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2015 (12) TMI 94

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..... ome forms art of the business income earned by the assessee and the same is not to be taxed under the head “Other Sources” - Decided in favour of assessee. - ITA No.727(B)/2015 - - - Dated:- 26-8-2015 - SMT. ASHA VIJAYARAGHAVAN, JM (SMC) Appellant by : Shri Suresh Muthukrishnan, CA Respondent by : Dr. P.K.Srihari, Addl.CIT ORDER PER SMT ASHA VIJAYARAGHAVAN, JM: This appeal by the assessee is directed against the order of CIT(A), Mysore dated 03-02-2015 for the assessment year 2009-10. 2. The assessee is primarily an agricultural co-operative society in the business of providing credit facilities to its members. It is also engaged in the purchase of seeds, fertilizers etc., intended for agriculture for the .....

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..... erm deposits. Hence, it is not surplus fund that was deposited. The deposits are not for investments, but for parking of funds for maximization of profit. Hence, it is in the usual course of business. The AO disallowed the deduction claimed u/s 80P(2)(a)(i) of the Act, relying on the decision in the case of M/s Totgar s Co-operative Sale Society Ltd Vs ITO 383 ITR 283(SC). The AO brought to tax amounting to ₹ 12,78,331/- under the head Other Sources . 3. Regarding the allowability of expenses u/s 57 of the IT Act, the AO observed that the assessee had interest free funds to the tune of ₹ 1,68,88,897/- which is free of cost and hence, no deduction is allowable. Accordingly, the AO placed reliance on the decision of the Hon bl .....

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..... 1,829/- being the income arrived at by the ld.AO after deducting the loss worked out from the business of providing credit facilities from the income derived by the assessee from the business of trading in agricultural implements, which computation made is opposed to law and facts of the assessee s case in as much as the assessee was entitled to claim deduction in respect of the entire profits from the business of trading in agricultural implements without setting of the losses incurred by the assessee from other activities. 4. The assessee denies itself liable to be charged with surcharge, which levy is opposed to the provisions of the Finance Act, 2009 and thus, the levy of surcharge deserves to be cancelled. 5. Without prejudice to .....

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..... e 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){!ii) of the Act. Therefore in the facts of the said case, the Apex Court held the Assessinq 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 t .....

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..... se of Tumkur Merchants Souharda Credit Co-operative Society Ltd(Supra). We find that the facts of the case on hand are similar to the facts of the aforesaid case decided by the Hon ble High Court of Karnataka, since in both cases the assessee was a credit co-operative society and invested in fixed deposits out of the surplus funds of business. Applying the ratio of the judgment of the Hon ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd (Supra), 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, as well as that the said interest income forms art of the business income earned by the assessee and t .....

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