TMI Blog2010 (1) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorities set aside and directed the Assessing Officer to allow deduction under section 80P(2)(a)(i) in relation to the income earned by way of interest from commercial banks, appeal of the assessee is allowed. - IT Appeal No. 996 (Chd.) of 2009, - - - Dated:- 29-1-2010 - G.S. Pannu, Sushma Chowla, JJ. M.R. Sharma for the Appellant N.K. Saini for the Respondent ORDER G.S. Pannu, Accountant Member:- 1. This appeal by the assessee is directed against the order of the CIT (Appeals) dated 27-8-2009 pertaining to the assessment year 2006-07. Although the assessee has raised multiple Grounds of Appeal but essentially, the dispute pertains to the taxability of income earned by way of interest on fixed deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT (Appeals), the assessee is in appeal before us. 3. Before us, the learned counsel for the assessee has referred to the following judgments:- (i) Bihar State Housing Co-operative Federation Ltd. v. CIT [2009] 315 ITR 286 (Pat.). (ii) CIT v. Iqbalpur Co-operative Cane Development Union Ltd. [2009] 315 ITR 441 (Uttarakhand). To argue that the interest income earned by the assessee qualifies for exemption under section 80P(2)(a)(i) of the Act. It is contended that the assessee is a Co-operative Society providing credit facilities to its members and interest earned on the amounts kept in the commercial banks is exempt under section 80P(2)(a)(i) of the Act as such deposit was ancillary to the business of providing credit fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in dispute that the assessee is a co-operative society which is inter alia engaged in the business of providing credit facilities to its member Co-operative societies. It is only the interest income from commercial banks, other than from Co-operative Societies, which has been considered by the Assessing Officer as not falling in the ambit of business income and the exemption under section 80P(2)(a)(i) has been denied on such income. Such income has been assessed as 'income from other sources'. 7. Evidently, the dispute revolves around the provisions of section 80P of the Act which provides for deduction in respect of income of co-operative societies. Section 80P(1) provides that in case of an assessee being a cooperative society, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference in scope and connotation between the expressions 'attributable to' and 'derived from' has also been subsequently explained by the Hon'ble Supreme Court in the case of CIT v. Sterling Foods [1999] 237 ITR 579. An income can be said to be attributable to a business if there is a proximate connection between the two, while the expression 'derived from' requires that such connection should be direct or the immediate source of such income ought to be the relevant business activity itself. Therefore, because of the use of expression 'attributable to' in section 80P(2)(a)(i), it would be in the fitness of things to hold that it is not necessary that the income in respect of which deduction is claimed, should be derived from the business re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit facilities to its members. No doubt, the direct source of income is not the loans advanced to the members of the society. So however, in view of the expression 'attributable to' present in section 80P(2)(a)(i), the said income can be said to be incidental and in proximity to the business of the assessee of providing credit facilities to its members. Clearly, the funds available with the assessee for its business have been kept in the banks which has resulted in earning of the impugned interest income. The parity of reasoning laid down by the Hon'ble Supreme Court in the case of CIT v. Karnataka State Co-operative Apex Bank [2001] 251 ITR 194 and that of the Special Bench of the Tribunal in the case of Surat District Co-operative Bank L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute in question, in favour of the assessee. 10. Before parting, we may refer to the judgment of the Hon'ble Madhya Pradesh High Court in the case of Devi Ahilya New Cloth Market Co. Ltd. (supra) relied upon by the learned DR. The issue before the Hon'ble Madhya Pradesh High Court related to the principle of mutuality and in this connection, it was held that the income earned from banks was to be assessed as 'other sources'. The facts and the circumstances of the dispute in the present case stand on a completely different footing than that was before the Hon'ble Madhya Pradesh High Court and, therefore, the said decision does not help the case of the revenue. 11. In the result, we set aside the order of the lower authorities and di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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