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TMI Blog2024 (12) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated the submissions made before the authorities below. Whereas, the learned Departmental Representative fairly agreed that the issue is covered by the decision of the Co-ordinate Bench of the Tribunal, Nagpur Bench, in various cases. 4. The short facts of the case is, the assessee Co-operative Society is registered as a Credit Co-operative Society under The Maharashtra Co-operative Societies Act, 1960, and is engaged in the business of providing credit facilities and consumables to its members who are the Mine Workers of Western Coalfields Ltd. The assessee Society filed its return of income on 30/09/2013, declaring total income of Rs. 12,43,170, for the assessment year 2013-14, also filed its return of income on 29/09/2018, for the assessment year 2018-19 declaring total income of Rs. 5,56,660. The assessee Society, for the assessment year 2013-14 claimed deduction for Rs. 50,62,356 under section and for the assessment year 2018-19, it claimed deduction of Rs. 3,74,86,043, under section 80P(2)(a)(i) of the Act. The Assessing Officer noticed that the assessee society has deposits/investments made in the commercial banks which are out of the surplus funds of the assessee soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort) out of voluntary reserves is income from banking business exempt under Section 80P(2)(a)(i) of the Income Tax Act, 1961?" After considering the issue, the Hon'ble Jurisdictional High Court has concluded as under : "12. Therefore, in all these cases, where the surplus funds not immediately required for day-to-day banking were kept in voluntary reserves and invested in KVP/IVP, the interest income received from KVP/IVP would be income from banking business eligible for deduction under section 80P(2)(i) of the Act. 13. In the result, there being no dispute that the funds in the voluntary reserves which were utilized for investment in KVP/IVP by the co-operative banks were the funds generated from the banking business, we hold that in all these cases the Tribunal was justified in holding that the interest income received by the co-operative banks from the investments in KVP/IVP made out of the funds in the voluntary reserves were eligible for deduction under section 80P(2)(a)(i) of the Act." The above case law fully supports the assessee's case. Here also surplus funds not immediately required for day to day banking were kept in Bank deposits. The income earned there from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The question before us, is whether interest on such deposits/securities, which strictly speaking accrues to the members‟ account, could be taxed as business income under section 28 of the Act? In our view, such interest income would come in the category of „income from other sources‟ hence, such interest income would be taxable under section 56 of the Act, as rightly held by the assessing officer....." 19.1 However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon'ble Supreme Court - "(on page 286) 7 ........ Before the assessing officer, it was argued by the assesse(s) that it had invested the funds on short term basis as the funds were not required immediately for business purposes and consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 and not under section 56 of the Act and, consequently, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 31.3.2009 was Rs. 13,69,955/- [source : Balance Sheet of the assessee available on record]. 19.6 In overall consideration of all the aspects, we are of the considered view that the ratio laid down by the Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd (supra) cannot in any way come to the rescue of either the Ld. CIT (A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT (A) was not justified in coming to a conclusion that the sum of Rs. 9,40,639/- was to be taxed u/s 56 of the Act. It is ordered accordingly." 5. Respectfully following the above decision of the Co-ordinate Bench, we hereby hold that the benefit of deduction u/s 80P(2)(a)(i) was rightly granted by ld. CIT(A), however, he has wrongly held that the interest income is taxable u/s 56 of the Act so do not fall under the category of exempted income u/s 80P of the Act. The adverse portion of the view, which is against the assessee, of ld. CIT(A) is hereby reversed following the decision of the Tribunal cited supra, resultantly ground is allowed. 8. We find that the ratio of above case also applies to the present case. As observed in the above case law, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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