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2015 (7) TMI 237 - ITAT BANGALORE

2015 (7) TMI 237 - ITAT BANGALORE - TMI - Entitlement to exemption claimed under Section 80P(2)(a)(i) - whether interest income earned by the co-operative societies from bank deposits cannot be regarded as income earned from business of providing credit facilities to its members and are therefore not entitled to deduction under Section 80P(2)(a)(i)? - Held that:- Respectfully following the order in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. (2015 (2) TMI 995 - KARNATA .....

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red and distinguished by the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. (supra). We find that the facts of the case on hand to be similar to the facts of the aforesaid case decided by the Hon'ble High Court of Karnataka. Thus we hold that the assessee is entitled to deduction under Section 80P(2)(a)(i) of the Act in respect of interest income earned on fixed deposits with banks out of surplus funds from business, as it forms part of .....

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he Petitioner : Shri V. Srinivasan, C.A. For the Respondent : Shri N. Balakrishnan, JCIT (D.R) ORDER Per Shri Jason P. Boaz, A.M. : These appeals by the assessee are directed against the common order of the Commissioner of Income Tax (Appeals), Mysore dt.17.10.2014 for Assessment Years 2009-10 & 2010-11. 2. The facts of the case, briefly, are as under :- 2.1. The assessee company is a co-operative society registered under the Co-operative Societies Act, 1959 and carries on the business of pr .....

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he assessee's income was determined at ₹ 5,95,035. For Assessment Year 2010-11, the assessee filed its return of income on 30.9.2010 declaring NIL income after claiming deduction under Section 80P(2) of the Act. The case was selected for scrutiny and the assessment was concluded under Section 143(3) of the Act vide order dt.21.3.2013 wherein the income of the assessee was determined at ₹ 18,43,090. 2.2 While concluding the above assessments, the Assessing Officer allowed deductio .....

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judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. reported in 332 ITR 283. In that view of the matter, the total income of the assessee was assessed at ₹ 5,95,035 after allowing deduction of ₹ 13,33,172 under Section 80P(2) of the Act, as against deduction of ₹ 19,28,209 claimed by the assessee. 2.3 For Assessment Year 2010-11, the Assessing Officer has denied the entire deduction claimed under Section 80P(2) of the Act on the ground .....

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d to deduction under Section 80P(2)(a)(i) as per the decision of the Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot in ITA No.5006/2013 dt.5.2.2014 and allowed the deduction claimed by the assessee for Assessment Year 2010-11. However, while doing so, the learned CIT(A) observed that the assessee has earned interest income on fixed deposits kept with banks amounting to ₹ 5,95,037 for Assessment Year 2009-10 and ₹ 7 .....

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common orders of the learned CIT(A), Mysore dt.17.10.2014 for Assessment Years 2009-10 and 2010-11, the assessee has preferred these appeals before the Tribunal raising the following common grounds for both the assessment years involved :- 1. The order of the learned CIT (Appeals) in so far as it is prejudicial to the interests of the appellant, is opposed to law and facts of the case. 2. The learned CIT (Appeals) erred in confirming the Assessing Officer s view that the interest amount of ͅ .....

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unds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 4. Grounds at S. Nos. 1 & 3 are general in nature and not being urged before us, are dismissed as infructuous. 5.1 Ground No.2, remains the only effective issue in this appeal that arises for our consideration. It .....

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ssed as business income and contended that the exemption claimed under Section 80P(2)(a)(i) of the Act in respect of interest income of ₹ 5,95,037 and ₹ 7,58,464 derived by the assessee from investments in fixed deposits was in order. The learned Authorised Representative submitted that the learned CIT(A) held that the assessee is not entitled to the said deduction in respect of the interest income in the light of the judgment of the Hon'ble Apex Court in the case of Totagars Co- .....

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e society engaged in the business of providing credit facilities to its members has to be regarded as income eligible for deduction under Section 80P(2) of the Act. 5.2 The learned Departmental Representative submitted that the issue decided by Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Cooperative Society Ltd. (supra) was different and the said judgment was not applicable to the facts of the case on hand, as the interest income covered by the judgment of .....

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judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (supra) and came to the conclusion that the interest income earned by the co-operative societies from bank deposits cannot be regarded as income earned from business of providing credit facilities to its members and are therefore not entitled to deduction under Section 80P(2)(a)(i) of the Act. We, however, find that the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit .....

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isputed facts which emerges is, the sum of ₹ 1,77,305 represents the interest earned form short term deposits and from savings bank account. The assessee is a co-operative society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business .....

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in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely : (a) in the case of co-operative society engaged in - (i) carrying on the business of banking or providing credit facilities toits members, or (ii) xxx (iii) xxx (iv) xxx (v) xxx (vi) xxx (vii) xxx the whole of the amount of profits and gains of business attributable to any one or more of such activities. 7. The word attributable used in the said section is of great importan .....

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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 canno .....

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from sources other than the actual conduct of the business of generation and distribution of electricity. 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 issued by the legislature whenever they intended to gather receipts from sources other than the actual conduct .....

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credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act. 9. In this context when we look at the judgment of the Apex Court in the case .....

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as 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 incom .....

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he 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. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT III, Hyderabad Vs. Andhra Pradesh State Co-operative Bank Ltd., reported in (2011) 200 Taxman 220/12. In that v .....

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