TMI Blog2015 (5) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of Commissioner of Income Tax (Appeals), Kolhapur dated 06-11-2013 for the assessment year 2010-11. The only issue raised by the assessee in appeal is disallowance of deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The brief facts of the case as emanating from records are: The assessee is a Co-operative Credit Society. The assessee filed its return of income for the assessment year 2010-11 on 11-10-2010, declaring NIL income. The return of the assessee was processed u/s. 143(1) on 20-05-2011 declaring refund of ₹ 4,940/-. In the meantime, the assessee filed revised return of income on 22-03-2011 declaring NIL income and claiming refund of ₹ 44,710/-. In both the returns of income the assessee had declared total income of ₹ 1,09,49,000/-. Both the returns of income, i.e. the original return as well as the revised return were selected for scrutiny. During the course of scrutiny assessment, the Assessing Officer observed that during the period relevant to assessment year 2010-11, the assessee has received interest of ₹ 29,28,361/- from bank deposits. On the said interest income the assessee has clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erused the orders of the authorities below. We have also examined the decisions on which both the sides have placed reliance. It is an undisputed fact that the assessee is Co-operative Credit Society. It is also not disputed that the assessee has earned interest income of ₹ 29,28,361/- from the deposits with nationalized bank. We find that the issue raised in the present appeal is similar to the one adjudicated by the Co-ordinate Bench of the Tribunal in the case of ITO Vs. Niphard Nagari Sahakari Patsanstha Ltd . (supra). In the said case the Tribunal has considered the judgment of the Hon ble Supreme Court of India rendered in the case of Totgars Co-op. Sale Society Ltd. Vs. ITO (supra), and has distinguished the same, on facts. The relevant extract of the order of the Co-ordinate Bench of the Tribunal in the aforesaid case is reproduced here-in-below: 11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case there is no dispute to the fact that the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of this society which has been claimed as exempt. According to the CIT (A), a similar issue to that of the present one was dealt with by the Hon'ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd v. ITO (supra). The issue before the Hon'ble Court for determination was whether interest income on short term bank deposits and securities would be qualified as business income u/s 80P (2)(a)(i) of the Act. 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 interest income arising on the surplus invested in short term deposits and securities which surplus was not required for business purposes? The assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is-whether interest on such deposits/securities, which strictly sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses 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 there is force in the argument of the assessee that the assessee not a co-operative Bank, but its nature of business was coupled with banking with its members, as it accepts deposits from and lends the same to its members. To meet any eventuality, the assessee was required to maintain some liquid funds. That was why, it was submitted by the assessee that it had invested in short-term deposits. Furthermore, the assessee had maintained overdraft facility with Dena Bank and the balance as at 31.3.2009 was ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the business of banking the investment in the state promoted treasury small savings fixed deposit certificate scheme is a banking activity, therefore, the interest accrued on such investment has to be treated as business income in the course of its banking activity. Once it is a business income, the assessee is entitled for deduction u/s 80P(2)((a)(i). therefore, this Tribunal is of the opinion that the judgment of the Larger Bench of the apex Court in Karnataka State Co- operative Apex Bank (supra) is applicable to the facts of this case. By respectfully following the judgment of the Apex court in Karnataka State Co-operative Bank (supra), the order of the Commissioner of Income-tax(A) is upheld. 6. In the result, the appeal of the revenue stands dismissed. 11.3 In the instant case there is no dispute to the fact that the society is a credit cooperative society authorised by the registrar of cooperative societies for accepting deposits and lending money to its members as per license granted by the registrar of cooperative societies and the main object of the society is to provide credit facility to members who can be any person of the society. We find the Pune ..... X X X X Extracts X X X X X X X X Extracts X X X X
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