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2020 (3) TMI 1111

..... ssessee on bank interest on fixed deposit receipts and savings bank accounts? - HELD THAT:- The above issue is covered by the decision in case of Totgar’s Co-operative Sale Society Ltd. v. ITO [2010 (2) TMI 3 - SUPREME COURT] wherein it has been considered and held that assessee is not eligible for deduction under section 80P of the Act on the bank interest received on fixed deposit receipts and savings bank accounts. Such 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 - 17-3-2020 - Ms. Suchitra Kamble, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : None For the Reven .....

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..... essee forms part of its operational income by way of being incidental to it, and hence, covered under the Principle of Mutuality. 5. Without prejudice to other grounds, in view of the fact and circumstances of the case, the CIT(Appeals) has erred in law and on facts in disallowing the direct and indirect expenses relatable to the impugned interest income which ought to have been treated as allowable expenditure against 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 reg .....

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..... /s 80P of the Income Tax Act. Consequently the addition of ₹ 794284/- was made and the assessment order under section 143 (3) of the Act was passed on 05/12/2016. 4. The assessee challenged the same before the learned CIT(A). The CIT(A) passed an order on 23/02/2018 following the decision of the Hon ble jurisdictional High Court in case of Mantola Co-operative Thrift Credit societies Vs. CIT dated 27/08/2014. Thus, 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 .....

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..... assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is-whether interest on such deposits/securities, which strictly speaking accrues to the members' 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 ana .....

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..... providing credit facilities to its members or marketing of the agricultural produce of its members. When the assessee-society provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under section 80P(2)(a)(i) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not 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" .....

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..... s. Even Explanation (baa) to section 80HHC was added to restrict the deduction in respect of profits retained for export business. The words used in Explanation (baa) to section 80HHC, therefore, cannot be compared with the words used in section 80P of the Act which grants deduction in respect of "the whole of the amount of profits and gains of business". A number of judgments were cited on behalf of the assessee(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 t .....

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