TMI Blog2018 (11) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... IL CHATURVEDI, AM For The Assessee : Ms. Riya S. Shah For The Revenue : Mrs. Shabana Parveen ORDER PER ANIL CHATURVEDI, AM : 1. These two appeals filed by the assessee are emanating out of separate orders of Commissioner of Income Tax (A) 7, Pune dt. 05.06.2017 for A.Y. 2013-14 and order dt.04.08.2017 for A.Y. 2012-13. 2. Before me, at the outset, both the parties submitted that though the appeals filed by the assessee are for different assessment years but the facts and issues involved in both the appeals are identical except the assessment years and the amounts involved and therefore the submissions made by them while arguing one appeal would be equally applicable to the other appeal also and thus, both the appeals can be heard together. In view of the aforesaid submissions of both the parties, I, for the sake of convenience, proceed to dispose of both the appeals by a consolidated order but however, proceed with narrating the facts in ITA No.2542/PUN/2017 for assessment year 2012-13. 3. The relevant facts as culled out from the material on record are as under :- Assessee is a Co-operative Credit Society engaged in the business of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld.D.R. After considering the reasons stated in the affidavit, I am of the view that the delay in filing the appeal has been satisfactorily explained. In view of these facts, I condone the delay and admit the appeal for hearing. 8. During the course of assessment proceedings, AO noticed that assessee has earned aggregate interest of ₹ 14,44,054/- on FDRs maintained with nationalized banks private sector banks, (the details of interest are listed at para 6.4 of the assessment order). AO was of the view that the interest income of ₹ 14,44,054/- was not from assessee s business activity of providing credit facilities to its members, it was in the nature of income from other sources which was required to be taxed u/s 56 of the Act and it was also ineligible for deduction u/s 80P(2)(a)(i) of the Act. The assessee was show caused and asked to explain as to why deduction claimed on such interest income not be disallowed. The submissions made by the assessee were not found acceptable to the AO. He thereafter considered the interest income earned aggregating to ₹ 14,44,054/- as income from other sources u/s 56 of the Act and denied the claim of deduction u/s 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive society is in nature of cooperative bank or primary agricultural credit society can be decided by RBI in terms of explanation to section 5(ccvi). The appellant has not brought anything on record certifying by the RBI that appellant is primary agricultural credit society as defined in part V of Banking Regulation Act, 1949 in section 5(cciv) or Primary Credit Society u/s. 5(ccvi). Further, the issue is under consideration before the Honorable Supreme Court in case of Mantola Co-Operative Thrift Credit Society Ltd. and there is no stay to the order of the Delhi High Court. 6.3 In view of the above, respectfully following the Delhi High Court decision and Supreme Court decision which is directly on the issue involved on interest from the bank is to be treated as income from other sources and appellant is not eligible for 80P the appellant has received interest of ₹ 14,44,054/- from the banks which cannot be characterized as income from business of providing credit facility to members of the society. Therefore, action of the Assessing Officer in treating ₹ 14,44,054/- as income from other sources is upheld and ground No.1, 2 and 3 of the appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant appeal is regarding the allowability of the claim of deduction u/s.80P(2)(a)(i) on the interest income of ₹ 10,77,0656/- received from the fixed deposits kept with nationalised banks, i.e. Bank of India and IDBI. According to the revenue such interest income has to be treated as income from other sources and thereby assessee is not entitled to deduction u/s.80P(2)(a)(i). According to the assessee such interest income has to be treated as income from business in view of the plethora decisions of the Coordinate Benches of the Tribunal. 9. I find an identical issue had come up before the Tribunal in the case of Chandraprabhu Gramin Bigar Sheti Sahkari Patsantha Maryadit Vs. ITO, Pandharpur vide ITA No.1352/PN/2016 order dated 29-07-2016 for A.Y. 2010-11. After considering the various decisions made by both the sides, I have decided the issue in favour of the assessee by holding that the assessee is entitled to deduction u/s.80P(2)(a)(i) on the interest income kept with various banks other than cooperative banks/societies. The relevant observation of the Tribunal from para 8 onwards read as under : 8. I have considered the rival arguments made by both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ari Patsanstha Ltd. (Supra) held that the said interest is its business income eligible for deduction u/s.80P(2)(a)(i) of the I.T. Act. I find the Tribunal in assessee s own case in the immediately preceding assessment year has also decided identical issue and the appeal filed by the Revenue has been dismissed. The relevant observation of the Tribunal from para 6 onwards read as under : 6. At the time of hearing, it was a common point between the parties that an identical controversy has been considered by the Pune Bench of the Tribunal in the case of another co-operative society, namely, ITO vs. Niphad Nagari Sahakari Patsanstha Ltd. vide ITA No.1336/PN/2011 dated 31.07.2013 wherein the issue has been held in favour of the assessee after considering similar objection, which has been raised by the Assessing Officer in the present case. The learned Representative for the assessee has furnished a copy of the said order of the Tribunal dated 31.07.2013 (supra) and has also pointed out that the Tribunal has duly considered the decision of the Hon ble Supreme Court in the case of Totgar s Co-operative Sale Society Ltd. (supra), which has been relied upon by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered the earlier part of section 80P(2)(a)(i), i.e. income of a cooperative society engaged in carrying on the business of banking is eligible for deduction. 11.1 We find the Ahmedabad Bench of the Tribunal in the case of M/s. Jafari Momin Vikas Cooperative Credit Society Ltd. (Supra) after considering the decision of Hon ble Supreme Court in the case of Totagar s Cooperative Sale Society Ltd. (Supra) has observed as under : 17. We have carefully considered the submissions of the either party, perused the relevant records and also the case law on which the learned AR had reservation in it s applicably in the circumstances of the assessee's case. 18. It was the stand of the learned CIT (A) that the entire income was not exempt and that it was to be examined as to whether there was any interest income on the short term bank deposits and securities included in the 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 Coop. Sale Society Ltd v. ITO (supra). The issue before the Hon'ble Court for determination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urplus funds, which were not immediately required for the purpose of its business, in short term deposits; ( b) that the surplus funds arose out of the amount retained from marketing the agricultural produce of the members; ( c) that assessee carried on two activities, namely, (i) acceptance of deposit and lending by way of deposits to the members; and (ii) marketing the agricultural produce; and ( d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3 In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4 While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities emerge, namely: ( 1) in the case of the assessee, the entire funds were utilized for the purposes 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 act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds by the co-operative society is not eligible for deduction u/s 80P(2). In the case before the Apex Court in Totgar's Co-operative Sale Society Ltd vs ITO (supra), the assessee co-operative society was to provide credit facility to its members and market the agricultural produce. The assessee is not in the business of banking. Therefore, this Tribunal is of the opinion that the judgment of the Apex court in Totgar's Co-operative Sale Society Ltd (supra) is not applicable in respect of the co-operative society whose business is banking. Admittedly, the assessee has invested funds in state promoted treasury small savings fixed deposit scheme. Since Government of India has withdrawn India Vikas Patra, as a small savings instrument, funds invested at the discretion of the bank is one of the activities of the banking as per the Banking Regulation Act. Since the assessee cooperative society is 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 bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only dispute to be decided in the grounds raised by the assessee is that whether the interest amounting to ₹ 25,01,774/- earned by the assessee on short term deposits with banks has to be treated as income from other sources u/s.56 or the assessee is eligible for deduction u/s.80P(2)(a)(i). We find the AO following the decision of Hon ble Supreme Court in the case of The Totgar s Cooperative Sale Society Ltd. (Supra) treated the interest earned from such short term deposits as income from other sources and brought the same to tax which has been upheld by the CIT(A). 10. It is the case of the assessee that in view of the decision of Hon ble Karnataka High Court in the case of Tumkur Merchants Souhards Credit Cooperative Ltd. (Supra) the interest earned from such short term deposits with bank is entitled to deduction u/s.80P(2)(a)(i). We find the Hon ble High Court of Karnataka after considering the decision of Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Ltd. (Supra) held that the interest earned by such coopera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 expression derived from been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression derived from , as, for instance, in section-80J. In our view, since the expression of wider import, namely, attributable to , has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. 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 expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 member's, 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 CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com 66. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order: 11. No doubt, a contrary decision to this effect was also cited by the Ld. Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. 11. In the result, the appeal filed by the assessee is allowed. 11. Before me, it is Revenue s contention that while deciding the assessee s appeal for A.Y. 2008-09, the amendment made to the Section w.e.f. A.Y. 2007-08 has not been considered by the Tribunal. Before me, no material has been placed by Revenue to demonstrate that Revenue has preferred appeal against the order of Tribunal for A.Y. 2008-09 and that the higher Judicial Forum has set aside / stayed the order for A.Y. 2008-09. Further, Revenue has neither pointed out any distinguishing feature in the facts of the present case and that of earlier year. I therefore, relying on the decision of the Tribunal in assessee s own case for A.Y. 2008-09 and for similar reasons hold that assessee is entitled to deduction u/s 80P(2)(a)(i) of the Act on the interest income on fixed deposits kept with nationalized banks and private sector banks. Thus, the ground of the assessee is allowed. 12. In the result, the appeal of assessee in ITA No.2542/PUN/2017 for A.Y. 2012-13 is allowed. 13. As far as the grounds raised in appeal in ITA No.2427/PUN/2015 for A.Y. 2013-14 is concerned, in view of the submissions of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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