TMI Blog2016 (4) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (SC) wherein it has been held that assessee is not eligible for deduction u/s. 80P(2)(a)(i) where such interest was earned on surplus funds invested in short term deposits. 2. On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 2. Learned Representatives fairly agree that the issue in appeal is covered, in favour of the assessee, by the decision of this Tribunal dated 13th January, 2016, in the case of Anant Sahakari Sharafi Mandli Limited vs. ITO in ITA No.2747/Ahd/2015, wherein the SMC Bench of the Tribunal has, inter alia, observed as follows: 5. I have heard rival contentions and gone through the record carefully. The discussion made by the Hon ble High Court in the case of Guttigedarara Credit Co-op. Society Ltd., ITO(supra) is worth to note. It reads as under: 5. Learned counsel for the assessee assailing the impugned order contended that the interest accrued from the deposits made by the assessee in a nationalized bank out of the amounts which was used by the i assessee for providing credit facilities to its members and therefore the said interest amount is attributable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial 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 . 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 buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor- General, it has used the expression derived from , as, for instance, in section 80J. In our view, since the expression of wider impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear. Supreme Court was not laying down any law. 12. In the instant case, the amount which was invested in banks to earn interest was not an amount 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. 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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. I fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v/s. Andhra Pradesh State Co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com 66. 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 question of law is answered in favour of the assessee and against the revenue. The assessee society s main object is to give credit facilities to its members from the funds received from the members by way of collection of deposits from its members in the common fund and such common fund is deployed in the form of granting loan to the members of the society. As the co-op. credit society is engaged in the money lending business it has to maintain certain liquid funds as per various rules and regulations and also to meet the minimum requirement of the funds. As a measure of safety minimum liquid and convenience of fund movement the appellant society had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be taxable under section 56 of the Act, as rightly held by the assessing officer 19.1. However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon ble Supreme Court (On page 286) 7 . Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 and not under section 56 of the Act and, consequently, the assessee(s) was entitled to deduction under section 80P(2)(a)(i) of the Act. The argument was rejected by the assessing officer as also by the Tribunal and the High Court, hence, these civil appeals have been filed by the assessee(s). 19.2. From the above, it emerges that- (a) that assessee (issue before the Supreme Court) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society Ltd. 9supra) cannot in any way come to the rescue of either the Ld.CIT(A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT(A) was not justified in coming to a conclusion that the sum of ₹ 9,40,639/- was to be taxed u/s.56 of the Act. It is ordered accordingly. 5. Respectfully following the above decision of the Co-ordinate Bench, we hereby hold that the benefit of deduction u/s.80P(2)(a)(i) was rightly granted by ld.CIT(A), however, he has wrongly held that the interest income is taxable u/s.56 of the Act so do not fall under the category of exempted income u/s.80P of the Act. The adverse portion of the view, which is against the assessee, of ld.CIT(A) is hereby reversed following the decision of the Tribunal cited supra, resultantly ground is allowed. 8. Thus, consistently, it has been held that the interest income earned by a credit cooperative society on the FDRs. with nationalized bank would qualify for grant of exemption under section 80P(2) of the Income Tax Act. I allow the appeal of the assessee and direct the AO to grant exemption to the assessee. 3. We see no reasons to take any other view of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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