TMI Blog2016 (10) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of interest income as the same is not earned by the assessee from investments made by it with co operative societies. 2 The Learned CIT(A) erred in holding that the assessee was eligible to claim the deduction u/s. 80P(1)(a)(i) in respect of the income earned by way of interest on deposits/savings bank account and dividend income on the ground that the said income is attributable to the business activity of the assessee co operative society and hence, the assessee is eligible to claim the deduction u/s. 80P(2)(a)(ii) in respect of this income. 3 Whether the CIT(A) erred in law and on facts in not appreciating the facts of the case and also relying upon the decision of the High Court of Karnataka in M/s. Tumkur Merchants Souharda Credit Co Operative Society in ITA No. 307 dated: 28.10.2014, and other decisions, ignoring the decision of the Hon ble Supreme Court in the case of The Totgars Co Operative Sale Society Ltd., [(322 ITR 283(SC)]. 3 Facts in brief relating to the impugned issues are that the assessee, a Rural Co Operative Bank and its main activities are lending of money to its members and accepting deposits from them. It filed its return of Income for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith any co operative bank or co operative society, or 5 With any scheduled bank approved by the Registrar. Rule 23 of the Act states that the objects of keeping or investing the surplus funds of co operative societies is intended to meet any unforeseen losses. The assessee states that the Revenue s reliance on the Apex court s decision in the case of Totagar s Co operative Sale Society is misconceived and distinguishable on the facts of the case as under. M/s. Totagar s Co Operative Sale Society, apart from providing credit facilities to members, was also in the business of marketing agricultural produce grown by its members. The sale consideration received from marketing agricultural produce from members was retained in many cases. The said retained amount payable to members was invested in short term deposit. Such amount which was retained by the society was a liability and it was shown as such, in the Balance Sheet on the liability side. Therefore to the extent, such interest cannot be said to be attributable either to Section 80P (2)(a)(i) of the Act or under section 80P(2)(a)(iii) of the Act. Therefore on the facts of the case, the Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore the assessee prays that the decision of the Jurisdictional High Court in ITA No. 307 of 2014, i.e.,Tumkur Merchants Souharda Credit Co Operative Society Ltd., and also that of Cahndrapabhu Urban Co Operative Credit Society Ltd., Nippani vs. ITA in ITA No. 100043 and 1000045, dtd. 21/09/2015, be followed and relief be granted. I have gone through the assessment orders for the assessment years, viz., 2010 2011 and 2012 2013 of the AO, and also the written submissions of the assessee. The object of keeping or investing the surplus funds of a Co Operative Society is intended to meet any unforeseen losses. The amount that is eligible for deduction under this section is the amount of profit attributable to the activity mentioned in Sec. 80P(2)(a) and the activity of the assessee falls under sub-clause (i), viz., providing credit facilities to its members. Thus it is the Activity that is the condition precedent for claiming deduction u/s. 80P of the Act and once it is proved beyond doubt that a particular income is attributable to only the activity/activities mentioned u/s. 80P(2)(a) of the Act, the whole of such income is eligible for deduction u/s. 80P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id out in the form of deposits as in the instant case, would not cease to be a part of circulating capital of appellant nor would they cease to form part of its banking business. Thus, I agree that the decision of the Karnataka High Court in ITA No. 307, dtd. 28/10/2104, in the case of Tumkur Merchants Souharda Credit Co Operative Society, which has analysed the provisions of sec 80P (2) (a) (ii), with reference to the decision of the Supreme Court, referred to by the AO, i.e., Totagar s Co Operative Sale Society and also other decisions and further held that the word attributable to is much wider when compared to derived from as held by another Apex Court decision (Cambay Electric Supply Industrial Co. Vs. CIT (1978) 113 ITR 84), squarely applies to the facts of the case and hold that the interest and dividend income earned by the assessee will qualify for deduction u/s. 80P (2) (d) of the interest and dividend earned from deposits with other co operative banks or not. For this purpose it is necessary to go through the provisions of sec. 80P (2) (d). Sec. 80P (2) (d): In the case of Co-Op. Society engaged in, 1 Carrying on business of banking or providing cre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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