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M/s Tibetan Rabgayling Primary Agricultural Credit Co-Operative Society Ltd. Versus The Income Tax Officer, Ward-1 (3) , Mysore And Vica-Versa

2015 (11) TMI 740 - ITAT BANGALORE

Deduction u/s.80P(2)(a)(i) - interest earned on the FDs placed by it with banks - Held 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 carried out by the assessee. Thus assessee was eligible for claiming deduction u/s.80P(2)(a)(i) of the Act, on the interest earned on the FDs placed by it with banks, this being a part of its business income. See Tumkur M .....

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er, the water was not exclusively intended for agricultural use. We are, therefore, of the opinion that claim of the assessee was rightly denied by the lower authorities. We do not find any ground to interfere with the orders of authorities below. - Decided in favour of revenue. - ITA No. 1598/BNG/2014, ITA No. 1596/BNG/2014 - Dated:- 4-9-2015 - Asha Vijayaraghavan, JM And Abraham P George, AM For the Petitioner : Shri Suresh Muthukrishnan, CA For the Respondent : Shri Praveen Karanth, JCIT ORDE .....

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t profit earned in all its activities is ₹ 9,02,472/- and has computed gross total income of ₹ 10,63,120/- on which it has claimed deduction under various clauses of 80P amounting to ₹ 10,63,120/- (but restricted to gross total 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 gr .....

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ant. 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 assessee is that CIT (A) upheld the view of AO that inco .....

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interest received from bank on fixed deposits was ₹ 1,24,15,519/-. As per the AO, primary object of the assessee society was to provide credit facility to its members and not making deposits in bank. As on 31-03-2010, total loans given to members was just ₹ 32,235/- as against deposits made in banks for ₹ 9,58,73,948/-. In other words, substantial part of the deposits from its members were parked in FDs with banks. This, as per the AO substantiated the view that assessee was no .....

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ggrieved, assessee moved in appeal before the CIT (A). Argument of assessee was that the amounts which were placed in deposits were having direct nexus with the amounts received as deposits from members. When there were no immediate need 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, clos .....

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cing 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 Socie .....

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the matter back to the AO for working out the interest that could be allowed. 11. Now before us, Ld. AR strongly assailing the order of CIT (A), submitted that the Hon'ble jurisdictional High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd., v. ITO (ITA No.307 of 2014, dt 28.10.2014), after considering the judgement of Hon'ble Apex Court in the case of Totgar's Cooperative Sale Society Ltd., (supra), had held that the said judgment of Hon'ble Apex Court was .....

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80P(2)(a)(i) of the Act. Ld. AR pointed out that assessee's case differed from that of Tumkur Merchants Souharda Credit Cooperative Ltd (supra), only by reason of multiple activities carried on by it. However, according to Ld. AR, providing credit facilities to its members was one of the avowed objects of the society. 12. The Ld. DR strongly supporting the orders of authorities below submitted that source of the interest was deposits in the bank. According to him, only the immediate source w .....

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of assessee. Funds which were placed in banks did not belong to anybody other than members of the society. Unless such funds are placed in the banks, it would not be possible for assessee to pay interest due to the members. Hence, according to Ld. AR, it was a part of assessee's business only. 14. The learned AR brought to our notice the order of the Hon'ble ITAT in assessee's appeal in ITA No.1056/Bang/2013 & revenue's appeal in ITA No.1081/Bang/2013 dated 30-04-2015 wherein .....

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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 Merch .....

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oviding credit facilities to its members and therefore the said interest amount is attributable to the credit facilities provided by the assesseeand forms part of 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 .....

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t 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 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 .....

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g credit facilities to its 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 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 I .....

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ot;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 cannot be regarded as profits and gains derived from the conduct of the business of generation and distr .....

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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 is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Coop .....

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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 of M/s. Totgars Co-opera .....

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uch 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. Fu .....

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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 COMMISSIONER OF INCOME-TAX III, HYDERABAD vs. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., reported in (2011) 200 TAXMAN 220/12. In that view of the matter, the order .....

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surplus, there being no takers, if deposited in banks for earning interest, such interest income would be attributable to the business of banking carried out by the assessee, we are of the opinion that the facts of the case here fit perfectly well with the facts in the judgment mentioned above. 16. We also find that the Co-ordinate Bench has decided the issue in assessee's appeal in ITA No.1056/Bang/2013 and revenue's appeal in ITA No.1081/Bang/2013 and others dated 30-04-2015. We, there .....

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u/s.80P(2)(a)(iv) of the Act, on income from operation of water treatment plant. 19. The assessee had supplied treated water to its members from its water treatment plant and on the amount received for supply of the water, it had claimed deduction u/s.80P(2)(a)iv) of the Act. AO was of the view that supply of water was both for agricultural operation as well as to tenants of a commercial complex which was leased out by assessee. Thus, according to AO, the water was not intended for agricultural .....

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f 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 j .....

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sed the orders and heard the rival contentions. It is not disputed that the water which was purified using water treatment plant was not the one essentially meant for drinking purpose and supplied to a commercial complex. As per assessee's admission, only a part of the water was used for agricultural purpose. Section 80P(2)(a)(iv) is reproduced hereunder : Section 80P - Deduction in respect of income of co-operative societies. (1) Where, in the case of an assessee being a co-operative societ .....

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