9911796707
TMI Blog2024 (8) TMI 1564X X X X Extracts X X X X X X X X Extracts X X X X ..... of November 01, 2023 and thus, the appeal was filed by the WBSCARDB Ltd. within 51 days from the date of issue of the order. Thus, it may kindly be noted that the appeal of the WBSCARDB Ltd. was not time barred." The Ld. AR of the assessee prayed before the Bench to treat the appeal as filed within time. Ld. CIT, DR did not raise any objection to this prayer of the assessee. Since no objection has been raised by the Ld. CIT, DR to the facts mentioned, we admit the appeal as being filed in time. 3. The Grounds of appeal raised by the assessee are as under: "1. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld Assessing Officer in holding that Expenses incurred against interest income of Rs. 55,08,000/- earned by the appellant co-operative society on FDR(s) with the Schedule Banks were to the tune of Rs. 8,26,000/- instead of the expenditure claimed by the Appellant at Rs. 54,50,166/-. 1.1 That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in Rs. 30,55,025/- confirming the action of Ld. Assessing Officer in holding that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,28.56,964/- (break up is Interest on Short Term deposits: Rs 55,08,000, Interest on HBL to employees: Rs. 28,71,843, Training Institute Grant from NABARD: Rs. 11,50,707, Guest Room Charges, Hostel charges, Stipend & Fooding Charges on Training: Rs. 19,04,318 and Building Maintenance Charges recovered from tenants: Rs. 13,07,047 by considering this as Income from other Sources. 3 Appeal filed with Ld. CIT(A) Claim for 80P(2)(a)(i) deduction reiterated 4. The Ld. CIT(A) passes its order Decision of Ld. AO is upheld except a sum of Rs 13,07,047 being Building Maintenance Charges recovered from tenants- said amount having been already subjected to tax under the head Income from House Property. 5 Appellant files Appeal before ITAT B Bench, Kolkata 1.Claim for 80P(2)(a)(i) deduction reiterated. 2. Additional ground filed for netting of expenses corresponding to the disallowed incomes. 6 16.09.15 ITAT, B Bench, Kolkata pronounces its order 1. Claim for 80P(2)(a)(i) deduction relating to Interest Income dismissed by pronounces its order relying on the Totgars case. 2.Appeal for netting of expenses corresponding to the disallowed incomes accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has held as under "An important point needs to be mentioned. The words "the whole of the amount of profits and gains of business" emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society. In this particular case, the evidence shows that the assessee-Society earns interest on funds which are not required for business purposes at the given point of time. Therefore, on the facts and circumstances of this case, in our view, such interest income falls in the category of "other Income" which has been rightly taxed by the Department under section 56 of the Act". In view of the above the appeal of the assessee is dismissed. 10. In respect of the additional grounds raised by the assessee the ld. DR did not object to the admission of the additional ground. 11. The Id. AR has prayed before the Tribunal that in case the aforesaid incomes if treated under the head income from other sources then the corresponding expenditure should be allowed against these incomes. It is a well settled law that the net income should be brought to tax after deducting the expenses incurred to earn that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was allowed for statistical purposes as the direction issued by the ld. CIT(Appeals) to the ld. Assessing Officer was found to be correct by the ITAT as per para 12 of the order of the Tribunal. Subsequent to the order of the Tribunal the ld. Assessing Officer passed another order on 30.12.2016, in which expenses incurred for earning interest on fixed deposits and short-term investments with Banks amounting to Rs. 8,26,200/-, being corresponding expenses of interest income of Rs. 55,08,000/- as against the assessee's claim of Rs. 54,50,166/- were allowed and the claim of corresponding expenses for other heads was rejected. 9. Aggrieved with the ld. Assessing Officer's order, the assessee went in appeal before the ld. CIT(Appeals) and also submitted the additional ground of appeal. The ld. CIT(Appeals) upheld the expenses as allowed by the ld. Assessing Officer incurred for earning interest income and rejected the other claims primarily on the ground that no separate books of account were maintained with regard to the income under dispute with a comment that such claims of the appellant have already been analysed under para 6 of his order, whereas no expenses were incurred for ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense corresponding to Interest on Deposits with banks other than cooperative banks. 4. The Ld. CIT(A), NFAC alleged that no separate books of Accounts were maintained by the Appellant and the proportionate expenses incurred for earning interest on fixed deposits and short-term investments with banks as arrived at by the Ld AO at Rs. 8,26,200 have been duly allowed to the Appellant. It is submitted that the Appellant society does not have a separate business for investment of funds with Banks. It is further submitted that the society is carrying on the business of Banking and providing credit facility to its members. As part of the banking business the Society mobilises deposits from its members A portion of such deposits was invested with Banks to follow the direction issued by RCS and NABARD. As would be agreed, in the business of banking or providing credit facilities, not only accepting deposits but also investment of the deposits is integral to the business activity of such an entity. It is important to note that said Banking activity of the Appellant is limited to its members only and is not open to the general public. 5. In terms of Order of Registrar of Co-operative So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with bank was the Deposits received from Members and the corresponding expenditure would be Interest paid thereon. 6. The amount claimed by the Appellant was based on detailed calculation and backed by necessary documentary evidences and would like to submit hereunder the said detail as also explanations: (Amount in Rs. ) 1 Deposits from members:- 2 Deposits received from Members through own branches 9,23,65,857/- 49,83,42,703/- 3 Deposits received from 24 PCARDBs 40,59,76,846/- 4 Required investment-(2*70%+3*15%) (Approx.) 12,55,00,000/- 5 Interest paid on Deposits (Schedule-XIII of Statement of Accounts) 6 Interest paid other than Thrift Deposit scheme 32,30,609/ 7 Interest paid on Thrift Deposit scheme 4,98,11,549/- 5,30,42,158/- 8 Effective rate of Interest 10.64% 9 Investment with schedule bank 10 UBI 6,64,20,000/ 11 UCO Bank 2,50,00,000/- 9,14,20,000/- 12 WBSCB 3,50,00,000/- 13 Interest Received 55,08,000/- 14 Effective Rate 6.03% 15 Rate of Interest offered by bank during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant encloses herewith a month- wise Cash Flow Statement together with a summary thereof covering the entire period from Apr 1, 2005 to Mar 31, 2006. It would be seen there from that on Aug 3, 2005 the Society had received Rs 1,494.67 L as Refinance from NABARD, incidentally at a cost of 6% and 6.25%. Out of this amount, the Society disbursed Rs 419.08 L in 9 tranches to the ARDBs on Aug 4 & 5 and a further Rs 138.81 L during Aug 9- 11 to 3 ARDBs. In addition, 2 remittances were made to branches of the Society during Aug 5- 8. Similarly, the Appellant receives repayments from its borrower members in hundreds of instalments. Repayment to its lenders, primarily NABARD however, takes place twice a year i.e. Jan 31 and July 31 each year as per schedule fixed by the lender. The society has to accumulate fund to honour its commitments on the scheduled dates. It is the timing difference in recovery of Loans extended by it which is spread throughout the year and the obligation to repay to its own lender only twice a year resulting in some floating fund which when invested yields an Income. Investment of these floating funds which incidentally yields an income is thus very much integral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable under the head "Income from other sources" shall be computed after making the following deductions, namely :- (i) in the case of 17[dividends, other than dividends referred to in section-115-O], or interest on securities, any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend or interest on behalf of the assessee; (ia) in the case of income of the nature referred to in sub-clause (x) of clause (24) of section-2 which is chargeable to income-tax under the head "Income from other sources", deductions, so far as may be, in accordance with the provisions of clause (va) of sub-section (1) of section-36; (ii) in the case of income of the nature referred to in clauses (ii) and (iii) of sub-section (2) of section-56, deductions, so far as may be, in accordance with the provisions of sub-clause (ii) of clause (a) and clause (c) of section-30, section-31 and sub-sections (1) and (2) of section-32 and subject to the provisions of section-38 ; (iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or fifteen th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us at paras 5 and 6 of the written submission, which is reproduced in the preceding paragraph, and allow the claim of assessee as per law and as per the direction of the Tribunal vide order dated 16.09.2015. It is not the case of the assessee that only the borrowed funds were invested in short-term deposit as no such correspondence or corelation has been exhibited before us. The assessee shall be at liberty to explain the same before the ld. Assessing Officer, who will allow the claim of deduction of interest on borrowed funds utilized in making the deposits in the Scheduled Banks and others, the earning of interest from which has been assessed under the head "income from other sources" by considering the totality of the facts and circumstances. Hence, this ground of appeal of the assessee is allowed for statistical purposes. 14. As regards Ground No. 1.1, the assessee has made the following submission- "Claim that expenditure was incurred corresponding to earning the receipts in respect of Training Institute Grant from NABARD of Rs 11,50,707 and Receipts from Training Institute of Rs 19,04,318/- 10. The Appellant Society has been providing training services to the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,56^047/- 21,56,047/- Training Institute Grant from NARBAD - Rs. 11,50,707/-:- 11. The Society received Training Grant from NABARD amounting to Rs. 11,50,707 which was alleged as Other Source Income. It is stated that the Appellant received this amount from NABARD towards part reimbursement of Expenses incurred by the Society for imparting training to the Staffs of the Cooperative Sector. The expenditure was incurred on fooding, lodging, cost of stationery as also salaries of the trainers and the associated personnel like Salary to Principal and its subordinates. The details of reimbursement claimed with NABARD were submitted before the Ld AO for his kind verifications and records. The Ld. ACIT did not consider the same but escaped his duty by commenting that no Expenditure was incurred corresponding to the receipts as stated in para 6 of Page no. 2 of the Order dated 30.12.16. The reimbursement of Grant from NABARD for an amount of Rs 11,50,707 was against the expenditure on Training for which the total expense as allocated comes to Rs. 21,56,047. Guest Room Charges, Hostel charges, Stipend & Food Charges on Training: Rs 19,04,318. 12. The Society has earned Rs. 19, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very specific and it was directed that the net income should be brought to tax after deducting the expenses incurred to earn that income. 17. As is mentioned above, the assessee has bifurcated the expenses relating to Training Institute Grant and has also bifurcated the expenses between rental income and others. It is stated that the Guest Room Charges, Hostel Charges, Stipend and Food Charges were incurred on Training while grant of Rs. 11,50,707/- was received from NABARD towards part reimbursement of expenses incurred by the Cooperative Society. The ld. Assessing Officer has considered the Training Institute Grant from NABARD at Rs. 11,50,707/- and the receipt from Training Institute at Rs. 19,04,318/- i.e. total amount of Rs. 30,55,025/- as not attributable to the business income of the assessee. However, while granting Training and earning income from Training, the assessee had also incurred expenses and out of the common expenses of rent and taxes, insurance, depreciation, salary allowance etc. it has bifurcated the expenses of Rs. 21,50,047/- and claimed the same as relating to the Training portion. Apparently, this was not furnished before the ld. Assessing Officer, Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment to NABARD would result in revoking of the State Government Guarantee and thus, existence of the Appellant would be in jeopardy as stated in para 6 here in above. Therefore, the aforesaid Fund is not Surplus Fund but only accumulation of fund over the 6 month period with a view to honouring its commitments to its financier. Thus the money that we deal with we parked it with a bank [and not in a godown] and that yielded an income which is very much incidental to our core business. It would be noted here that whereas Totgars was basically a sale or a Marketing society, the Appellant is primarily a Co-operative Credit Society. In the Totgars case, the Ld. Judges stated in their Order that the said Cooperative Society which is a Sale or a Marketing Society, Invested its surplus funds arising from the sale of Marketing of Agriculture Products in Schedule Bank and Govt. Securities which was not required for the purpose of business. It would thus be seen that investment in deposits with Banks is very much a business activity of the Appellant; income therefrom is to be computed under the head "Profits and gains from Business" and not under "Income from Other Sources" as unjustly do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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