TMI Blog2014 (1) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... ony,JJ. For the Appellant : Shri Divyakant Parikh For the Respondent : Shri D. K. Singh, Sr. D. R. ORDER Per Shri Mukul Kr. Shrawat, Judicial Member :- This is an appeal filed by the Assessee arising from the order of ld.CIT(A)-Gandhinagar dated 19/07/2012 passed for A.Y.2008-09 and the solitary ground is reproduced below:- 1. The Assessing Officer has erred in facts and in law, in making addition Whole Profit of Amt. of Rs.13,65,535/- and was disallowed and also not granted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alore Commercial Transport Credit Co- operative Society Ltd. in ITA No.1069/Bang/2010 for AY 2007-08 dated 08/04/2011 which has decided the issue in favour of the appellant." 3.1. However, in the opinion of ld.CIT(A), the entire income was not exempted. In his opinion, the interest income earned from bank out of the surplus funds invested, the same is taxable u/s.56 of the Act. Accordingly, it was held as under:- "In the light of the above, the interest income if any, earned from keeping the 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the surplus invested in short term deposits and securities which surplus was not required for business purposes? The assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such by such retention was not 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely, (i) acceptance of deposit and lending by way of deposits to the members; and (ii) marketing the agricultural produce; and (d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3. In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4. While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities 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 ret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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