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2015 (7) TMI 946 - ITAT BANGALORE

2015 (7) TMI 946 - ITAT BANGALORE - TMI - Deduction u/s.80P(2)(a)(i) - interest earned on the FDs placed by with banks - Held that:- In view of the judgement of in the case of CIT v. Tumkur Merchants Souharda Credit Cooperative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT] it has been clearly mentioned that the money meant for lending, remaining surplus, there being no takers, if deposited in banks for earning interest, such interest income would be attributable to the business of banking carri .....

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aham P. George and Shri Vijaypal Rao, JJ. For the Petitioner :None For the Respondent : Shri. Sunil Kumar Agarwal, JCIT ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by Revenue, it is aggrieved that CIT (A) allowed the claim of assessee for deduction u/s.80P(2)(a)(i) of the Income-tax Act, 1961 ( the Act in short), relying on the decision of Hon ble High Court of Karnataka in CIT v. Sri Biluru Gurubasava Pattin Sahakari Sangh Niyamit, Bagalkot [ITA No.5006/2013, dt.05.02. .....

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lly stated that the provisions of section 80P would not apply to a cooperative bank. Though the assessee argued that it had transactions only with its members and not public, this contention was not accepted. According to the Assessing Officer even a section of the public was good enough to be considered as 'service to the public'. Further, as per the Assessing Officer, the primary object of the assessee was transacting in banking business and its paidup share capital exceeded ₹ 1 .....

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d of the funds for loan disbursements, instead of keeping the funds idle, assessee had placed it with the banks as deposits. As per assessee, it was bound to pay interest to the members. Submission of assessee was that acceptance of deposits from its members, closure of such deposits and repayments were regular and routine feature of its business. As per assessee, unless the funds which were remaining with it were placed in banks, it would not have been possible for it to pay the interest due to .....

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e source. Hon ble Apex Court was clear in this aspect in the decision of Totgar s Cooperative Sale Society Ltd., (supra). Here in the case of assessee, only a very small amount was lent by it to its members. It was not similar to a society which was carrying on credit business. Therefore according to him, claim for deduction u/s.80P(2)(a)(i) of the Act, on such interest was unjustified. 06. Nobody appeared on behalf of the assessee. 07. We have perused the orders and heard the Ld. DR There is no .....

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it from them. Therefore, when there were no takers for the money, which assessee as a part of its objects wanted to lend, the only available choice for assessee, in order not to keep the funds idle, was to place it in banks for earning interest. Hon ble jurisdictional High Court in the case of CIT v. Tumkur Merchants Souharda Credit Cooperative Ltd (ITA.307 of 2014, dt.28.10.2014), which was also in relation to a cooperative society having as its object, business of providing business credits to .....

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profits and gains of business and therefore he submits the appellate authorities were not justified in denying the said benefit in terms of Sub-sec.(2) of Section 80P of the Act. In support of his contentions, he relied on several judgments and pointed out that the Apex Court in the aforesaid judgment has not laid down any law. 5. Per contra, learned counsel for the Revenue strongly relied on the said judgment of the Supreme Court and submitted, the case is covered by that judgment of the Apex C .....

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hort duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law ie., Section 80P(2)(a)(i): Deduction in respect of income of co-operative societies: 80P (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, i .....

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any one or more of such activities. 7. 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. VS. COMMISSIONER OF INCOME-TAX, GUJARAT-ll reported in ITR VOL. 113 (1978) PAGE 842 at page 93 as under: As regards the aspect emerging from the expression attributable to oc .....

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t 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 gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General, it has used the expression derived from , as, for instance, in section 80J. In our vi .....

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said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount .....

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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 of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained .....

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cts 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. 10. 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 accou .....

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