TMI Blog2016 (7) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Facts of the case, in brief, are that the assessee is a Cooperative Credit Society registered under the Maharashtra Cooperative Societies Act, 1960. It filed its return of income on 14-10-2010 declaring total income at Nil after claiming deduction u/s.80P of the Act at ₹ 10,41,382/- During the course of assessment proceedings the AO observed from the details furnished by the assessee that it has earned interest income from loans and advances given to members and from other cooperative societies. However, the assessee cooperative credit society had also deposited its surplus funds in banks other than cooperative societies/cooperative banks on which it has earned interest to the tune of ₹ 15,36,248/-. After debiting the various expenses the assessee has claimed deduction u/s.80P(2)(a)(i) amounting to ₹ 10,41,382/-. The AO, therefore, asked the assessee to justify its claim of deduction u/s.80P(2)(a)(i) in respect of the interest income received from non cooperative banks as the said interest income is not attributable to the business of the assessee that of providing credit facilities to its members. According to the AO such income fall under the head inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (3) it ensures safety of surplus funds available with the assessee. He submitted that vide Government Resolution dated 12-11-2008 permission is granted to the Cooperative Societies to keep deposits in nationalized banks. He submitted that the Pune Bench of the Tribunal in the case of Niphad Nagari Sahakari Patsanstha Ltd. vide ITA No.1336/PN/2011 order dated 31-07-2013 has upheld the order of the CIT(A) in holding that assessee is entitled to deduction u/s.80P(2)(a)(i) on account of interest from banks other than cooperative banks/societies. He submitted that following the above decision the Pune Bench of the Tribunal in various other decisions have held the same view. The Ld. Counsel for the assessee referring to the decision of Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO reported in 55 taxmann.com 447 submitted that the Hon ble High Court in the said decision has held that the assessee credit cooperative society which has earned interest from banks other than co-operative banks is entitled to deduction u/s.80P(2)(a)(i) of the I.T. Act, 1961. He also relied on the following decisions : 1. Mahesh Nagari Sahakari Patsan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have also considered the various decisions cited before me. I find the assessee in the instant case is a cooperative society and has received interest of ₹ 48,16,346/- from its investments with different banks. The assessee claimed deduction u/s.80P(2)(a)(i) of its income on account of interest from banks other than cooperative societies. The AO following the decision of Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Ltd. disallowed an amount of ₹ 44,52,781/- after allowing deduction of ₹ 3,63,565/- as proportionate expenses for earning such interest income. I find the Ld.CIT(A) following the decision of the Pune Bench of the Tribunal in the case of Niphad Nagari 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 controve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on mutual funds long term and short term capital gain on mutual funds etc. While doing so, he held that the decision in the case of Totagar s Cooperative Sale Society Ltd. (Supra) is not applicable to the facts of the present case since in that case the amount invested in short term deposits and securities was not out of interest bearing deposits collected from members but out of sale proceeds of agricultural produce of farmer members marketed by the society. Further, the Hon ble Apex Court has considered only the latter part of section 80P(2)(a)(i), i.e. income of a cooperative society engaged in providing credit facilities to its members is eligible for deduction and has not considered 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 and not under section 56 of the Act and, consequently, the assessee(s) was entitled to deduction under section 80P(2)(a)(i) of the Act. The argument was rejected by the assessing officer as also by the Tribunal and the High Court, hence, these civil appeals have been filed by theassessee(s). 19.2 From the above, it emerges that (a) that assessee (issue before the Supreme Court) had admitted before the AO that it had invested surplus 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 considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cochin Bench of the Tribunal in the case of Muttom Service Cooperative Aplappuzha Bank Ltd. Vs. ITO (Supra) after considering the decision of Hon ble Supreme Court in the case of Totagar s Cooperative Sale Society Ltd. (Supra) and various other decisions has observed as under : 5. We have considered the rival submission on either side and also perused the material available on record. We have also carefully gone through the order of the lower authority. No doubt, the latest judgment in Totgar's Co-operative Sale Society Ltd vs ITO (supra), the Apex court found that the deposit of surplus 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 cooperative society whose business is banking. Admittedly, the assessee has invested funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm the action of the CIT(A) allowing the claim of the assessee for exemption u/s 80P(2)(a)(i) of the Act in relation to a sum of ₹ 75,36,432/-. Accordingly,Revenue fails in its appeal. 10. I find the Coordinate Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Patsanstha Maryadit vide ITA No.604/PN/2014 order dated 19-08-2015 following the decision of Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO reported in 55 taxmann.com 447 (to which I am a party) has observed as under : 9. 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. 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. v. CIT [1978] 113 ITR 84 (SC) 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 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 whenev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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