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Gandhinglaj Taluka Sahakari, Patpedhi Ltd., Versus Income Tax Officer 15 (1) (2) , Mumbai

2015 (12) TMI 287 - ITAT MUMBAI

Eligibility for deduction u/s 80P(2)(a)(i) - interest income earned on the deposits kept with banks - whether is liable to be assessed as income from other sources? - Held that:- Consistent with the view taken in the case of M/s Jaoli Taluka ahakari Patpedhi Maryadit (2015 (9) TMI 170 - ITAT MUMBAI ) hold that the interest income is assessable as profit and gains of business in the hands of the assessee and accordingly, it is liable for deduction u/s 80P(2)(a)(i) of the Act. Accordingly, set asi .....

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T(A) in holding that the interest income earned on the deposits kept with banks 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. 2. The facts relating to the above said issue are stated in brief. The assessee is a co-operative credit society registered under Maharashtra CoITA No .5793/ Mum/2014 2 operative Society Act, 1960. The main objects of the society is to provide credit/loans to its members and collect deposits from it .....

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h 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 w.e.f. 1.4.2007 and the same reads as under:- 80P(4) The provisions of this section shall not apply in relation to any co-operative bank other than primary agricultural credit society or primary co-operative agricultural and rural development bank. Accordin .....

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r, 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. 4. In the appellate proceedings, the ld CIT(A) held that the assessee cannot be considered to be a co-operative bank. On this decision, the revenue has not come on appeal before the Tribunal and hence the finding given by Ld CIT(A) has attained finality. Since the asses .....

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er the head income from other sources, in which case the deduction u/s 80P(2)(a)(i) of the Act is not available to it. The assessee submitted that it is holding statutory reserves to the tune of ₹ 115.51 crores under various heads and they have been parked in deposits with Scheduled banks and co-operative banks. Accordingly it was submitted that 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 alter .....

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ourt in the case of Totgars Co-operative Sale Society Ltd (2010)(229 CTR (SC) 209) Aggrieved, the assessee has filed this appeal. 6. I heard the parties and perused the record. I notice that an identical issue was considered by me in the case of M/s Jaoli Taluka Sahakari Patpedhi Maryadit V/s ITO in I.T.A. No.6627/Mum/2014 relating to AY 2010-11 and I have decided the issue in favour of the assessee, vide my order dated 10.8.2015. For the sake of convenience, I extract below the operation portio .....

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n ble 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 "deriv .....

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t to 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 facil .....

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members. 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 me .....

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