TMI Blog2009 (12) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... O has erred in law and on facts while holding that activities of the assessee fall under s. 80(2)(c) and 100 per cent deduction cannot be allowed. 4. That the learned CIT(A) has erred in law and on facts while confirming the addition of ₹ 21,61,240 on account of interest received from its members. 5. That the observation of the AO regarding NPA provision in the assessment order is wrong, illegal and without justification. 6. That the learned AO has erred in law and on facts while making an addition of ₹ 3,92,600 out of NPA provision which does not change the character of income of the assessee, rather the addition on account of said NPA provision has enhanced the exempt income. 7. That the learned CIT(A) has further erred in law and on facts while confirming the addition of ₹ 3,92,660 out of NPA provision. 8. The appellant seeks the permission for any other ground as may be submitted during the course of hearing. Accordingly, it is prayed that the order of the AO making addition referred to above and likewise the order of learned CIT confirming the same be quashed and declared version may kindly be accepted. 2. In both the appeals, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute vide its order dt. 14th Nov., 2008. Aggrieved by the same, the assessee filed the appeal before the learned first appellate authority who vide order dt. 27th July, 2009 dismissed the appeal of the assessee by upholding the order of the AO. 4. The learned counsel for the assessee stated that the assessee was required to provide credit facility to the members of the bank both for development of agricultural sector or for non-agricultural sector. He further stated that the AO completed the assessment without referring any bye-laws, which have been violated by the AO (assessee). He further stated that the Revenue authorities have not cited any provisions of the Act or the bye-laws prohibiting the assessee from advancing loans to its members for the non-farming sector. He stated that the assessee has produced the instructions issued by the Punjab State Co-operative Agricultural Bank Ltd., Chandigarh bearing No. SADB/7653, dt. 16th Oct., 1993, (PBR-7) 7789, dt. 20th Oct., 1992 (PBR-7 and 8) and 14540, dt. 11th March, 1994 (PBR-8) specifically before the authorities below showing that the assessee bank was directed to achieve the target of loans fixed by the Government/State Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to deduction under s. 80P(2)(a)(i) of the Act because such income falls in the nature and character mentioned therein. He further stated that the expression used for allowing deduction is in respect of the whole of the amount of profits and gains of business attributable to any one or more of activities enumerated in s. 80P(2)(a) of the Act. The expression used is not derived from . It is settled position of law. that expression attributable to is more liberal and wide than the expression derived from . In case of income derived from , the nexus must be direct and not incidental to the carrying on of a particular activity. However, in case of attributable to , income would be exempt or entitled to deduction even if the connection with the carrying on of activity is indirect or incidental. This difference was duly noted by the Hon'ble Supreme Court of India in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC), wherein it is observed that the legislature has deliberately used the expression attributable to having a wider import than the expression derived from , thereby intending to cover receipts from sources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TTJ (Hyd) 116 : (2007) 291 ITR 163 (Hyd)(AT); 8. Asstt. CIT vs. H.P. State Co-operative Agriculture Rural Development Bank Ltd. (2006) 104 TTJ (Chd) 864 : (2006) 100 ITD 479 (Chd); 9. Ambala Central Co-operative Bank Ltd. vs. ITO (1984) 20 TTJ (Chd) 37 : (1984) 8 ITD 795 (Chd); 10. Asstt. CIT vs. Punjab State Co-op. Agri. Dev. Bank Ltd. (ITA No. 435/Chd/2009). 6. The learned counsel for the assessee also placed reliance on a recent judgment of the Hon'ble Punjab Haryana High Court in the case of CIT vs. Punjab State Co-operative Bank Ltd. (2008) 5 DTR (P H) 132 : (2008) 300 ITR (P H) 24 and stated that in the case, the assessee was a co-operative society carrying on the business and extending credit facilities to its members and nominal members. The AO denied exactly similar deduction to the assessee and treated the interest received from the nominal members as income under the head 'Income from other sources'. The learned CIT(A) and the Tribunal allowed the deduction under s. 80P(2)(a)(i) of the IT Act, 1961 for the reasons that the said income was income from banking business. The Hon'ble jurisdictional High Court has upheld the order of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f profits and gains attributable to either the business of banking carried out by a co-operative society or the business of providing credit facilities to its members earned out by a co-operative society. Both these points are relevant to decide the controversy on hand. Firstly, there is no dispute that the assessee before us is a co-operative society. Further, in relation to the significance of the expression attributable to in s. 80P(2)(a)(i), it is now well-settled, in view of the judgment of the Hon'ble apex Court in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC) that the aforesaid expression is much wider in scope and connotation than the words derived from . The words 'derived from' are considered to mean only such incomes which have a direct nexus between the profits/gains and the particular activity in question. The difference in scope and connotation between the expressions attributable to and derived from has also been succinctly laid out by the Hon'ble apex Court in the case of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC). An income can be said to be attributable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-operative Agricultural Development Banks in the State. Subject : Regarding advancement under non-farm sector. Memo In continuation of this office letter No. SADB/7653, dt. 16th Oct., 1993, the required guidelines along with specimen of documents required for non-farm sector financing are enclosed herewith for further necessary action. The details of proformae are given below : 1. List of activities'Annex. A. 2. Project at a glance'Annex. B. 3. Techno-economic project report'Annexs. B1 and B2, 4. Certificate from the competent authority'Annexs. B1 and B2. 5. Appraisal report by F.O.'Annex. C. 6. Proper utilisation certificate by F.O.'Annex. D. 7. Proper utilisation certificate by manager'Annex. E. 8. Monitoring report by R.O. District Manager'Annex. F. You are also directed to supply one copy of the guidelines with documents to each field officer of your bank so that he may be having these guidelines with him for more effective lending under non-farm sector. The Punjab State Co-operative Agricultural Development Bank Ltd., Chandigarh. Brief guidelines for financing under non-farm sector activities. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e : 1. The approval of firms by the committee/administrator/supervisory officer of the PADB, as the case may be, may not be adhered to in case of non-farm sector loans. However, the manager shall ensure the utilisation of loans advanced under non-farm sector. 2. Earlier a member of the PADB could purchase shares upto ₹ 10,000 and as such the M.C.L. of the member was ₹ 2 lacs for raising of long-term loans. Since this limit for purchase of shares has been enhanced in the Punjab Co-operative Societies Act and now a member of the PADB can purchase shares upto ₹ 50,000, the M.C.L. of the member, therefore, also increases to ₹ 10 lacs accordingly, provided he fulfils the conditions and has a security of agriculture land to offer for the purpose. Further, the committee of the PADB is already authorised to finally sanction all the loans under the NABARD schemes upto the extent of eligibility. Non-farm sector is also a NABARD scheme for the purpose of finally sanctioning the loans by the committee of PADB. 3. The project reports for advancement of non-farm sector loans can also be secured from the sources available or the agencies other than those alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of ₹ 3,92,660. Briefly stated, the facts are that the AO disallowed an amount of ₹ 3,92,660 in ITA No. 419/Asr/2009 being excess provision under s. 36(viia) of the IT Act, 1961. On appeal, the learned CIT(A) has upheld this disallowance in the foregoing discussion and we have held the entire income of the assessee entitled to s. 80P(2)(a)(i) of the IT Act, 1961. Even if the disallowance for excess provision is upheld, the same would enhance the income which is entitled to deduction under s. 80P of the IT Act, 1961. The learned counsel for the assessee stated that in the case of Punjab State Co-op. Agri. Dev. Bank Ltd. (supra), the AO disallowed similar claim and the CIT(A) deleted the disallowance. On this issue, the Tribunal, Chandigarh Bench in its order dt. 24th Sept., 2004 passed in ITA No. 435/Chd/2009 deleted the disallowance and dismissed the appeal of the Revenue. Respectfully following the judgment of the Chandigarh Bench (supra), we allow this ground in favour of the assessee and deleted the addition in dispute. 13. As we have stated in the beginning that in the present two appeals the issue in dispute are identical, we have deleted the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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