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TMI Blog2015 (11) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income) and computed il total income. In the assessment order, the AO disallowed the claim u/s 80P(2) under various sub-section after giving detailed reasons. 3. Aggrieved the assessee preferred appeal before the CIT(A) 3.1 The CIT(A) held among other grounds that the income earned by the assessee on FD requires to be assessed under the head "Other Sources" and not as part of the business of providing credit facilities and thereby holding that the assessee is not entitled to deduction u/s 80P(2)(a)(i) of the Act, as claimed by the assessee in the return of income. Further, the CIT(A) held that the assessee is not entitled to deduction u/s80P(2)(i) of the Act in respect of the income derived from the operation of the Water Treatment Plant. 4. The assessee preferred appeal before the Hon'ble ITAT against the order of the CIT(A). In its appeal had taken six ground, of which grounds 1 and 6 are general needing no specific adjudication. 5. Ground.5 is on charge of interest u/ss.234A, B and C of the Incometax Act, 1961 ('the Act' for short), which also does not need any specific adjudication being consequential in nature. 6. Vide its ground 2, grievance raised by as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered under the head 'income from other sources', then interest paid by assessee on deposits to its members which was used for placing the deposits with bank had to be allowed as a deduction u/s.57(iii) of the Act. As per assessee, there was a direct nexus between the deposits received from its members and the deposits placed by it with the banks, and this was clearly brought out in its balance-sheet. 10. CIT (A) was however not impressed by the above contentions raised by assessee. According to him, the AO was justified in relying on the decision of the Hon'ble Apex Court in the case of Totagars Cooperative Sale Society (supra), which unequivocally held that interest received by a cooperative society on surplus funds placed with banks as deposits, were to be assessed under the head 'income from other sources'. However, according to the CIT (A), claim of the assessee that deduction should be allowed u/s.57(iii) of the Act, was justified if it could show direct nexus between the funds received from the members which were interest bearing, with the deposits made by it in the banks. For this, he remitted the matter back to the AO for working out the interest that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 081/Bang/2013 dated 30-04-2015 wherein similar issue has been discussed elaborately. The relevant portion is extracted herein below: "We have perused the orders and heard the rival contentions. There is no dispute that one of the main object of assessee society was providing credit facility to its members. AO himself has mentioned that this was the primary object for which assessee was incorporated, at para 6 of the assessment order. Nodoubt, out of substantial sum received as deposits from the members, only small portion were given by assessee as loans to its members. Major part of the funds were parked in FDs. However, it is an admitted position that assessee was bound to give interest to its members on the deposits received by 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. Their Lordships in the judgment in Tumkur Merchants Souharda Credit Cooperative Ltd (supra), , which was also in relation to a cooperative society having as its object, business of providing business credits to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 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-II reported in ITR VOL. 113 (1978) PAGE 842 at page 93 as under: "As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry here generation and distribution 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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 account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial complex which was leased out by assessee. Thus, according to AO, the water was not intended for agricultural purpose alone. Further, as per the AO, there was no cost for purchase of water and deduction of income could not be allowed. Reliance on the decision of Mumbai High Court in the case of CIT vs. Shetkari Sahakari Sakhar Karkhana Ltd., (1999) 238 ITR 983, wherein it was held that only water for irrigation facilities could be considered as agricultural use. In this view of the matter, he disallowed the deduction claimed u/s.80P(2)(a)(iv) of the Act. 20. In its appeal before the CIT (A), argument of assessee was that water was basically supplied for drinking purpose to the commercial complex and partly for agricultural purpose. According to assessee, even if it was used partly for agricultural purpose, it could claim deduction u/s.80P(2)(a)(iv) of the Act. However, CIT (A) was not impressed. He confirmed the disallowance. 21. Now before us, Ld. AR strongly assailing the orders of authorities below submitted that similar claim of tractor hire charges was allowed by CIT (A) relying on the judgment in Addl. CIT vs. Ryots Agricultural Produce Co-operative Marketing Soci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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