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2016 (9) TMI 249 - ITAT AHMEDABAD

2016 (9) TMI 249 - ITAT AHMEDABAD - TMI - Deduction under section 80P(2)(a)(i) in respect of interest earnings from the State Bank of India granted - I.T.A. Nos.1201, 1202, 1203, 1204 & 1205/Ahd/2015 - Dated:- 28-7-2016 - Pramod Kumar AM For The Appellant : M.K. Patel, For The Respondent : Satish Solanki ORDER 1. These five appeals pertain to the same assessee, involve a common issue and were heard together. As a matter of convenience, therefore, all these appeals are being disposed of by way of .....

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n respect of interest income from FDRs with SBI. 1.2 The applicant states that the impugned order of the AO dated 24.02.2015 was communicated to the applicant on 26-2-2015 and therefore the appeal was required to be filed on or before 28.04.2015. However, the same was filed 7-5- 2015 and thus there is a delay of about 10 days that is from 29-04-20l5 to 06-05- 2015 in preferring the said appeal. The small delay in filing the same has been caused due to the sufficient reasons as stated herein belo .....

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re filed with the Registry. The applicant most respectfully submits that the delay has been caused due to sufficient cause and it is neither intentional nor deliberate so that if the delay is not condoned, the applicant will suffer irreparable loss and injury. On the other hand, if the delay is condoned, the Respondent will not suffer in any way. Therefore, the delay caused due to genuine and bona fide reasons is required to be condoned in the interest of justice and equity. 1.4 This application .....

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pass such further orders and give such other directions and as in the nature and circumstance of the case may require. AND FOR THIS ACT OF KINDNESS AND JUSTICE, THE APPLICANT SHALL AS IN DUTY BOUND EVER PRAY. 3. Having perused the above petition, and having heard rival contentions on the same, I am inclined to accept assessee s explanation for delay. I am satisfied that the delay in filing of appeal was due to bonafide reasons beyond the control of the assessee. I, therefore, condone the delay .....

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d that the assessee had earned interest income on fixed deposits with the State Bank of India. The Assessing Officer was of the view that deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 was not admissible in respect of such earnings since Stat Bank of India, per se, was not a member of the assessee Society. Accordingly, the assessments were reopened to decline deduction under section 80P(2)(a)(i) of the Act in respect of the interest earnings from the State Bank of India. The re .....

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ssessee, by a division bench order of this Tribunal in the case of State Bank of India Supervising Official s Co-operative Credit Society Limited vs. ITO (ITA Nos.905 to 908/Ahd/2015; order dated 10.06.2016). In the said order, the division bench has, inter alia, observed as follows :- 3. Out of remaining grounds, ld. Counsel for the assessee contends that the following ground is the effective ground:- That the learned CIT(A) has grievously erred in law and on facts, in disallowing the claim of .....

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was found that interest was earned on SBI FDRs and also received interest income from the loan advanced to members. Assessee was allowed deduction u/s 80P(2)(a)(i), which according to Assessing Officer the assessee was not eligible to assessee. Notice u/s 147 was issued, during the course of re-assessment proceedings, the Assessing Officer observed that the assessee was not entitled to deduction u/s 80P(2)(a)(i) of the Act on ₹ 21,87,277/- (AY 2007-08) received as interest on FDs with SBI .....

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in respect of interest income received from SBI and treated the same as Income from Other Sources. 4.1 During the appellate proceedings, the assessee contended that funds deposited with SBI were not surplus funds and that the operational funds were deposited with the bank. The assessee further submitted that an overdraft is obtained on these FDs and the amount of overdraft facility is used for meeting the obligations of giving interest and loan to its members without resorting to premature with .....

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ce, the assessee is entitled to deduction u/s 80P(2)(a)(i) of the Act of ₹ 21,87,277/- for Assessment Year 2007- 08 in respect of interest income received from SBI. The assessee cited various case laws in support of its various contentions. 4.2 Ld. CIT(A) confirmed the action of the Assessing Officer in denying deduction u/s 80P(2)(a)(i) by following observations:- From the above it is clear that deduction u/s 80P is available to a cooperative society engaged in activities listed in (a)(i) .....

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r of the appellant society. Further, providing loans and advances to banks and earning interest on the same is not part of business activity of the appellant. Further, in respect of contention of the appellant that operational funds have been kept as FDs with bank is not borne by facts. During the year under consideration, the appellant had reserve funds to the tune of ₹ 3.06 crores. The FDs with the bank were for ₹ 3.15 crores which is roughly equal to the reserve fund This clearly .....

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ITO 322 1TR 283 (SC) and held that interest earned on surplus funds not required for business immediately and invested in short term deposits is required to be taxed as Income from Other Sources u/s.56 of the Act Hon'ble Apex Court observed as follows: - "The words "the whole of the amount of profits and gains of business" emphasize that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Soci .....

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ents relied upon by the appellant the same are not applicable to the present case. In view of discussion above and relying on the judgment of the Apex Court in Totgars Co-operative Sale Society (supra), I hold that the AO was justified in disallowing deduction u/s 80P(2)(a)(i) of the Act of ₹ 21,87,277/- in respect of interest income received from SBI. Accordingly, I uphold the addition of ₹ 21,87,277/- made on this account. This ground of appeal is dismissed. 4.3 Aggrieved, the asse .....

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erchants Souharda Credit Cooperative Ltd vs. ITO, reported in [2015] 55 taxmann.com 447 (Karnataka), wherein in similar set of facts, the Hon ble Karnataka High Court held as under:- A Cooperative 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, they cannot keep the said amo .....

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and is liable to be deducted from the gross total income under Section 80P of the Act. [Para 8] 10. 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 the members, as there were no takers. Therefore they had deposited the money in .....

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question, which was invested in SBI to earn interest, was not an amount due to any members. It was not the liability. It was also not shown as liability in their account. This amount, which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, the assessee had deposited the money in SBI so as to earn interest. The said interest income was attributable to carrying on the business of banking and th .....

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Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd vs. ITO, reported in [2015] 230 taxman 309 (Kar), which clearly held as under:- 8. Therefore, the word attributable to is certainly wider in import than the expression derived from. Whenever the legislature wanted to give a restricted meaning, they have used the expression derived from. The expression attributable to being of wider import, the said expression is used by the legislature whenever they intended to gather receipts .....

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its 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. 9. In this context when we look at .....

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ts members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the 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 office .....

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gains, was not immediately required by the assessee for lending money to the 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 Commissioner of Income-Tax III, Hyderabad vs. Andhra Pradesh State cooperativ .....

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erative Ltd (supra), the Hon ble Karnataka High Court has duly considered the Hon ble Supreme Court judgment in the case of Totgars Co-operative Sale Society Ltd and distinguished it as it dealt with only issue of surplus amounts deposited in the bank which were held on account of being liabilities payable to members of agricultural marketing credit society. In clear contradiction, the funds in the instant case are the surplus funds and not the liability of the bank but its own surplus funds. Ba .....

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- 8. We are of the view that the facts of the case are identical to that in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. (supra) which has been decided by Hon ble Karnataka High Court and therefore considering the facts of the present case in the light of the aforesaid decision of Hon ble Karnataka High Court and in the absence of any contrary binding decision pointed out by Revenue, we are of the view that the interest earned by the assessee is eligible for deduction u/s 80P. .....

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kur Merchants Souharda Credit Cooperative Ltd, Andhra Pradesh State Cooperative Bank Ltd., Amalsad Vibhag Vividh Karyakari Sahkari kHedut Mandali Ltd. and Maroli Bazar Vibhag Vividh Karyakari Sahkari Mandi Limited (supra). Thus, the assessee s claim may be allowed. 5.5 Ld. Departmental Representative, on the other hand, contends that the issue of assessee s appeal for AY 2010-11 was only on the validity of 263 proceedings and not the decision on merits. In this regard, he relied upon the decisio .....

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edit & Supply Society Ltd, the judgment is dated 26.03.2015. The latest Karnataka High Court Judgment in the case of Tumkur Merchants Souharda Credit Cooperative Ltd (supra) has been considered in assessee s case and not in earlier case. Besides, on merits, there are two High Court judgments i.e., Hon ble Karnataka High Court and Andhra Pradesh High Court (supra), in favour of the assessee and no High Court s judgment has been cited by the Revenue. It is a settled law that Hon ble High Court .....

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