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2015 (12) TMI 287 - ITAT MUMBAI

2015 (12) TMI 287 - ITAT MUMBAI - [2015] 44 ITR (Trib) 87 (ITAT [Mum]) - 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 .....

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sessment year 2010-11. The assessee is aggrieved by the decision of ld CIT(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 socie .....

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t 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 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 .....

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or agricultural and rural development activities. 3. 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. 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 he .....

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rom business activities and hence the same is required to be assessed under 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 activiti .....

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regard, he placed reliance on the decision rendered by Hon ble Supreme Court 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. .....

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he reasoning that the same shall form part of its business income. The Hon 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 wante .....

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t income so derived or the capital, if not immediately required to be lent 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 .....

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as also in the business of marketing of agricultural produce grown by its 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 in .....

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