9911796707
TMI Blog2014 (1) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... nted benefit of Section U/s.80-P of I.T. Act. But Learned Commissioner of Income tax (Appeals) Gandhinagar has granted relief of Rs.6,03,224/-, Out of Total Interest earned on Bank Fixed Deposit Amt. of Rs.10,44,394/-. 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the IT Act dated 24/12/2010 is that the assessee is a Co-operative Society incorporated with the object of providing credit facilities to its Members. For the year under consideration, the Society has claimed a deduction u/s.80P(2)(a)(i) of Rs.13,65,535/-. The AO has invoked sub-section (4) of section 80P and thereupon held that the Assessee-cooperative Society is only a "primary credit society" and not a "primary agriculture credit soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus fund in banks would be taxable u/s.56 and will not qualify for deduction u/s.80P. It is seen that the total interest earned from deposits with other banks' (other than co-op.societies, which is exempt) FD etc. is Rs.10,44,394/-. The appellant has mixed funds wherein the members' interest free contribution and accumulated profits are mixed with interest bearing funds. The interest earned from members etc., is Rs.41,14,002/- and total interest paid is Rs.29,79,405/-. Therefore, for earning total interest of Rs.51,58,396/- the appellant has spent Rs.29,79,405/-. Taking on pro-rata basis, the interest expenses on earning the interest from bank taxable u/s.56 would be Rs.6,03,224/- (10,44,394 x 29,79,405/51,58,396). Therefore, the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties emerge, namely: (1) in the case of the assessee, the entire funds were utilized for the purposes of business and that there were no surplus funds;- in the case of Totgars, it had surplus funds, as admitted before the AO, out of retained amounts on marketing of agricultural produce of its members; (2) in the case of present assessee, it did not carry out any activity except in providing credit facilities to its members and that the funds were of operational funds. The only fund available with the assessee was deposits from its members and, thus, there was no surplus funds as such; - in the case of Totgars, the Hon'ble Supreme Court had not spelt out anything with regard to operational funds; 19.5. Considering the above facts, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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