TaxTMI 
TaxTMI 
2015 (8) TMI 1085
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....71/- earned by the assessee society from the cooperative societies. According to the AO, as per the provisions of section 80P(2)(a)(i), the income earned by the credit cooperative societies from the activity of giving credit facilities to its members is fully exempt. However, the interest earned from deposits kept with banks other than cooperative credit society has to be taxed as "income from other sources" u/s.56 of the I. T. Act. Relying on the decision of the Hon'ble Supreme Court in the case of The Totgar's Cooperative Sale Society Ltd. reported in 322 ITR 283 the AO held that the interest earned from the deposit of surplus funds with banks, even where the cooperative society is engaged in the activity of providing credit facilities to its members, is ineligible for the deduction u/s.80P(2)(a)(i). He accordingly assessed the income from interest as "income from other sources" u/s.56 of the I. T. Act. 3. In appeal the Ld.CIT(A) upheld the action of the AO by observing as under : "6. I have gone through the assessment order and the submission of the assessee. I find that the interest income earned from banks cannot be said to be attributable to the activities of the appellant.....
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....hakari Pat Sanstha Maryadit, Murgud, Kolhapur has erred in both on facts and in law. 2. Whether on fact and circumstances of case, CIT(A) was correct in arriving at conclusion, that principle emerging from Supreme Court decision in case of Totgars Cooperative Sale Society Ltd. Vs. ITO 322 is applicable in case of assessee (cooperative society) engaged in the activity of providing credit facilities to its member and accordingly, treating Rs. 25,01,774/being interest earned on deposit kept with schedule banks is not eligible for deduction u/s.80P(2)(a)(i)." 5. The Ld. Counsel for the assessee submitted that the assessee is engaged in the business of providing credit facilities and accepts deposits which is akin to carrying on business of Banking which needs to maintain liquidity as per rules and regulations under Maharashtra Cooperative Societies Act, 1960. Accordingly, assessee during the relevant year under consideration, has maintained such liquidity. Considering the realization risk factor involved, it has kept such short term deposits with schedule bank. Assessee has earned Rs. 25,01,774/- as interest on such deposits. According to the AO, the interest earned on such deposit i....
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....ated as "income from other sources" u/s.56 or the assessee is eligible for deduction u/s.80P(2)(a)(i). We find the AO following the decision of Hon'ble Supreme Court in the case of The Totgar's Cooperative Sale Society Ltd. (Supra) treated the interest earned from such short term deposits as "income from other sources" and brought the same to tax which has been upheld by the CIT(A). 10. It is the case of the assessee that in view of the decision of Hon'ble Karnataka High Court in the case of Tumkur Merchants Souhards Credit Cooperative Ltd. (Supra) the interest earned from such short term deposits with bank is entitled to deduction u/s.80P(2)(a)(i). 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 earn....
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....and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned SolicitorGeneral, it has used the expression "derived from", as, for instance, in section80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. 8. Therefore, the word "attributable to" 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 ....