TMI Blog2019 (12) TMI 1481X X X X Extracts X X X X X X X X Extracts X X X X ..... associate members are to be considered at par in the present year which is before amendment in Karnataka Co Operative Societies Act, In respect of interest from regular members, learned CIT (A) has directed the AO to allow deduction u/s 80P. I modify this direction and direct the AO to allow deduction u/s 80P as per law in respect of interest income from regular members as well as associate members. Deduction u/s 80P in respect of Bank Interest - We find that the claim of the assessee for deduction u/s 80P in respect of bank interest income was disallowed by AO and CIT (A) by following the judgment of Hon ble Apex Court rendered in the case of Totgars Co Operative Sale Society Limited vs. ITO [ 2010 (2) TMI 3 - SUPREME COURT] Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments of Hon ble apex court rendered in the case of Totgars Co Operative Sale Society Limited vs. ITO (Supra) and of Hon ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. Vs. ITO (Supra) to find out which judgment is applicable in the facts of the present case. Appeal of the assessee is allowed for statistical purposes. - ITA No. 1189 (Bang) 2019 - - - Dated:- 26-12-2019 - SHRI A.K. GARODIA, J. Appellant by : Shri Jeevan Kishore D., Advocate Respondent by : Shri Ganesh R. Ghale, Standing Counsel ORDER A. K. GARODIA, J. This appeal is filed by the assessee and it is directed against the order of CIT (A) Hubballi dated 29.03.2019 for A. Y. 2013 14. 2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y another judgment of Hon ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. Vs. ITO, 230 Taxman 309, in which this judgment of Hon ble apex court rendered in the case of Totgars Co Operative Sale Society Limited vs. ITO, 322 ITR 283 was duly considered. He submitted that learned CIT (A) has decided the issue against the assessee by following this judgment of Hon ble apex court rendered in the case of Totgars Co Operative Sale Society Limited vs. ITO (Supra) without considering the later judgment of Hon ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. Vs. ITO (Supra) and therefore, his order should be reversed and this issue should be decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Society Limited vs. ITO (Supra). I reproduce the relevant Para 10 of this judgment and the same is as under:- 10. At the outset, an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduction under s. 80P(2)(a)(i) of the Act is not the interest received from the members for providing credit facilities to them. What is sought to be taxed under s. 56 of the Act is the interest income arising on the surplus invested in short-term deposits and securities which surplus was not required for business purposes. 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 fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s profits and gains of business mentioned in s. 80P (2) of the Act. In the present case, as stated above, assesseesociety regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression profits and gains of business . Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of 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 s. 80P(2)(a)(i) is not in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the applicability of these two judgments, the facts are to be examined as to whether in the present case, the money advanced to earn interest income from various banks is out of liability or own funds of the assessee because if such advances are out of liability, then this judgment of Hon ble apex court rendered in the case of Totgars Co Operative Sale Society Limited vs. ITO (Supra) will be applicable and the assessee will not be entitled to deduction u/s 80P with regard to interest from banks but if such advances are not out of liability but are out of own funds of the assessee than the judgment of Hon ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. Vs. ITO (Supra) will be applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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