TMI Blog2016 (6) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Haresh Shah Revenue by: Shri Vishwas Jadhav ORDER PER SAKTIJIT DEY, J.M. The aforesaid appeal at the instance of the assessee is directed against the order dated 28 th August 2014, passed by the learned Commissioner (Appeals)-26, Mumbai, for the assessment year 2010 11. 2. The solitary issue arising for consideration in this appeal is in relation to disallowance of part of deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961 (for short the Act ). 3. Brief facts are, the assessee is a credit co operative society. For the assessment year under consideration, the assessee filed its return of income on 26 th September 2010, declaring total income of `nil. During the assessment proceedings, the Assessing Officer after verifying the accounts of the assessee noticed that the assessee is collecting deposits by way of fixed deposit, saving deposits and recurring daily deposits. He found that as on 31 st March 2010, the paid up capital of the society was `88,76,300 and it has taken loans including deposits amounting to `10,14,47,893 and has given loans and advances of `9,53,85,330. The profit declared by the assessee during the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee cannot claim deduction under section 80P(2)(a)(i) in respect of such income. 5. Learned Authorised Representative submitted before us that there is no surplus reserve created by the assessee in its accounts so as to infer that the surplus funds available with the assessee which were not required for day to day business activities, were invested in fixed deposit. In this context, he drew our attention to the Balance Sheet as on 31 st March 2010 of the society. Learned Authorised Representative submitted, there is no fund earmarked for members. It is assessee s own funds which were invested in fixed deposits in the course of business. He, therefore, submitted that as the funds invested in fixed deposits were not earmarked for members and were assessee s own funds out of business activities, the interest income earned by keeping them in fixed deposit is to be treated as business income and not income from other sources. In this context, he relied upon the following decisions: i) ITO v/s Sunder Patel Co operative Credit Society Ltd., 2018 46 CCH 427 (Ahd.); and ii) Yashomandir Sahakari Patpedi Ltd., ITA no.3477/Mum./2014 dated 20.1.2016. 6. He submitted, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of the assessee. Moreover, it is not the case of the Department that the funds utilised for investment in fixed deposit is not assessee s own funds. Thus, as could be seen, the so called surplus funds were nothing but generated from business activities of the assessee and do not belong to the members. That being the case, even assuming that such surplus funds not required for day to day business activities were set apart forinvestment in fixed deposit for earning interest income,in our view, would form part of business income as the decision to invest the surplus funds is a decision taken by a prudent businessman for not keeping his funds idle. Therefore, in our view, the learned Commissioner (Appeals) fell into error in holding that the income earned on fixed deposit is to be treated as income from other sources and not business income of the assessee. Even otherwise also, the issue in dispute involved in the present appeal is covered by the decision of the co ordinate bench of the Tribunal cited before us by the learned Authorised Representative. In the case of Sunder Patel Co operative Credit Society Ltd., (supra), the Tribunal after taking note of the decision of the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature 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 from sources other than the actual conduct of the business. 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tfully following the decision of the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra), we set aside the order of the Ld. CIT(A) and direct the Assessing Officer to grant the assessee deduction under section 80 P of the Act on this issue. Consequently, grounds raised at S.No.1 and 3 of the assessee s appeal are allowed. 9. As far as the decision of the Hon'ble Supreme Court in Totgars Co operative Sale Society Ltd. (supra) relied upon by the learned Commissioner (Appeals), it needs to be mentioned as discussed in the decisions referred to above, the facts are completely different. In the case before the Hon'ble Supreme Court, the assessee co operative society apart from providing credit facilities to its 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 and was invested in short term deposit. The sale considerations were payable to members from whom produces were bought. Thus, the funds retained by the assessee were a liability and was shown in the Balance Sheet in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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