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The Dhanera Nagrik Sahkari Mandli Ltd. Versus The ACIT

Claim of deduction u/s.80P(2)(a)(i) denied - interest income earned by the assessee on deposits made out of surplus funds - Held that:- As in M/s Guttigedarara Credit Co-Operative Society Ltd. Versus The Income Tax Officer [2015 (7) TMI 874 - KARNATAKA HIGH COURT] interest income earned by a Credit Co-operative Society on deposits of surplus funds with scheduled bank would qualify for deduction u/s.80P(2)(a)(i) of the Income Tax Act - Decided in favour of assessee - ITA No. 2402/Ahd/2015 - Dated .....

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grievance of the assessee is that ld. CIT(A) has erred in denying the claim of deduction u/s.80P(2)(a)(i) of interest income amounting to ₹ 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 dec .....

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anks. Accordingly, ld. A.O. has made an addition of ₹ 3,93,533/-. 4. Appeal to the ld. CIT(A) did not bring any relief to the assessee. 5. With the assistance of ld. Representatives, we have gone through the record carefully. We find that an identical issue was considered by the Hon ble Karnataka High Court in the case of Guttigedarara Credit Co-operative Society Ltd. vs. ITO reported in [2015] 60 taxmann.com 215 (Karnataka). The Hon ble Karnataka High Court has reversed the order of the T .....

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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) Without prejudice, whether the tribunal is justified in not holding that if at all the interest earned from deposits with sc .....

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ts 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 has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to .....

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e 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 word 'attributable' used in the said Section is of great importance. The Apex Court had an occasion to conside .....

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r-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 used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and bui .....

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slature 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". The expression "attributable to" being of wider import, the said expression is used by the legislature wheneve .....

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nterest 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 th .....

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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 Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the .....

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