TMI Blog2016 (7) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... the Asstt.Year 2010-11. 2. The grounds of appeal taken by the Revenue read as under: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in law, in directing to tax interest received from short term deposits with banks as 'profit and gains of business1 eligible for deduction U/S.80P against 'income from other sources' not eligible for deduction u/s.SOP as held by the AO which gets support from the decision of the Supreme Court in the case of Totgars Cooperative Sale Society Ltd., reported in 188 taxman 282 (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. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. 3. The ld.counsel for the assessee at the outset submitted that the issue is squarely covered in favour of the assessee by the order of the ITAT dated 14.3.2016 in its own case in the Asstt.Year 2009-10. He p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er contra, learned counsel for the Revenue strongly relied on the said judgment of the Supreme Court and submitted that the case is covered by that judgment of the Apex Court and no case for interference is made out. 7. From the aforesaid facts and rival contentions, the undisputed facts which emerge are, certain sums of interest were earned from short-term deposits and from savings bank account. The assessee is a Co-operative Society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. 8. In this regard, it is necessary to notice the relevant provision of law i.e., Section 80P(2)(a)(i):- 80P Deduction in respect of income of co- operative societies:- (1) Where, in the case of an [ assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion attributable to being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Co-operative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, the society cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act. 11. In this context when we look at the judgment of the Apex Court in Totgars Co-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r their own costs. 6. In the case of Dhanlaxmi Credit Co-op. Society, a similar issue has been considered by the Tribunal for the Asstt.Year 2012-13. The finding of the Tribunal recorded in para-5 of ITA No.2073/Ahd/2015 reads as under: 5. We have heard the rival contentions and gone through the facts and circumstances of the case as well as records available and judicial pronouncements referred therein. The only issue is in regard to the addition of various types of income such as rent, interest income from nationalized bank, commission income, other income totaling to ₹ 12,72,308 and the AO after allowing deduction under section 80P(2)(c) of the Act assessed the income of the assessee society at ₹ 12,22,308/-. As submitted in the statement of facts by the assessee society that its main object is to provide credit facilities to its members and the society is neither registered under Banking Regulation Act nor doing any banking activity. Surplus funds in the hands of society at times when borrower members demand was less in comparison to the deposits from members held by the assessee society. Therefore, in the interest of the members this surplus fund was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax refund of ₹ 13,271 totalling to ₹ 45,542/- is not eligible for deduction under section 80P(2)(a)(i) of the Act. Ground Nos.1 and 2 are partly allowed. 7. Similarly, we deem it appropriate to take note of the finding recorded by the ITAT in the case of Dhanlaxmi Credit Co-op. Society Ltd., in the Asstt.Yar 2008-09, which reads as under: 4. With this brief background, we have heard both the sides. It was explained that the Co-operative Society is maintaining operations funds and to meet any eventuality towards re-payment of deposit, the Cooperative Society is maintaining some liquidated funds as a short term deposit with the banks. This issue was thoroughly discussed by the ITAT B Bench Ahmedabad in the case of The Income Tax Officer vs. M/s.Jafari Momin Vikas Co-op.Credit Society Ltd. bearing ITA No.1491/Ahd/2012 (for A.Y. 2009-10) and CO No.138/Ahd/2012 (by Assessee) order dated 31/10/2012. The relevant portion is reproduced below:- 19. The issue dealt with by the Hon ble Supreme Court in the case of Totgars (supra) is extracted, for appreciation of facts, as under: What is sought to be taxed under section 56 of the Act is the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural produce; and (d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3. In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4. While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities emerge, namely: (1) in the case of the assessee, the entire funds were utilized for the purposes of business and that there were no surplus funds; - in the case of Totgars, it had surplus funds, as admitted before the AO, out of retained amounts on marketing of agricultural produce of its members; (2) in the case of present assessee, it did not carry out any activity except in providing credit facilities to its members and that the funds were of operational funds. The only fund available with the assessee was deposits from its members and, thus, there was no surplus funds as such; - in the case of Totgars, the Hon ble Supreme Court had not spelt out anything with regard to operational funds; 19.5. Considering the above facts, we find that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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