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2016 (2) TMI 298 - ITAT AHMEDABAD

2016 (2) TMI 298 - ITAT AHMEDABAD - TMI - Deduction u/s.80P(2)(a)(i) - Held that:- Issue in dispute is purely covered in favour of the assessee partly by the decision of Hon’ble Karnataka High Court in the case of Guttigedarara Credit Co-operative Society Ltd. vs. ITO [2015 (7) TMI 874 - KARNATAKA HIGH COURT] wherein it has been specifically held that interest income earned by the Credit Co-operative Society from deposits made with scheduled bank would also qualify for grant of deduction u/s.80P .....

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he instance of assessee against separate orders of even dated i.e. 09th June, 2015 passed by ld. CIT(A)-4, Ahmedabad on the appeals of assessee for A.Ys.2010-11 & 2012-13. Since, common issues are involved, therefore, we heard both the appeals together and it may be appropriate to dispose of them by this common order. 2. First we take ITA No.2401/Ahd/2015 i.e. appeal for A.Y. 2012-13. The grounds of appeal taken by assessee are not in consonance with Rule 8 of ITAT Rules, 1963. They are desc .....

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as filed its return of income on 29th of September, 2012 declaring total income at NIL. The case of the assessee was selected for scrutiny assessment and a notice u/s.143(2) of the Income Tax Act was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer that assessee society has earned income by way of interest derived from its investments other than co-operative society. He worked out the total interest income of ₹ 3,77,517/-. Ld. A.O. reje .....

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eal of the Revenue against this order has also been dismissed by the Hon ble Gujarat High Court and the order of the Hon ble Gujarat High Court reported in [2014] 49 taxmann.com 571 (Gujarat). The question framed by the Hon ble High Court in this case read as under: Whether the hon ble Tribunal is correct in allowing the deduction under section 80P(2)(a)(i) to the assessee s society even though the same is covered under section 80P(4) read with section 2(24)(viia) being income from providing cre .....

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ion 80P, a question would arise why then the Legislature specified primary agricultural credit societies along with primary co-operative agricultural and rural development banks for exclusion from such exclusion and, in other words, continued to hold such entity as eligible for deduction. However, the issue has been considerably simplified by virtue of the Central Board of Direct Taxes Circular No. 133 of 2007, dated May 9, 2007. Circular provides as under : "Subject : Clarification regardi .....

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l and rural development bank. For the purpose of the said subsection, co-operative bank shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949. 3. In Part V of the Banking Regulation Act, 'co-operative bank' means a State cooperative bank, a Central co-operative bank and a primary co-operative bank. 4. Thus, if the Delhi Co-op. Urban Thrift and Credit Society Ltd. does not fall within the meaning of 'co-operative bank' as defined in Part V of the Bank .....

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aid entity not being a cooperative bank, section 80P(4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenue's contention that section 80P(4) would exclude not only the co-operative banks other than those fulfilling the description contained therein but also credit societies, which are not co-operative banks. In the present case, the respondent-assessee is admittedly not a credit co-operative bank but a credit co-operative society. The exclusion cl .....

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investment in the course of activity of providing credit facilities to members and that the same cannot be considered as investment made for the purpose of earning interest income and consequently passed a perverse order ? (ii) Whether the Tribunal is correct in law in holding that the interest earned on the deposits by the appellant/co-operative society does not qualify for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 on the facts and circumstances of the case? (iii) Withou .....

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iding the above questions in favour of assessee: 7. From the aforesaid facts and rival contentions, the undisputed facts which emerge are, certain sums of interest were earned from short-term deposits and from savings bank account. The assessee is a Co-operative Society providing credit facilities to its members. It 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 h .....

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ith and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely: (a) in the case of co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) to (vii) ** ** ** the whole of the amount of profits and gains of business attributable to any one or more of such activities." 9. The .....

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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 use .....

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n 80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.' 10. 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". Th .....

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, the society 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 facilities to .....

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he 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-Sociery 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 Se .....

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nt 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 its members, as 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. .....

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ing order:- Appeal is allowed. The impugned order dated 19.9.2014 is set aside. Parties to bear their own costs. The Hon ble Karnataka High Court has reversed the order of the Tribunal and held that interest income earned by a Credit Co-operative Society from the deposits with scheduled bank is liable to be considered as eligible for claim of deduction u/s.80P(2)(a)(i) of the Income Tax Act. 6. On the other hand, ld. D.R. relied upon the order of Assessing Officer. 7. On due consideration of the .....

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Income Tax Act and the interest income of ₹ 3,77,517/-. 8. Now we take ITA No.2400/Ahd/2015 i.e. appeal for A.Y. 2010-11. 9. In this appeal, the grievance of the assessee is that ld. CIT(A) has erred in upholding the denial of deduction u/s.80P(2)(a)(i) of the Income Tax Act of ₹ 56,359/- which was earned by the assessee as interest income. 10. The brief facts of the case are that assessee has filed its return of income on 08.10.2010 declaring total income at Nil. The ld. Assessing O .....

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₹ 14,02,150/-. 11. Dissatisfied by this assessment order, assessee carried the matter in appeal before the ld. CIT(A). Ld. CIT(A) has partly allowed the appeal of the assessee. The ld. CIT(A) has held that interest received by the assessee on short term deposits and Government securities would be assessed as income from other sources and deduction u/s.80P(2)(a)(i) of the Income Tax Act will not be admissible to the assessee. The finding given by the ld. CIT(A) in paragraph no.4.12 read as .....

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