TMI Blog2023 (6) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, has rightly been rejected by the lower authorities. Interest income be treated as business income of the assessee has also been rightly rejected by the lower authorities in the light of the aforesaid decision of the hon ble Supreme Court in the case of Totgar s Co-operative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] . Interest earned on the bad debt fund and reserve fund maintained as per the provisions of section 81 82 of the West Bengal Co-operative Societies Act, 2006 - As in South Eastern Railway Employees Cooperative Credit Society Ltd [ 2016 (9) TMI 814 - CALCUTTA HIGH COURT] held that the expenditure incurred for earning of interest income from the funds parked in the commercial bank is liable to be set off/deducted from the said income, which is the amount of interest paid for that funds to the members. Such interest expenditure held to be deductible out of the interest income earned from deposits in the commercial bank, is further liable to be deducted from the business expenditure of the eligible business and after subtracting the said interest expenditure related to the deposits in the commercial bank, the business profits of the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in ITA No.546/Kol/2022 for assessment year 2015-16 is taken as lead case for the purpose of narration of facts. 2. ITA 546/Kol/2022 The assessee has taken the following grounds of appeal: 1. For that on the facts and circumstances of the case and in law, the disallowance of claim of deduction u/s. 80P(2)(a)(i) by the assessee credit cooperative society is wrong, arbitrary, misconceived, erroneous, excessive and deserves to be allowed. 2. For that on the facts and circumstances of the case and in law, the assessment of interest income of Rs. 14156300 under Income from Other Sources instead of under Profits Gains of Business or Profession as reported by assessee, is wrong, arbitrary, misconceived, erroneous, excessive and deserves to be reversed. 3. For that on the facts and circumstances of the case and in law, in any case and as an alternate claim, the interest income from investments earned by the assessee should be reduced by the cost of funds utilized for such investment and the allocable overhead expenses attributable to such income, whether the interest income is assessed under Income from Other Sources or under Profits Gains of Business or Profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in commercial bank was intrinsically linked to the business of providing credit facilities to its members. Apart from that, by operation of section 81 section 82 of West Bengal Co-operative Societies Act, 2006 and clause 43 of the Byelaws of the assessee-society, it is statutory for the assessee society to create bad debt fund and reserve fund from out of its profits. That these two funds are statutory funds and are required to be created, maintained and invested as per prescribed rules and regulations. The ld. counsel has contended that the interest income from investments made from these funds is attributable to the business of providing credits to members of the cooperative society only. The ld. Counsel therefore has submitted that the interest earned on account of aforesaid statutory deposits which were essential for running the business of the society of providing credit facilities to its members are therefore allowable as deduction u/s 80P(2) of the Act. The ld. Counsel for the assessee has further submitted that even otherwise, the assessee may be allowed deduction of interest expenditure incurred on the funds which were deposited in the commercial bank. 4. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is intrinsically linked with the business activity of providing credit facilities to its members is concerned, we find that the said issue is squarely covered by the decision of the Jurisdictional Calcutta High Court in the case of CIT vs. South Eastern Railway Employees Cooperative Credit Society Ltd. reported in [2017] 390 ITR 523 (Cal), wherein, the Hon ble High Court taking note of the identical provisions of the Multi-State Co-operative Societies Act , 2002, has held that such an interest income is attributable to the business income of the society and is eligible for deduction u/s 80P of the Act. Further, the Hon ble Calcutta High Court, in the identical facts and circumstances, has held that the expenditure incurred for earning of interest income from the funds parked in the commercial bank is liable to be set off/deducted from the said income, which is the amount of interest paid for that funds to the members. The Hon ble High Court has further held that such interest expenditure held to be deductible out of the interest income earned from deposits in the commercial bank, is further liable to be deducted from the business expenditure of the eligible business and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii) Furniture like bed, sofa, table, Wardrobe, dressing table, mirror etc. ix) Security service He therefore has submitted that the holiday homes facility was created for the members which was run on commercial lines and therefore, the income from the same was rightly claimed as business income of the assessee. 9. We find force in the above contention of the assessee. In this case, the holiday homes maintained and run by the assessee are not in course of normal letting out of the buildings, rather, the same were run on commercial lines and the assessee has incurred daily business expenses and charges on business lines as detailed above. Therefore, the income from holiday homes is to be treated as business income of the assessee and consequential deduction of business expenditure and admissible claim of depreciation etc. is required to be given. However, so far as the claim of the assessee that the building of holiday homes has been purchased out of eligible income of the assessee after claiming deduction u/s 80P of the Act, therefore, the income of the holiday homes should also be allowed as deduction u/s 80P of the Act, we do not find force in the above contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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