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2015 (9) TMI 170 - ITAT MUMBAI

2015 (9) TMI 170 - ITAT MUMBAI - [2015] 43 ITR (Trib) 138 (ITAT [Mum]) - Entitlement to deduction u/s 80P - interest income earned on the deposits kept with banks - whether is not eligible for deduction u/s 80P(2)(a)(i) of the Act and hence liable to be assessed as income from other sources as held by CIT(A)? - Held that:- As decided TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED case [2015 (2) TMI 995 - KARNATAKA HIGH COURT] in the amount which was invested in banks to earn interest was n .....

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the Act. See Totagars Co-operative Sale Society Ltd. (2010 (2) TMI 3 - SUPREME COURT) - Decided in favour of assessee. - I.T.A. No.6627/Mum/2014 - Dated:- 10-8-2015 - SHRI B.R.BASKARAN, J. For The Appellant : Shri Prakash Jhunjhunwala For The Respondent : Shri Maurya Pratap ORDER PER BENCH: The assessee has filed this appeal challenging the order dated 12- 06-2014 passed by ld CIT(A)-26, Mumbai and it relates to the assessment year 2010-11. The assessee is aggrieved by the decision of ld CIT(A) .....

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the copy of order was given to the present counsel who advised to file the present appeal. Accordingly it was submitted that the delay occurred for bonafide reasons and accordingly it is prayed that the delay be condoned. I heard the parties on this preliminary issue. Having heard to the submissions made in the affidavit, I am of the view that there is reasonable cause for the delay in filing the present appeal. Accordingly I condone the delay and admit the appeal for hearing. 3. The facts rela .....

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of the Act provides for deduction of income specified in sec. 80P(2) in case of an assessee, being a co-operative society. Sec. 80P(2)(a)(i) provides deduction of the whole of the amount of profits and gains of business attributable to any one or more of such activities. Since the assessee is a co-operative society engaged in carrying on the business providing credit facilities to its members, it claimed deduction u/s 80P(2)(a)(i) of the Act. However, sec. 80P(4) was inserted by Finance Act 2006 .....

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operative agricultural and rural development bank means a society having its area of operation confined to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities. 4. The assessing officer, after referring to the provisions of Banking Regulation Act held that the assessee is a bank and hence it is hit by the provisions of sec. 80P(4) of the Act. Accordingly he rejected the claim for deduction u/s 80P of the Act. 5. In the app .....

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ee has received interest income as detailed below:- S.No. Name of the Bank FD/SAVING A/c Interest amount 1 Mumbai Dist.Central Co-op Bank. FD 13,48,195 2 Mumbai Dist.Central Co-op Bank. SAVING 196 3 Oriental Bank of Commerce SAVING 180 4 Punjab National Bank SAVING 103 5 Punjab National Bank FD 1230 6 Maharashtra State Sahakari Bank SAVING 187 7 Apna Sahakari Bank FD 1,57,714 8 The Greater Bombay Bank SAVING 1,915 9 Hindustan Co-op Bank SAVING 51 Total int. 15,09,773 The Ld CIT(A) took the view .....

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t these interest income also derived from carrying on its business activities and hence the same is exempt u/s 80P(2)(a)(i) of the Act. In the alternative, it was submitted that the interest received from deposits kept with Co-operative societies is exempt u/s 80P(2)(d). The Ld CIT(A) was not convinced with the contentions of the assessee and accordingly held that the interest income received from deposits cited above is assessable as income under the head Income from other sources and according .....

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ng reliance on it. The Ld A.R invited my attention to the decision rendered by Hon ble Karnataka High Court inthe case of Tumkur merchants Souharda Credit Cooperative Ltd (2015)(230 Taxman 309) and submitted that the Hon ble Karnataka High Court has discussed about the decision rendered by the Apex Court in paragraph 9 of the order and have held that the same has been rendered under the facts prevailing in the case of the assessee before the Hon ble Supreme Court. The Hon ble Karnataka High Cour .....

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s to its members. The Ld A.R also placed reliance on the decision rendered by the Kolkatta bench of ITAT in the case of S.E.S.E.C & E Co. Railway employees Vs. ACIT (2014)(41 CCH 0218), wherein identical view has been expressed. The Ld A.R submitted that the Hon ble High Court of Calcutta also taken identical view in ITAT No.135 of 2010 in the case of CIT Vs. South Eastern Railway Employees Co-operative Credit Society. 8. The Ld D.R. on the contrary, placed strong reliance on the order passe .....

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High Court upheld the said view by duly considering the decision rendered by Hon ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd (supra). For the sake of convenience, I extract below the observations made by the Hon ble Karnataka High Court:- 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 fr .....

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the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing 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 .....

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ers. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was 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 mention .....

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