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Boinchipota Samabay Krishi Unnayan Samity Ltd. Versus DCIT, Circle-1, Hooghly

Eligibility to deduction u/s. 80P(2)(a)(i) on interest income - Held that:- Respectfully following the decision of Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd. (2010 (2) TMI 3 - SUPREME COURT ) and taking down the fact that interest income in the present case is identical to the interest income received by the assessee in the decision referred to above. We hold that the assessee is entitled to deduction u/s 80P(2)(a)(i) of the Act in respect of the interest income. In thi .....

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ed by DCIT, Circle-1, Hooghly u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 07.12.2007 for assessment year 2005- 06. Grounds raised by assessee are reproduced below:- 1) That CIT(A) has erred in holding while disposing ground No.1 (as reproduced below) that assessment order does not suffer any legal infirmity, ignoring the fact that the assessee has challenged by this ground the computing the income at ₹ 7,31,360/- which is bad in law and .....

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per computation of total income ignoring the fact that assessee in his computation has claimed the said amount as not taxable u/s. 80P of the IT Act, 1961 and in allowing relief of ₹ 78,685/- only being difference between ₹ 9,95,656/- added by AO as income from deposit mobilization and ₹ 9,16,971/- claimed by assessee in his computation as not taxable u/s 80P. 3) That the CIT(A) has further erred in confirming addition of ₹ 30,000/- being provision made for Gratuity9 Fund .....

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aised by assessee in ground No.1 & 2 is that Ld. CIT(A) erred in not giving relief to the assessee u/s 80P of the Act. 3.1 Facts in brief are that assessee is a Co-operative Society registered under the West Bengal Co-operative Societies Act, 1983 and engaged in distribution of agricultural related materials. During the first appellate proceedings, Ld. CIT(A) noticed that assessee had claimed deduction u/s. 80P(2)(a)(i) of the Act on the following interest income. a) From Banks Rs. Rs. UBI-R .....

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specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) in the case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agricultu .....

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of business attributable to any one or more of such activities : The CIT(A) treated the interest income as income from other sources and accordingly denied the benefit of deduction u/s 80P(2)(a)(i) of the Act without adducing any reason thereon. According to the assessee, it was giving loans to agriculturists who are members of the society. Therefore interest income was part and parcel of the activity of either banking or providing credit facilities to members. This contention was not accepted b .....

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the aforesaid decision accepted loans and deposits from its members and utilized the same towards providing loans and credit facilities to its members. However, excess funds were utilized in making deposits in banks and investments. The Tribunal relying upon the decision rendered by the Hon ble jurisdictional High Court in the case of CIT vs South Eastern railway Employees Co-operative Credit Society in G.A.No.1838 of 2010 dated 22.07.2010 came to the conclusion that interest income has to be re .....

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re also affirmed by the Hon ble Jurisdictional High Court in its order for A.Yr.2005-06. In this order the Hon ble Jurisdictional High Court has considered all the relevant orders and has decided the issue in favour of the assessee. We may gainfully reproduce the operative order of the Jurisdictional High Court which is as under :- We have gone through the impugned judgment and order of the Learned Tribunal. It appears that the point involved .is whether interest earned out of the investment ear .....

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The Learned Tribunal in relation to the assessment years 1998-99 to 2002-2003 by order dated 10.11.2006 in ITA Nos. 840 to 844/Kol/2006 and again by order dated 29.12.2006 in relation to assessment years 2003-04 and 2004-05 has deleted the disallowance made in those assessment years and it was held that the interest earned by the assessee cooperative society from its short term and fixed deposits with the bans and other institutions were disallowed on the ground that this income was not business .....

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e order of the Commissioner of Income Tax (Appeal) that there is no change in the facts and circumstances of this case and it was held that the assessee was eligible for deduction under Section 80P(2)(a)(i) on interest on investment amounting to ₹ 1,18,07,645/- in this assessment year also. Since the Tribunal found that this decision of the Tribunal was followed by CIT(A) there is no reason to take a different view. Under these circumstances, we feel that when the Commissioner of Income Ta .....

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we think that challenge of the assessee has now become redundant as the earlier view taken in both the assessment years have been reversed by the Tribunal by its subsequent decision. Hence, the pendency of that earlier matter is of no consequence in this matter. Had there been a challenge of the decision of the Tribunal in relation to the assessment years 1998-99 to 2002-03 and also 2003-04 to 2004-05 the matter would have been different. The revenue did not take any step whatsoever. Therefore, .....

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hen the issue has been decided by the Jurisdictional High Court no convincing reason has been pointed to take a different view, any deviation is not permitted. 7.3. Now we come to the case laws relied upon by the ld. CIT(A). As regards the decision of the Hon ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. (supra) we find that the said decision is not applicable in the facts of the case. We find that the Hon ble Apex Court in the said decision in para 11 has itself mentioned .....

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e Apex Court had held that interest earned would come in category of Income from other sources taxable u/s 56 of the Act and would not qualify for deduction as business income u/s 80P(2)(a)(i). From the above it is amply evident in the present case the assessee has not retained any amount due to its members and instead of paying the same had invested the same and earned interest. Thus this case law is not applicable on the facts of the present case. 7.4. As regards the decision of Hon ble Patna .....

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