TMI Blog2022 (10) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 its 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) - Decided in favour of assessee. - ITA No.427 And 428/SRT/2019 - - - Dated:- 6-10-2022 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri P.M. Jagasheth, CA For the Respondent : Shri Anurag Dubey, Sr. DR ORDER PER DR. A. L. SAINI, AM: Captioned two appeals filed by same assessee, pertaining to Assessment Years (AY) 2014-15 and 2015-16, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-1, Surat [in short the ld. CIT(A) ], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 08.12.2016 30.11.2017 respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,371/- 3 Interest earned on saving bank account with Surat Dist. Co-Op.Bank Ltd. 4,331/- 4 Interest earned on FDR with SBI 13,26,116/- 5 Interest earned on FDR with Surat Dist. Co-Op. Bank Ltd. 5,16,439/- Total 24,53,796/- 7. However, the Assessing Officer noted that assessee has shown net profit of Rs.14,93,112/- for A.Y 2014-15 and the entire profit has been claimed as deduction u/s 80P of the Act. It is mentioned here that the above net profit also includes interest of Rs.4,371/- on saving account and interest on FDR of Rs.13,26,116/- with SBI both totalling to Rs.13,30,487/-. On examination of the P L account balance-sheet of the assessee, it was noted by Assessing Officer that the total deposits received from the members is to the tune of Rs.1,78,41,156/- whereas loans and advances given to the members is only Rs.39,68,104/-.Thus, it was noted by Assessing Officer that only approximately 22% of the funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India for AY 2014-15 AY 2015-16- I have already decided this issue in the case of Suvidha co-op credit Society Appeal No. CIT(A), Surat-1/10269/2017-18 Order dated: 03.06.2019 as under:- Perused details on record and considered written and verbal submission of the AR. In this case the Ld. AO has disallowed and added back Rs.23,58,639 on account of interest income received from other than co-operative societies. The AR, however contends that the assessee co-op society has offered net interest income received from other than co-op societies, after deducting proportionate expenses from the same. The Ld AO did not consider this explanation and added back the impugned gross interest income. The Ld AO applied the ratio of decision Hon'ble High Court of Karnataka in the case of Totagars Co-op Society (83 taxmann.com 10). 2. I have considered the issue and I find that the Ld AO has mislead in applying decision of Tatagar (supra). The issue before Hon'ble High Court is of eligibility for deduction u/s 80P, whereas that is not the dispute in instant case. The assessee co-op also admits to it and states it has not claimed deduction and has offered net interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(a)(i) is mainly for credit society and assessee under consideration is providing credit facilities to its members and therefore assessee-society has to lend money to its members and collect money from its members, hence it means it is a credit society. Therefore, the assessee-society is eligible for deduction u/s 80P(2)(a)(i) of the Act. To bolster his arguments, Ld. Counsel relied upon the judgment of Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-Operative Ltd. vs. ITO, Ward-V, Tumkar [2015] 55 taxmann.com 447 (Kar), wherein the Hon'ble High Court held as follows:- 8. Therefore, the word attributable to is certainly wider in import than the expression derived from . Whenever the legislature wanted to give a restricted meaning, they have used the expression derived from . The expression attributable to being of wider import, the said expression is used by the legislate whenever they intended to gather receipts from sources other than the actual conduct of the business. Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is li 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 CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxmman 220/12 taxmann.com 66. 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. Hence, we pass the following order: Therefore, Ld. Counsel contended that addition sustained by Ld. CIT(A) may be deleted. 12. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 13. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society Ltd. Vs. ITO, (2015) 377 ITR 464. He also placed on record copy of the ITAT, Ahmedabad Bench decision passed in ITA No.2610/Ahd/2015 in the case of Shree Balaji Urban Coop. Credit Society Ltd. Vs. ITO, wherein under similar circumstances deduction was allowed to the assessee. 6. On the other hand, the ld.DR submitted that the CIT(A) has followed the decision of the Hon ble Supreme Court in the case of M/s.The Totgars Cooperative Sales Society Ltd. Vs. ITO, Karnataka, 322 ITR 283. 7. We have duly considered rival contentions and gone through the record carefully. We find that similar issue has come up before the ITAT, Ahmedabad Bench in large number of cases. In ITA No.1767/Ahd/2011 in the case of Supa (Kural) Vibhag Seva Sahari Mandli Ltd. Vs. ITO, order dated 13.1.2016 the Tribunal, while allowing the claim of the assessee, has recorded the following finding: 5. With the assistance of the ld.representatives, I have gone through the record carefully. I find that the Hon ble High Court in the case of Guttigedarara Credit Co-op. Society Ltd., ITO (60 taxmann.com page 215) (Kar) has allowed the claim of the assessee on similar issue. It is worth to note relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of profits and gains of business attributable to any one or more of such activities. 9. The word 'attributable' used in the said Section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT[1978] 113 ITR 84 (at page 93) as under:- 'As regards the aspect emerging from the expression attributable to occurring in the phrase profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression attributable to and not the expression derived from . It cannot be disputed that the expression attributable to is certainly wider in import than the expression derived from . Had the expression derived from been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee-Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear. Supreme Court was not laying down any law. 12. 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 its members, as there were no takers. Therefore they had deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. I fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v/s. Andhra Pradesh State Co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com 66. 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. The assessee society s main object is to give credit facilities to its members from the funds received from the members by way of collection of deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 rightly held by the assessing officer 19.1. However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon ble Supreme Court (On page 286) 7 . Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m short-term deposits. Furthermore, the assessee had maintained overdraft facility with Dena Bank and the balance as at 31.3.2009 was Rs.13,69,955/- [source: Balance Sheet of the assessee available on record]. In overall consideration of all the aspects, we are of the considered view that the ratio laid down by the Hon'ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd. (supra) cannot in any way come to the rescue of either the Ld.CIT(A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT(A) was not justified in coming to a conclusion that the sum of Rs.9,40,639/- was to be taxed u/s.56 of the Act. It is ordered accordingly. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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