TMI Blog2016 (7) TMI 1498X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee are thus, allowed. - ITA No.992/PN/2016, ITA No.1041/PN/2016, ITA No.1138/PN/2016 - - - Dated:- 29-7-2016 - MS. SUSHMA CHOWLA, JM For the Appellant : Shri S.N. Puranik For the Respondent : Shri Anil Kumar Chaware ORDER PER SUSHMA CHOWLA, JM: This bunch of appeals filed by different assessees are against separate orders of CIT(A)-7, Pune, dated 05.02.2016, 05.02.2016 16.02.2016 relating to assessment year 2010-11 against respective orders passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. This bunch of appeals relating to different assessees were heard separately but relating to same issue are being disposed of by this consolidated order for the sake of convenience. The facts and issues in all the appeals are identical. However, in order to adjudicate the issue, reference is being made to the facts in ITA No. 992/PN/2016. 3. The assessee in ITA No. 992/PN/2016 has raised the following grounds of appeal:- 1. CIT(A) has erred in confirming Assessing Officer s Order of assessing income of ₹ 3,80,660/- against return income of Rs.NIL. Appellant prays for deletion of addition / disallowance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Authorized Representative for the assessee pointed out that the issue raised in the present appeal is squarely covered by the order of Tribunal in Shri Vasantrao Chougule Nagari Sah. Pat Sanstha Ltd. Vs. ITO in ITA No.516/PN/2014, relating to assessment year 2009-10, order dated 31.05.2016, which in turn relied on its earlier order in ITO Vs. M/s. Kundalika Nagari Sahakari Patsanstha Maryadit in ITA No.900/PN/2014 and ITO Vs. M/s. Kamal Mahila Nagari Sahakari Patpedhi Maryadit in ITA No.898/PN/2014 and Cross Objections No.34/PN/2015 and 32/PN/2015, relating to assessment year 2010-11, order dated 29.01.2016. 7. On perusal of record, it is apparent that the assessee was a co-operative credit society. It was receiving deposits from its members and was also providing credit facilities to its members. The assessee was earning interest on such credit facilities provided to its members, which was claimed as its income from business being eligible for deduction under section 80P(2)(a)(i) of the Act. There is no dispute with regard to the claim of deduction under section 80P(2)(a)(i) of the Act in respect of such interest income received by providing credit facilities to its members. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P(4) of the Act, which was inserted by the Finance Act, 2006 w.e.f. 01.04.2007 and it was pointed out that the said section had overriding provisions and hence, the same was applicable. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said interest income was held to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Patsanstha Ltd. (supra) had laid down the similar proposition as by the Hon ble High Court of Karnataka. 21. The issue arising before us is whether the interest earned by the assessee on its investments is eligible for deduction under section 80P(2) of the Act. The learned Authorized Representative for the assessee has made several propositions before us. The first and foremost proposition raised by the learned Authorized Representative for the assessee is that the interest income is eligible for the deduction under section 80P(2)(a)(i) of the Act. However, without prejudice to the same, the learned Authorized Representative for the assessee made an alternate proposition that in case the interest earned by the assessee is held to be assessable as income from other sources, then the proportionate expenditure relatable to such investments is to be allowed in the hands of the assessee and then only balance interest income is to be taxed as income from other sources. Another proposition raised by the learned Authorized Representative for the assessee was that where the investments were made with other co-operative societies, then the assessee was entitled to the benefit of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the present case being at variance to the facts before the Hon ble Supreme Court in Totgar s Co-operative Sale Society Ltd. Vs. ITO (supra), we hold that the assessee is entitled to the claim of deduction under section 80P(2)(a)(i) of the Act. In the alternate, we find merit in the plea of the assessee that at best the income which can be assessed in the hands of assessee is the net income and not the gross income as proportionate expenditure incurred is to be allowed in the hands of the assessee. However, we are not adjudicating this issue since we have already held the assessee to be eligible for claim of deduction under section 80P(2)(a)(i) of the Act. In view thereof, we also do not adjudicate the second alternate plea raised by the assessee that it is entitled to the claim of deduction under section 80P(2)(d) of the Act. However, the assessee is not entitled to the deduction under section 80P(2)(a)(i) of the Act relating to dividend received from UTI Mutual Funds and Sundaram Finance of ₹ 87,087/- and ₹ 88,519/-, which a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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