TMI Blog2016 (3) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1] The learned CIT(A) erred in confirming the disallowance of deduction u/s 80P in respect of the interest income of ₹ 6,31,391/- received by the assessee co-operative society on investments made in deposits in Jalna Dist. Central Co-operative Bank Ltd. 2] The learned CIT(A) erred in holding that the assessee was not eligible to claim the deduction u/s 80P(2)(a)(ia)/80P(2)(d) in respect of the income earned by way of interest on deposits made in Jalna Dist. Central Cooperative Bank Ltd. 3] The learned CIT(A) failed to appreciate that the assessee was a credit cooperative society engaged in the business of providing credit facility to its members and hence, the investments made in fixed deposits of Jalna Dist.Central Co-operative Bank Ltd. were made in the course of the assessee's business and thus, there was no reason to deny the deduction u/s 80P(2)(a)(i) in respect of the income derived from the above investments. 4] Without prejudice to the above grounds, the assessee submits that Jalna Dist Central Co-op. Bank Ltd. was registered under the Maharashtra Coop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 80P(2)(d) of the Act. 5. Similar issue of claim of deduction under section 80P(2)(a)(i) of the Act in respect of interest received on Fixed Deposits, arose before the Tribunal in ITO Vs. M/s. Kundalika Nagari Sahakari Patsanstha Maryadit (supra), wherein the Tribunal has held as under:- 16. We have heard the rival contentions and perused the record. The assessee before us is a credit co-operative society, which is accepting deposits from its members and using the same for giving loans to its members. In addition, the assessee is also making investments with other co-operative societies, which it claims to have made as per the mandate of Maharashtra Cooperative Societies Act, 1960. The issue arising before us is whether the interest income earned by the assessee on such investments is liable for deduction under section 80P(2) of the Act in the hands of the assessee. The Assessing Officer relying on the ratio laid down by the Hon ble Supreme Court in Totgar Co-operative Sale Society Ltd. Vs. ITO (supra) was of the view that the said interest earned by the assessee was not eligible for deduction under section 80P(2)(a)(i) of the Act. The alternate plea of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source or head under which such income would fall. The Hon ble Apex Court noted that the interest income arising on surplus investment in short term deposits and securities, which surplus was not required for business purpose, was to be taxed under section 56 of the Act. The Hon ble Apex Court further noted that the assessee markets the produce of its members whose sale proceeds at times were retained by it and the tax treatment of such amount was the issue before them. The Hon ble Apex Court held that where the interest on deposits / securities, where the funds were not immediately required for business purposes, was invested in specified securities, would be taxable as income under section 56 of the Act. It further held that where the assessee society regularly invests its funds not immediately required for business purposes, interest on such investment could not fall within the expression of profits and gains of business and the same could not be held to be attributable to the activities of the society i.e. carrying on of business of providing credit facilities to its members or marketing the agricultural produce of its members. The Hon ble Apex Court further reiterated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities side. Where the interest income was earned on such funds, then the same was held by the Hon ble Apex Court to be treated under section 56 of the Act. However, the distinction was drawn by the Hon ble High Court of Karnataka in para 10 and it was pointed out that in the case before them, the amount which was invested in banks to earn the interest was not an amount due to any member, it was not the liability and it was not shown as liability in their accounts. In fact, the amount was in the nature of profits and gains which was not immediately required by the assessee for lending money to the members as there were no takers and hence, was deposited in the banks so as to earn interest, such interest income earned by the assessee was held to be attributable to carrying on the business and therefore, same was liable to be deducted in terms of section 80P(1) of the Act. 19. Another decision referred to by the learned Authorized Representative for the assessee is Guttigedarara Credit Co-operative Society Ltd. Vs. ITO (supra), wherein the assessee was a co-operative society engaged in the activity of carrying on the business of providing credit facilities to its members. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 reflects the assets in the form of bank balance, cash, investments and other deposits along with the loan advanced to members, property held by the assessee and interest receivable on investments and outstanding loan. On the liabilities side, the assessee has declared share capital, share capital fund of the assessee society, the deposits received from its members and other deposits and thereafter, provision of ₹ 41,62,699/-. The break-up of the investment of ₹ 5.55 crores is provided by the assessee at page 56 of the Paper Book. The break-up of the investment is in different FDs with cooperative societies totalling to ₹ 5.47 crores and the other investment in UTI Mutual Funds, Sundaram Finance, gratuity fund and shares totalling ₹ 7,48,216/-, totalling ₹ 5.55 crores. The assessee has further furnished the break-up of FDs with different co-operative banks at pages 57 to 68 of the Paper Book with sample copies of FDs at pages 69 to 75 of the Paper Book. The claim of the assessee before us is that it was engaged in the business of providing credit facilities to its members, out of loan received from its members itself. The surplus amount which was o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
