TMI Blog2016 (7) TMI 1665X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the Assessment Year 2012-13. 2. Facts of the case, in brief, are that the assessee is a Cooperative Society engaged in the activities of providing credit facilities to its members out of the contributions from members of the society and also interest earned from the deposits kept with other cooperative societies. It has been registered under the Maharashtra Cooperative Society Act, 1950. It filed its return of income on 29-09-2012 declaring Nil income after claiming deduction u/s.80P(2)(b)(i) and 80P(2)(d). 3. During the course of assessment proceedings the AO observed that the assessee has received interest of Rs.49,22,747/- from deposits with scheduled and nationalized banks which was claimed as deduction u/s.80P(2)(a)(i) of the Act. However, the AO was of the opinion that the interest income was not the assessee s business income since the same was earned out of deposits made with banks other than cooperative society/cooperative bank. In this connection, the assessee s submissions along with several judgments of various ITATs in its favour were rejected by the AO. Relying on the decision of Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noring the clear provisions of section 80P(2)(d) of the Income Tax Act, 1961, wherein income by way of interest or dividend derived by Co-operative Society from its investment with any other Co-operative Society is eligible for deduction and not income by way of interest from banks other than Co-operative banks/ societies? 3. The Ld.CIT(A) was failed to appreciate that on similar issue the Hon,ble ITAT, 'B' Bench, Pune has vide ITA No. 646/PN/2014 for A.Y. 2010-11 in A1-Fatath Urban Co-op. Credit Society Ltd. held that interest income on bank deposits with banks other than co-operative banks/societies was assessable as Income from other sources in view of the Hon'ble Supreme Court's decision in Totagars Co-op Sale Society Ltd vs. ITD reported as 322 ITR 283 (SC) and not eligible for deduction u/s 80P(2)(a)(i) of the Act. 7. The Ld. Counsel for the assessee at the outset filed a copy of the order of the Tribunal in assessee s own case for A.Y. 2010-11 vide ITA No.604/PN/2014 order dated 19-08-2015 and submitted that under identical circumstances the Tribunal after considering the decision of Hon ble Supreme Court in the case of Totgar s Cooperative Sale Societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). We find the Hon ble High Court of Karnataka after considering the decision of Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Ltd. (Supra) held that the interest earned by such cooperative societies on short term deposits with scheduled banks is eligible for deduction u/s.80P(2)(a)(i). The relevant observation of the Hon ble High Court from para 6 onwards read as under : 6. From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the sum of Rs. 1,77,305/- represents the interest earned from short-term deposits and from savings bank account. The assessee is a Cooperative Society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law i.e., Section 80P(2)(a)(i): Deduction in respect of income of co-operative societies: 80P (1) Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is certainly wider in import than the expression derived from . Whenever the legislature wanted to give a restricted meaning, they have used the expression derived from . The expression attributable to being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and against the revenue. Hence, we pass the following order: 11. No doubt, a contrary decision to this effect was also cited by the Ld. Departmental Representative where the Hon ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (Supra) has held that where the assessee cooperative society was engaged in providing credit facilities to its members earns interest income on surplus funds deposited as fixed deposits, such interest income would be assessable as income from other sources and thus not eligible for deduction u/s.80P(2)(a)(i). However, it is also the settled proposition of law that when two views are possible, the view which is in favour of the assessee has to be followed. Since in the instant case, two divergent decisions were cited before us and no decision of the Hon ble jurisdictional High Court is available, therefore, following the decision of the Hon ble Supreme Court in the case of CIT Vs. Vegetable products reported in 88 ITR 192 we hold that the view in favour of the assessee, i.e. the decision of the Hon ble Karnataka High Court has to be followed. Accordingly, we hold that the interest income earned by the assessee on sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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