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TMI Blog2018 (2) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AR of the assessee appeared and produced required information and other details as required by the AO. On verification and examination of return of income, the AO found that the assessee claimed interest income under the head 'profit and gains' from its business and issued show cause notice explaining why the income received on investment should not be treated as income from other sources. In reply, the assessee stated as under:- 'In an Employee's co-operative Credit Society, any moment huge fund may be required to meet the member's demand for loan. There can be no prediction as to how many members would apply for loan and for how much amount. Hence, it cannot be stated that the deposits are made out of the funds not immediately required for business. Hence, we are left to maintain full liquidity of our investments for carrying on business of proving credit to our members'. 4. The AO found not satisfied with the submissions of the assessee and held that the assessee has got surplus fund in the A.Y under consideration as well as earlier years and made investments mainly with State Bank of India (SBI) and W.B. State Co-operative Bank Ltd and interest income recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso observed that the society has been generating surplus fund not immediately required for business year after year. The society kept the surplus fund of this year as well as earlier years as investment mainly with State Bank of India and W.B. State Co-operative Bank Ltd. and earned interest income on this investment of Rs. 44,92,235/- As, this interest income was received on the investment made by the assessee out of the fund not immediately required for its business, the interest income cannot be said as profit or gain from business. The interest income received from investment can neither be termed as profit or gain attributable to the business activity of the assessee, as the business of the assessee was providing credit facilities to its member. Hence, the interest received by the assessee on its investment is treated as 'income from other source' which comes under the purview of section 56 of the Income-tax Act, 1961. And, as per section 80P(2)(a), the amount of profit and gains of business attributable to any such activity only shall be deducted from the gross total income. But, since the interest income received of Rs. 44,92,235/- is income from other source, the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the total interest income, amounting to Rs. 44,95,235/- was being brought under Sec 56 of the Income Tax Act. Having so decided, the AO has allowed certain portions to be eligible for deduction u/s 80P(2)(d), these being those related to interest income received by the' assessee- appellant (of, Rs. 5,61,698/ -) from the West Bengal Co-operative; Bank. The Ad has not allowed the amount of interest received from the nationalized banks, being an amount of Rs. 39,30,537/-. 02. After having perused the assessment order, and the various reasons recoded by" the AO while making the impugned disallowance of Rs. 39,30,537/-,and analyzed the submissions of the appellant, I find that the appellant's case.ls.slrnuar.to the' case of the SE,SEC &. E.Co. Railways Employees' Cooperative Credit 'Society Vs ACIT (2014) (41 CCH 0218), adjudicated by the Hon'ble jurisdictional Kolkata High Court. The matter has been referred to by the Hon'ble. ITAT,,' "C"- Bench Kolkata in their 'decision in IT No 1693/Kol/ 2012 dated 30th October,2014, relevant for the A.Y 2008-09 for the same assessee, namely The S.E, S.E.C. &. E.Co Railways Employees' Credit Society, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the decisions rendered against the assessee in relation to assessment years 1995-96 and 1996-97 on the same issue in relation to subsequent years. It was found by the Tribunal while affirming the 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 Rs. 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 Tax (A) as well as the Tribunal has followed the earlier unchallenged decision no question of law is involved in this matter. Nothing has been produced before us to show subsequent decision of the Tribunal in relation to the assessment years 1998-99 to 2002- 03 and 2003-04 have been challenged by any of the parties before this Court. It is submitted by Mr. Bhowmick that there has been challenge of the decision in relation to assessment years 1995-96, 1996-97 and the same is pending before this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 High Court in the case of Bihar Rajya Sahkari Bhoomi Bikash Co-op. Bank Ltd. (supra) the same is also not applicable to the facts of the present case. In that case the question was the treatment, of Interest earned on provident fund and rental income as attributable to banking business and this qualifying for deduction u/s. 80P(2)(a)(i) of the Act. 7.5 In the background of the aforesaid discussion and precedent we hold that the issue is squarely covered in favour of the assessee by the decision of the Tribunal and the Jurisdictional High Court in assessee's own case. The decision relied upon by the ld.CIT(A) are not applicable in the facts of the case. The principle of consistency as conveyed by the Hon'ble Apex Court mandates that the Revenue does not take a different stand. Accordingly we set aside the orders of the authorities below and decide the issue in favour of the assessee. 03. Other than the judgment of the jurisdictional High -Court has followed by the Hon'ble jurisdictional ITAT, I find that there are a catena of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilities to its members, or (ii) xxx (iii) xxx (iv) xxx (v) xxx (vi) xxx (vii) xxx the whole of the amount of profits and gains of business attributable to anyone or more of such activities. " 7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. Vs. CIT, Gujarat-II reported in ITR Vol. 113 (1978) Page 842 at page 93 as under: " As regards the aspect emerging from the expression 'attributable to' occurring in the phrase 'profits and gains attributable to the business of' the specified industry (here generation and distribution of electricity) on which the learned Solicitor General relied, it will be pertinent to observe that the legislature has deliberately used the expression 'attributable to' and not the expression 'derived from'. It cannot be disputed that the expression 'attributable to' is certainly wider in import than the expression 'derived from'. Had the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, 'as 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 Officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 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 show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said decision and argued that the AO has rightly disallowed the claim of assessee in respect of interest earned from nationalized bank i.e. SBI. He further placed his reliance on the order of SBI Employees' Co-op. Credit Supply Society and argued that the Hon'ble High Court of Gujarat held that investment of surplus fund in any bank were not part of business of assessee. The ld.DR further submits that the Hon'ble High Court of Gujarat in the case of supra considered the decisions of the Hon'ble Supreme Court & Hon'ble High Court of Karnataka in the cases of supra. The ld.DR also relied on the order of Ahmedabad Tribunal in the case of Shree Modpatni Co-op. Credit Society Ltd and referred to para 6 of the said order and argued that the Tribunal considering the submissions of assessee remanded the issue to the file of the AO to verify the interest expenditure, if any, incurred by the assessee for earning interest from the nationalized bank. 8. The assessee has also relied on the order of ITAT, Kolkata, Kolkata Benches, Kolkata dt. Nov., 18, 2015, ITA No. 1890/Kol/2012 for the A.Y 2009-10 in the case of The Baksara Co-op Credit Society Ltd and argued that the Kolkata Tribunal al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or more of the activities laid down in Sub-section (2) is deductible. The Division Bench did not give any independent reasoning. The Division Bench proceeded on the basis that the view taken by them was supported by the Judgment in the case of Karnataka State Co-operative Apex Bank (supra) which, with respect, was not a correct impression. The other judgement cited by Mr. Khaitan in the case of Guttigedarara Credit Co-operative Society Ltd. (supra) is not applicable because the caution appearing in sub-section (1) of Section 80P, that only an income referred to in sub-section (2) was deductible, was not taken into account. The sub-section (2) provides for only the income attributable to the business of advancing credit facilities to its members. Income arising from any other source including investment of capital "if not immediately required to be lent to the members" was not contemplated. The assessee cannot claim any deduction which is not provided for by the section. Moreover the judgment in the case of Totgars Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC) is a binding authority for the preposition that "interest income arising on the surplus inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce in this contentions of the ld. Counsel for the assessee, because, only net amount is always taxable for the purpose of income tax. If assessee has incurred any expenditure, which is attributable to the earning of interest income, then, the AO shall examine that aspect and exclude the interest expenditure if any incurred by the assessee for earning this interest from bank. In other words, the only net interest income is to be excluded from the claim of deduction under section 80P(2) of the Act. Appeal of the assessee is allowed for statistical purpose. 11. The Hon'ble Kolkata Bench in the case of the Baksara Co-op. Credit Society Ltd held as under:- "12. Keeping in view the decision of the Hon'ble Supreme Court in the case of Totgar's Cooperative Sale Society Limited (supra) cited by the ld. D.R. and the decision of the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Limited (supra) cited by the ld. Counsel for the assessee, the question that arises in the case on hand, is whether the investment, which is made by the assessee- Society and which has fetched interest income in question, is made out of its own surplus fund, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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