TMI Blog2020 (12) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... Chirakkal Service Co-operative Bank Ltd. [ 2016 (4) TMI 826 - KERALA HIGH COURT ]. Interest income earned from fixed deposits and claimed deduction u/s.80P(2)(d) - AO has denied deduction on interest income earned from a co-operative bank on the ground that as per the said provisions, interest earned from any other co-operative society is only eligible for deduction u/s.80P(2)(a)(i) - HELD THAT:- In this case, the assessee is primarily engaged in the business of providing credit facilities to its members and in the course of its business it has parked funds collected from its members in other co-operative banks / nationalized banks as per the statutory requirements of the cooperative societies Act. The assessee has treated interest earned from other co-operative banks as part of its business activity. Once the assessee has earned interest income as part of its business activity and such interest income is earned out of the funds belonging to its members, then the assessee is entitled for deduction u/s.80P(2)(d) in respect of such interest income. identical issue was considered by the Hon ble Madras High Court in the case of CIT vs. Veerakeralam Primary Agricultural Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve society but has earned interest from a Co-operative Bank where it has parked some of its funds and hence not eligible for deduction u/s.80 P(2)(d). {Reliance is placed in the case of Totagars Co-Operative Sales Society Limited Vs. ITO in 188 Taxman 282 (2010) by time Honourabie Supreme Court s decision Wherein it was held that the interest earned by the Cooperative society comes under other sources as such the societies are not eligible for deduction u/s 80P in respect of such interest income and ii) in the case of PCIT Vs. Totagars Cooperative Sales Society in 395 ITR 6ii (201 7)by the Honourabie Karnataka High Court -wherein it was held that deduction u/s 80P(2)(d) is not available to any Co-operative society, if the interest is earned from funds parked in any Co-operative Bank.} 2.3.1 The learned CJT(A) erred both in facts and on law in holding that the assessee being the cooperative society promoted by Government of India and dealing with its own members and providing credit and thrift facilities to only these members would be fully entitled to benefit of Section 80P. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the CIT(A). Before the ld.CIT(A), the assessee submitted that it is entitled for deduction u/s.80P(2)(a)(i) of the Act in respect of profit and gains derived from its business because the assessee being a co-operative society is mainly engaged in providing banking business to its members. The assessee further contented that although it has earned interest income from deposits kept with other cooperative banks but such deposits have been kept as required under the statutory provisions of co-operative societies and such deposits is made out of funds collected from the members. Since the interest income is an integral part of its business activity, it is entitled for deduction u/s.80P(2)(a)(i) of the Act for entire income including interest earned on funds kept in other co-operative banks. 5. The ld.CIT(A) after considering the relevant submissions of the assessee and also by taking note of provisions of Section 80P(2)(a)(i) of the Act and by relying upon certain judicial precedents including the decision of Hon ble High Court of Karnataka in the case of Pr.CIT vs. Totagars Co-operative Sale Society, 395 ITR 611 allowed relief to the assessee and directed the AO to delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction towards income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society. In this case, the assessee has kept surplus funds with other co-operative banks and the same is part of its business activity and hence total income including interest earned from deposits is eligible for deduction. The CIT(A) after considering the relevant submissions of the assessee rightly upheld that the assessee is entitled for deduction towards profit derived from its business activity including interest earned u/s.80P(2)(d) of the Act and his order to be upheld. 8. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below along with various case laws cited by both the parties. There is no dispute with regard to the fact that the assessee is a credit co-operative society registered under the TamilNadu Cooperative Societies Act, 1983. It is also not in dispute that the assessee is engaged in the business of providing credit facilities to its members. The AO has disallowed deduction claimed u/s.80P(2)(a)(i) of the Act primarily on two grounds. The first object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)(i) of the Act. The AO has taken support from the decision of the Hon ble Supreme Court in the case of M/s. Totagars Co-operative Sales Society Ltd., supra. We have gone through the findings recorded by the AO in the light of the decision of the Hon ble Supreme Court in the said case and find that the fact of the case before the Hon ble Supreme Court is entirely different from the facts of the present case. In the case before the Hon ble Supreme Court, the assessee was a cooperative sales society which is engaged in the business of trading in agricultural produce for its members and during the course of its business it has parked surplus funds in other cooperative banks / nationalized banks and earned interest. In those facts, the Hon ble Supreme Court came to the conclusion that the assessee is not entitled for deduction towards interest income u/s.80P(2)(d) of the Act, because such interest is not earned from its business activity. In this case, the assessee is primarily engaged in the business of providing credit facilities to its members and in the course of its business it has parked funds collected from its members in other co-operative banks / nationalized banks as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
