing the disallowance the Ld. AO did not consider the fact that bank interest also include interest earned on deposit with other co- operative banks. 4.3 He thus concluded by submitting that the assessee is eligible for deduction of entire interest earned under section 80P(2)(d). 5. On the contrary the Ld. DR relied upon the order of authorities below. 6. We have perused the submissions made by both the parties and the orders passed by the authorities below. Clause (d) of section 80P(2) reads as under:- "(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society, the whole of such income" 6.1 The above provision clearly mentions that any income of a co-operative society derived from investment with the co-operative society forms part of gross total income and is available for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which actually provides credit / finance to its members in furtherance of the cooperative movement and not for the purpose of profit making. 6.3 Ld. A.R. placed reliance on various judgments of Hon'ble High Court and coordinate bench of this Tribunal, in respect of allowability of interest income earned from surplus funds invested in FDRs made with commercial/cooperative bank and interest earned from investments made with cooperative societies / banks. 7. We have perused the orders passed by the authorities below and the judgment relied upon by the assessee. The ld.AR has placed his reliance on the order dated 03.05.2011 passed by jurisdictional High Court in case of CIT vs. National Agricultural Co- operative Marketing Federation of India Ltd., in ITA no. 839/2009 & 1037/2010. The Hon'ble High Court held that the assessee was eligible to the deduction u/s.80P(2) (d) in respect of the interest earned from investments made by a society in other cooperative banks. 7.1 It is pertinent to note that during the concerned years under consideration the assessee had deposits with co-operative banks and commercial banks, as provided in the chart submitted before us. It is observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that of providing credit facilities to its members. Ld. A.R. submitted that the funds taken as deposits from members are used either for earning interest income from investments or earning interest income from credit facilities to the members it is only the members of the Society can avail the banking facility and/or avail credit facilities. He submitted that if a member comes forward with the deposit, the societies bound to accept the same and give him the interest, irrespective of whether the funds are required for giving credit to the members or not. Accordingly, the interest cost incurred by the assessee is partly towards money kept in the bank FDR's and partly attributable to providing credit facility to its members. He thus submitted that the bifurcations of interest expenses between the two activities, has been done on a rational manner. 10 The ld.AR submitted that the assessee is entitled to deduction in respect of the cost of the funds being interest paid on deposits received from the members and proportionate administrative and other expenses attributable to the cost of the funds under section 57 with respect to the residual interest income which is taxable under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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