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TMI Blog2016 (2) TMI 1390X X X X Extracts X X X X X X X X Extracts X X X X ..... in denying the claim of deduction u/s.80P(2)(a)(i) of interest income amounting to Rs. 3,93,533/- which was earned by the assessee on deposits made out of surplus funds. 3. The brief facts of the case are that the assessee is a Co-operative Society registered under Gujarat Co-operative Society Act, 1961 carrying on the business of providing credit facilities to its member. It has 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 received interest income from banks on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961 on the facts and circumstances of the case? (iii) Without prejudice, whether the tribunal is justified in not holding that if at all the interest earned from deposits with scheduled banks is held to be not attributable to the activity of providing credit to members, then the whole of such income is not liable to tax but only the net income after reducing the expenditure incurred to earn such interest income would be liable to tax on the facts and circumstances of the case?" The Hon'ble Karnataka High Court has recorded the following findings while deciding 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (at page 93) as under:- 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act. 11. In this context when we look at the judgment of the Apex Court in Totgars Cooperative Sale Society's case (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 CIT v. Andhra Pradesh State Co-operative Bank Ltd. [2011] 336 ITR 516/200 Taxman 220/12 taxmann.com 66. 13. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial questions of law are answered in favour of the assessee and against the revenue. Hence, we pass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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