TMI Blog2014 (12) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... such fixed deposits which were again used for the purpose of business of assessee - Decided against revenue - I.T.A. No. 2607/Del/2012 - - - Dated:- 19-12-2014 - H. S. Sidhu (Judicial Member) And T. S. Kapoor (Accountant Member) For the Petitioner : Gaurav Dudeja For the Respondent : Dr. Rakesh Gupta, Ashwani Taneja ORDER T. S. Kapoor (Accountant Member) This is an appeal filed by Revenue against ht order of Ld. CIT(A) dated 19.03.2012. The revenue has taken the following grounds of appeal: 1. The Ld CIT(A) grossly erred in deleting the addition made by the AO not appreciating the fact that the assessee was not eligible for deduction u/s 80P of I.T. Act, 1961 w.r.t. interest and Dividend earned by the assessee from its investment of surplus funds in banks and from Non-members amounting to ₹ 62,11,528/-. The Ld. CIT(A) grossly erred in deleting the addition made by the AO by treating the interest and dividend received by the assessee from its investments of surplus funds in banks and from other Non-members amounting to ₹ 62,l1,528/- as income from other sources and hence such income is not eligible for deduction u/s 80P of I.T.Act,1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s members. It is not the case of the assessee that investments of surplus funds was mandated by virtue of any Statute or Law, since, as per its own submission dt 23.12.2010, AR stated that assessee society is not registered either with RBI or under any other banking Statute and was not statutorily liable to invest in such deposits. It is also not the case of the assessee that it is into banking business or providing banking facilities to its members. Hence, this interest income received from investments in Banks cannot be presumed to be or attributed as the income of the Society from its business activity of providing credit facilities to its members. Assessee in its submission dt 23.10.2010, has affirmed that scheduled bank in question is not the member of the assessee co-operative society. In the present case, the assessee- society invested funds not immediately required for its business purposes with the Bombay Mercantile Cooperative bank and Delhi State Co-operative bank, however, nowhere by-laws of the assessee society mandates the procedure regarding investment of surplus funds with scheduled banks. Interest on such investments, therefore, cannot fall within the meaning of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 5(iii). On a plain reading of the clause (d) sub-section (2) of Section 80-P read with newly inserted section 80P(4), it can be stated that the intention of the Legislature is to encourage the idea of Co-operative Societies to help its own members as well as other such Co-operative Societies to grow economically, through credit facilities and investments etc. The intent and purpose of section 80P(2)(a)(i) of the Act is to grant deduction to income which has a direct and proximate nexus to the activity of providing credit facility carried on by a cooperative society. If both the sections 80P(2)(a)(i) and 80P(4) are read together, the intention of the Legislature becomes clear, and that is to provide benefit of deduction to a co-operative society which actually provides credit/finance to its members in furtherance of the co-operative movement and not for the purposes of banking. In other words, with amendment in the section 80-P r.w.s 2(24)(viia) w.e.f. 01.04.2007, legislature has taken away the shield of tax benefits in the nature of deduction from the co-operative banks, emphasizing the intention of promoting only co-operative societies that work only for members without an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and restricted to the income from its business activity of providing credit to its members only. 4. Aggrieved, the assessee field appeal before Ld. CIT(A). Ld. CIT(A) after recording various submissions of the assessee, has deleted the additions by holding and relying on various case laws, as under: I. CIT vs. Punjab State Co-operative bank Limited- The court has discussed the case of a co-operate bank. The 'A' is a Co-operate Society and has not provided any banking facilities. It is providing credit facilities to a limited extent. Totgar's Co-operative Sale Society Limited v I ITO- A.O has wrongly placed reliance on the decision of Totgar's Co- operative sale society Limited v/s ITA (2010) 322 (ITR 0283 dated 08.02.2010. The facts of the above case are different when compared to appellant's case. Case citied above relates to a society whose business is 'Sales' i.e. marketing. A marketing society's main business is not of providing credit facilities to its members and such society getting short term fund invested and getting income from it may be taxable. As per above case interest income is not from its main business while in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant on Fixed Deposit, and Investment in shares of Bombay Mercantile Bank Limited and Delhi State Co-operative Bank Limited both totaling to ₹ 4930005/ - by stating that both Income are not business receipts but income from other sources. I delete the disallowance made by the Assessing Officer. Appeal on this ground is allowed. In the result, the appeal is allowed. 5. Aggrieved, the Revenue is in appeal before us. 6. At the outset, Ld. D.R. submitted that income of interest and dividend was not eligible for deduction u/s 80P2(a)(i) of the I. T. Act, 1961 as the said section provides the deduction for cooperative societies to claim deduction on whole of the amount of profit and gain of business but the assessee has earned this income from its fixed deposits which is taxable under Section 56 of the Act. In this respect, our attention was invited to relevant provisions of Section 80P. It was further submitted that the assessee was not eligible for deduction u/s 80P(2)(d) also as the fixed deposit was not placed with a cooperative society. It was submitted that Ld. CIT(A) has passed a non speaking order and has not given any finding and after recording submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible u/s 80P(2)(d) assessee was also eligible under section 80P(2)(i) as income from funds kept as short term funds is deemed to have accrued as profits and gain of business attributable to the activities of assessee and reliance in this respect was placed on the case law of Dhan Laxmi Credit Cooperative Society Ltd. vs ITO in I.T.A. No. 2342 wherein under similar circumstances, the deduction u/s 80P(2)(i) was allowed after taking into account the case law of Totgar s Society as decided by Hon'ble Supreme Court. The Ld. A.R. also referred to Section 80P(4) and submitted that benefit of Section 80P has been taken away from 01.04.2007 from cooperative banks but the assessee was not a cooperative bank but was a cooperative society and therefore, was eligible for deduction under that section. 9. We have heard rival parties and have gone through the material placed on record. We find that total income earned by the assessee included income on fixed deposits placed with Bombay Mercantile Bank, interest income from a scheduled bank and dividend income from Delhi Cooperative Bank. From the certificate as placed at paper book page 30, we find that Bombay Mercantile Cooperative Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X
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