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2020 (3) TMI 1111

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..... h interest income falls in the category of "Other income" which has been rightly taxed by the Department under section 56 - Decided against assessee. - ITA No. 2894/Del/2018 - Dated:- 17-3-2020 - Ms. Suchitra Kamble, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : None For the Revenue : Shri Pradeep Singh Gautam, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the Delhi Cooperative Commercial Thrift and Credit Society Ltd (assessee) against the order of the Commissioner of income Tax (Appeals)-18, New Delhi dated 23/02/2018 wherein the appeal filed by the assessee against the order of Income Tax Officer, Ward-53 (5), New Delhi (the learned AO) passed u/s 143 (3) of the Income .....

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..... the said income of interest from FDRs and Saving Bank Accounts. 6. That the disallowance and explanations made are unjust, unlawful and based on mere surmises and conjectures and the evidence produced, material placed and available on record has not been properly considered and judicially interpreted. 3. The assessee is a registered co-operative society to undertake thrift and credit business. It filed its return of income on 30/9/2014 declaring Nil income. During the assessment proceedings it was found that assessee is deriving interest income from loans and advances to members and also interest from fixed deposit receipts with bans. Assessee claimed the total income as fully deductible under section 80P of the Income Tax Act and therefore .....

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..... , assessee is aggrieved and preferred this appeal before us. 5. Despite notice, none appeared on behalf of the assessee. This appeal is fixed for hearing on earlier six occasions wherein on earlier four occasions assessee has sought adjournments. No adjournment request was received. Therefore, now the issue is decided on the merits of the case. 6. The learned Departmental Representative vehemently supported the order of the learned CIT(A) and submitted that issue is decided following the decision of the Hon ble jurisdictional High Court and therefore there is no infirmity in the said order. 7. We have carefully considered the rival contention and perused the orders of the lower authorities. The only issue involved in this appeal is whether .....

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..... #39; account, could be taxed as business income under section 28 of the Act ? In our view, such interest income would come in the category of "Income from other sources", hence, such interest income would be taxable under section 56 of the Act, as rightly held by the Assessing Officer. In this connection, we may analyse section 80P of the Act. This section comes in Chapter VI-A, which, in turn, deals with "deductions in respect of certain incomes". The headnote to section 80P indicates that the said section deals with deductions in respect of income of co-operative societies. Section 80P(1), inter alia, states that where the gross total income of a co-operative society includes any income from one or more specified activ .....

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..... t required immediately by the assessee(s) for its business purposes and which have been only invested in specified securities as "investment". Further, as stated above, the assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this "retained amount" which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities. Such an amount, which was retained by the assessee-society, was a liability and it was shown in the balance-sheet on the liabilities-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 in section 80 .....

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..... see(s) in support of its contention that the source was irrelevant while construing the provisions of section 80P of the Act. We find no merit because all the judgments cited were cases relating to co-operative banks and the assessee-society is not carrying on banking business. We are confining this judgment to the facts of the present case. To say that the source of income is not relevant for deciding the applicability of section 80P of the Act would not be correct because we need to give weightage to the words "the whole of the amount of profits and gains of business" attributable to one of the activities specified in section 80P(2)(a) of the Act. An important point needs to be mentioned. The words "the whole of the amount .....

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