TMI Blog2019 (3) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee is a Co-operative Society and its main activities are accepting deposits and granting loans to its Members. Assessee electronically filed its return of income on 23.09.2015 declaring total income at Rs. Nil. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt30.10.2017 and the total income was determined at ₹ 20,16,130/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.27.04.2018 (in appeal No.PN/CIT(A)-7/Wd-1/10152/2017-18) granted partial relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following effective ground : On the facts and in the circumstances of the case and in law the lower authorities have erred in denying the deduction u/s 80P(2)(a)(i) for the interest earned from deposits with nationalized bank, a sum of ₹ 19,83,126/- treating it as a income from other sources by disregarding appellant s contention in this regard. 3. During the course of assessment proceedings, on perusing the Profit and Loss account, AO noticed that assessee had earned interest income from National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, ICICI Bank and Bank of Baroda. The said issue is squarely covered by the order of the Tribunal in ITO Vs. Niphad Nagari Sahakari Patsanstha Ltd. (supra) wherein the Tribunal had held that the assessee is entitled to claim deduction under section 80P(2)(a)(i) of the Act on the interest income received by it on bank fixed deposits. The relevant findings of the Tribunal are reproduced at page 9 of the appellate order but are not being reproduced for the sake of brevity. 10. We further find that the issue of allowability of deduction under section 80P(2)(a)(i) of the Act on interest income earned by the assessee in the hands of assessee was decided by the Tribunal in ITA No.1584/PN/2012, relating to assessment year 2009-10, vide order dated 30.04.2014; thereafter in ITA No.1394/PN/2015, relating to assessment year 2011-12, vide order dated 22.07.2016 and also in ITA No.2006/PUN/2014, relating to assessment year 2010-11, vide order dated 04.05.2017. The Tribunal in assessment year 2011- 12 had made reference to the ratio laid down in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit in ITA No.604/PN/2014, relating to assessment year 2010-11, order dated 19.08.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and rival contentions, the undisputed facts which emerges is, the sum of ₹ 1,77,305/ represents the interest earned from short term deposits and from savings bank account. The assessee is a Cooperative Society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law i.e., Section 80P(2)(a)(i): Deduction in respect of income of cooperative societies: 80P (1) Where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. (2) The sums referred to in subsection (1) shall be the following, namely: (a) in the case of coope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cooperative society and is liable to be deducted from the gross total income under Section 80P of the Act. 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Cooperative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee Cooperative Society, apart from providing credit facilities to the members, was also in the business of mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est 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 law that when two views are possible, the view which is in favour of the assessee has to be followed. Since in the instant case, two divergent decisions were cited before us and no decision of the Hon ble jurisdictional High Court is available, therefore, following the decision of the Hon ble Supreme Court in the case of CIT Vs. Vegetable products reported in 88 ITR 192 we hold that the view in favour of the assessee, i.e. the decision of the Hon ble Karnataka High Court has to be followed. Accordingly, we hold that the interest income earned by the assessee on short term deposits kept with banks has to be allowed as deduction u/s.80P(2)(a)(i) of the I.T. Act. The order of the CIT(A) is accordingly set aside and the grounds raised by the assessee are allowed. 11. In view of the issue being decided by the Pune Bench of Tribunal in assessee s own case in different years, we find no merit in the grounds of appeal raised by the Revenue and the same are d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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