TMI Blog2018 (5) TMI 1821X X X X Extracts X X X X X X X X Extracts X X X X ..... A, JM For The Appellant : Shri S. N. Puranik For The Respondent : Shri Ajay Modi ORDER PER SUSHMA CHOWLA, JM: This bunch of appeals filed by different assessee are against respective orders of CIT(A), relating to different assessment years against respective orders passed under sections 143(3) / 143(3) r. w. s. 147 of the Income-tax Act, 1961 (in short the Act ). 2. All the appeals relating to different assessee on similar issue were heard on different dates and are being disposed of by this consolidated order for the sake of convenience. 3. First, we shall take up the appeal of Revenue in the case of M/s. Shiroli Budruk Krishak Seva Sahakari Patsanstha Maryadit in ITA No. 96/PUN/2017, relating to assessment year 2012-13, wherein following grounds of appeal have been raised:- 1. Whether in facts and circumstances of the case the Ld. CIT(A) was justified in allowing deduction u/s 80P of the IT Act, 1961 of ₹ 35,22,862/- from its reinvestment in Bank of India, a nationalized bank in view of section 80P(2)(d) of the I. T. Act, 1961, Co-operative Credit Societies where interest from investment in Co-operative Banks only are eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80P(2)(a)(i) of the Act. The Assessing Officer did not accept the plea of assessee and rejected the claim of deduction under section 80P(2)(d) of the Act. 6. The CIT(A) in turn, relying on the order of CIT(A) in earlier years in the case of assessee itself i. e. assessment years 2009-10 and 2010-11 allowed the claim of assessee. 7. The Revenue is in appeal against the order of CIT(A). 8. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer. 9. The learned Authorized Representative for the assessee pointed out that the CIT(A) had allowed the claim of assessee in assessment years 2009-10 and 2010-11, against which the Department had not filed any appeal before the Tribunal. Another aspect which was pointed out was that Bank of India was member of assessee s society since 29. 12. 1979, hence investment made by the assessee with its society and interest earned from the said Bank is exempt. The learned Authorized Representative for the assessee further placed reliance on the ratio laid down by the Pune Bench of Tribunal in Baliraja Gramin Bigarsheti Vs. ITO (2018) 52 CCH 247 (Pune Trib. ) and pointed out that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 80P(2)(a)(i) of the Act on interest income earned by the assessee with its investments in fixed deposits with Nationalized Banks. Since the investment was made with Nationalized Banks, the Assessing Officer held in ITA No. 96/PUN/2017 that the assessee was not entitled to claim the deduction under section 80P(2)(d) of the Act, which was originally claimed by the assessee. However, during the course of hearing, the assessee changed its stand and claimed deduction under section 80P(2)(a) of the Act, which was also denied to the assessee. In all other appeals, the assessee had claimed deduction under section 80P(2)(a) of the Act on the surmise that the said income belonged to Co-operative society and hence, was not exigible to tax. 14. Similar issue has been elaborately considered by the Pune Bench of Tribunal in ITO Vs. M/s. Maharashtra Bank Employees Co-op. Credit Society Ltd. in ITA Nos. 454 to 456/PUN/2015, relating to assessment years 2007-08, 2008-09 2010-11 along with CO Nos. 16 17/PUN/2017, order dated 22. 12. 2017, wherein the ratio laid down by the Hon'ble Supreme Court was also taken note of and subsequent decision on the issue was also considered and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s could be in any Co-operative Bank or Banking company approved for this purpose by the Registrar. The assessee society belonging exclusively to the employees of Bank of Maharashtra, had invested its reserve funds in FDs with Bank of Maharashtra. Accordingly, the assessee society applied for requisite permission from the Registrar of Co-operative Societies under section 70 to do so. The Registrar vide its letter dated 18. 10. 1995 in respect of investment of reserve funds consequent to Society s Resolution dated 25. 08. 1994 and Management Committee s Resolution dated 29. 07. 1991 and further the assessee s letter dated 11. 07. 1995, granted permission under section 70 of the Maharashtra Co-operative Societies Act, 1960 and Rule 54 of the Rules 1961 to transfer reserve funds amount with Pune District Central Co-operative Bank to the Bank of Maharashtra with condition of investment and also that the amount invested in the Bank of Maharashtra could not be given as security for borrowing or used for any other purpose without written permission from the Registrar. The copy of said permission is placed at page 6 with English translation at page 7 of the Paper Book. The claim of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in Totgar s Co-operative Sale Society Ltd. Vs. ITO (supra), the Tribunal after considering the factual and legal aspects held as under:- 17. In order to adjudicate the issue, first reference is made to the decision of Hon ble Supreme Court in Totgar Co-operative Sale Society Ltd. Vs. ITO (supra). In the facts of the said case, the assessee before the Hon ble Apex Court was a co-operative society providing credit facilities to the members or marketing agricultural produce of its members. The assessee had parked its funds in short term bank deposits and securities and the interest earned on the same was claimed as deductible under section 80P(2)(a)(i) of the Act. The Revenue authorities held that the same was taxable under the head income from other sources . The claim of the assessee was that it had invested the funds on short term basis as these were not required immediately for business purposes and consequently, interest received by the assessee was eligible for deduction under section 80P(2)(a)(i) of the Act. Further, the contention of the assessee before the Court was that under regulations 23 and 28 r. w. s. 57 and 58 of the Karnataka Co-operative Societies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be covered under section 56 of the Act, was eligible for deduction under section 80P(2)(a)(i) of the Act, was rejected. 18. In the facts of the case before Hon ble High Court of Karnataka in Tumkur Merchants Souharda Credit Co-operative Ltd. Vs. ITO (supra), the assessee co-operative society was engaged in the activity of carrying on of business of providing credit facilities to its members and it had earned interest income on its deposits. Another fact noted by the Hon ble High Court of Karnataka was that the amount which was invested in banks to earn interest was not the amount due to any members and it was not the liability of the assessee. In fact, the said amount was in the nature of profits and gains, which was not immediately required by the assessee for lending money to the members as there were no takers and the assessee in such circumstances, deposited the money in bank so as to earn interest. The Hon ble High Court of Karnataka in such circumstances held that the interest income was attributable to carrying on of business of banking and therefore, it was liable to be deducted in terms of section 80P(1) of the Act, they took note of insertion of section 80P(4) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d laid down the similar proposition as by the Hon ble High Court of Karnataka. 21. The claim of the assessee before us is that it was engaged in the business of providing credit facilities to its members, out of loan received from its members itself. The surplus amount which was on account of amount received from its members only, which had not been advanced to any of the members was invested in the banks, against which the said investment was made out of surplus funds available with the assessee, which in turn, were amounts advanced by the members itself. The said parking of funds with the co-operative banks was claimed by the assessee to be in the nature of its business activity as it was the requirement of Maharashtra Co-operative Societies Act, 1960, that 20 to 30% of total deposits are to be parked in the investments with co-operative banks. It is not the case of the Department that the amount invested by the assessee was out of any liabilities due by the assessee. In the absence of the same and following the same parity of reasoning laid down by the Hon ble High Court of Karnataka in Tumkur Merchants Souharda Credit Co-operative Ltd. Vs. ITO (supra) and the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproved security, then the income attributable thereto is deductible under section 80P(2)(a)(i) of the Act. The Hon'ble Supreme Court relied on earlier decisions of the Apex Court in this regard. 16. The Hon ble Punjab Haryana High Court in CIT Vs. Punjab State Co-operative Agricultural Development Bank Ltd. (2016) 389 ITR 607 (P H) has remanded the issue back to the Tribunal to decide whether the assessee was carrying on business of banking and thereafter, decide the issue of eligibility of deduction under section 80P(2)(a)(i) of the Act on the interest income attributable to the business of banking. 17. However, we find that the Hon ble High Court of Gujarat in State Bank of Income Vs. CIT (supra) while deciding similar issue of eligibility of deduction under section 80P(2)(a)(i) of the Act on interest income from deposits of surplus funds in banks held that neither it was business income nor income from investment in any other Co-operative societies. It may be pointed out that the Hon ble High Court in para 16 has clearly noted that in the said case, there was no obligation upon the assessee to invest its surplus funds with the State Bank of India. It was furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k or Scheduled Banking company. The assessee before us, in line with statutory obligation of maintaining its status of Co-operative society and as per the regulations of Maharashtra State Co-operative Societies Act, was duty bound to transfer 25% of its profits to reserve funds, which it has done. There is no dispute to the same. The second aspect is the utilization of funds in reserve funds by way of making FDRs with Scheduled bank under section 70 of the said Act. The assessee has received permission of the Registrar of Maharashtra Co-operative Societies Act to make such investment with Bank of Maharashtra and also in order to carry on the business activities of providing credit facilities to its employees, it is mandatory upon the assessee to invest 25% of its profits in the reserve funds, which in turn, are parked in FDRs with Bank of Maharashtra, then interest income earned by the assessee is from carrying on its business activities. Once it is so, then the said income is assessable as Income from business and the assessee is entitled to claim deduction under section 80P(2)(a)(i) of the Act. Accordingly, we hold so . . 15. The issue arising in the present appeal is sq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive Sale Society Ltd. (Supra). We find the Ld. CIT(A) allowed the claim of the assessee on the ground that the assessee is entitled to deduction u/s. 80P(2)(a)(i) on account of interest from banks other than cooperative banks, 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 Cooperati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as attributed by the Revenue. However, in regard to the case before the Hon'ble Supreme Court (On page 286) 7. . . . . . . . . . . . Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds 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 ITA No. 2180/PN/2013, A. Y. 2010-11 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 the assessee(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. 19. 7 Before parting with, we would, with due regards, like to record that the ruling of the Hon'ble jurisdictional High Court in the case of CIT v. Manekbang Co-op Housing Society Ltd reported in (2012) 22 Taxmann. com 220(Guj) has been kept in view while deciding the issue. 11. 2 We find the 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 ITA No. 2180/PN/2013, A. Y. 2010-11 credit facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative Sale Society Ltd. (Supra) we find no infirmity in the order of the Ld. CIT(A). Accordingly, the same is upheld and the grounds raised by the Revenue are dismisse d. 6. The stand of the assessee right through has been that the society is not engaged in any other activity except receiving deposits from its members and providing credit facilities to its members. The assessee has made deposits with nationalized banks in order to maintain liquidity and provide ready availability of funds for repayment of deposits on redemption/maturity. These facts have not been refuted by the department. Since, the issue raised in the appeal is identical to the one already adjudicated by the Co-ordinate Bench of the Tribunal, we respectfully follow the same ratio. Thus, we hold that the assessee is eligible to claim deduction u/s. 80P(2)(a)(i). In view of the above, the impugned order is set aside and the appeal of the assessee is allowed. 16. The learned Departmental Representative for the Revenue on the other hand, had placed reliance on the ratio laid down by the Hon ble High Court of Delhi in Mantola Co-operative Thrift Credit Society Ltd. (supra). The learned Authorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 cooperative societies on short term deposits with scheduled banks is eligible for deduction u/s. 80P(2)(a)(i). The relevant observation of the Hon ble High Court from para 6 onwards read as under : 6. From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the sum of ₹ 1,77,305/ represents the interest earned from shortterm deposits and from savings bank account. The assessee is a Cooperative Society providing credit facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 SolicitorGeneral, it has used the expression derived from , as, for instance, in section80J. 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 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 require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 cooperative 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. Departmental Representative where the Hon ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (Supra) has held that where the assessee cooperative society was engaged in providing credit facilities to its members earns interest income on surplus funds deposited as fixed deposits, such interest income would be assessable as income from other sources and thus not eligible for deduction u/s. 80P(2)(a)(i). However, it is also the settled proposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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