TMI Blog2022 (2) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... being income from other sources. The assessment order in not adding such interest to the total income, can be construed as prejudicial to the interest of revenue because such interest income is charged to Tax as income from other sources in the context of the assessee due to the non-availability of deduction u/s.80P(2)(d) on such amount. We, therefore, hold that the Ld. Pr.CIT was justified in revising the assessment order. The impugned order is upheld. - ITA No. 275/(Asr)/2018 - - - Dated:- 21-2-2022 - SH. RAVISH SOOD, JUDICIAL MEMBER AND Dr. M. L. MEENA, ACCOUNTANT MEMBER Appellant by : Sh. Ashray Sarna, CA. Respondent by: Shri Sunil Gautam, CIT-DR ORDER Per Dr. M. L. Meena, AM: The present appeal has been filed by the Assessee against the impugned order dated 30.03.2018, passed by Ld. Commissioner of Income Tax (Appeals)-II, Jalandhar, in respect of the assessment order passed u/s.143(3), for the Assessment Year 2013-14. In the grounds of appeal, the Assessee has raised the following grounds: 1. (i) That having regards to the facts and circumstances of the case Hon ble CIT has erred in law and facts in passing order u/s 263 of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.35,308/- v. PNB Adda Cholang Rs.34,050/- vi. PNB Prime Tower, Jalandhar Rs.53,277/- Total Rs.5,45,649/- The Society has received interest income from its members at Rs.82,77,728/- that 's to say that your gross income has two components viz. interest earned from its members on loans advanced to it which is your main business activity interest income earned from Banks. Since, interest of Rs.5,45,649/- has not been earned on investment with a co-operative society, deduction u/s 80P is not available to you in the light of the provisions of section 80P(2)(d) of the Income tax Act, 1961 therefore, tax has to be charged on the interest income of Rs. 5,45,649/- after disallowing deduction u/s 80P of the I.T. Act, 1961 to this extent. ii. During the course of assessment proceedings, the then Assessing Officer did not examine this issue and therefore, the Assessing Officer had not made any disallowance w.r.t. deduction claimed u/s 8 OP of the Income Tax Act, 1961 and the same was required to be added to your income. iii. As per provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Vs. M/s Punjab State Cooperative Federation of Housing Building Societies Ltd [ITA No.643 of 2010 dated 10.05.2011], in which the Hon ble High Court has rejected the deduction u/s 80P(2)(a)(i) of the I.T Act, 1961 on the interest income earned by the society from commercial banks. The Pr. CIT has also referred that the Hon ble High Court has relied upon the decision of Hon ble Supreme Court in the case of The Totgars Cooperative Sale Society Ltd. Vs I.T.O, L110 35 DTR 25 on this issue. It was noted that the interest income earned by the society was neither from any other co-operative society nor from the business of carrying of banking activity or providing credit facilities to its members. 4. In view of the above facts and the decision of Hon ble High Court of Punjab Haryana (discussed supra), the Pr. CIT being satisfied that the assessment order passed by the Assessing Officer, on 18.01.2016 was erroneous in so far as it is prejudicial to the interest of the revenue as the assessment order has not been passed in accordance with the decision of the jurisdictional High Court (supra). He has referred to clause (d) of Explanation 2 of section 263(1) of I.T Act, 1961, where suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was business profits and eligible for deduction u/s 80P(2)(a)(i)? 8. The ld. AR for the assessee argued that its activity of providing credit facilities to its members was an eligible activity u/s 80P(2)(a)(i) and that as the investments were made not with the idea of investments, but for the reason that cash should be available with the appellant as and when it was needed for the purpose of its business. 9. The section. 80P(2)(a)(i) allows a deduction in the case of a co-op society engaged in carrying on the business of providing credit facilities to its members of the whole of the amount of profits and gains of business attributable to such activity. In our view, the words profits and gains of business means business profits and not Income from other sources . The receipt of the interest on surplus invested in short-term deposits, not being attributable to the business of providing credit facilities to the members or marketing of agricultural produce of the members, is assessable as other income and not as business profits . Thus, the words the whole of the amount of profits and gains of business attributable to one of the activities specified in s. 80P (2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of The Totgars Co-operative Sale Society Ltd. Vs ITO 2010(35) DTR 25, have held that interest received by the assessee from Commercial banks was not covered by Section 80P(2)(a)(i) of the Act and was taxable under section 56, being income from other sources. 13. The Hon ble Supreme Court, in the case of The Totgars Co-operative Sale Society Ltd. (Supra) has observed as under: At the outset, an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduction under Section 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 Section 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 fund created by such retention was not ...9/- http://www.itatonline.org - 9 - required immediately for business purposes, it was invested in specified securities. The question, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich have been only invested in specified securities as investment . Further, as stated above, 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 liability-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 80P(2)(a)(iii) of the Act. Therefore, looking to the facts and circumstances of this case, we are of the view that the ...11/- http://www.itatonline.org - 11 - Assessing Officer was right in taxing the interest income, indicated above, under Section 56 of the Act. 14. In the backdrop of the above discussion, the assessment order in not adding such interest to the total income, can be construed as prejudicial to the interest of revenue because such interest income is charged to Tax as income from other sources in the context of the assessee due ..... X X X X Extracts X X X X X X X X Extracts X X X X
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