TaxTMI 
TaxTMI 
2015 (10) TMI 592
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....come after claiming deduction u/s.80P(2)(a)(i) of the Act. It had received interest of Rs. 34,63,090/- on fixed deposits placed with other banks. AO was of the opinion that interest earned on such deposits could not be given benefit of deduction u/s.80P(2)(a)(i) of the Act in view of the judgment of Hon'ble Apex Court in the case of Totgar's Cooperative Sale Society Ltd v. ITO [(2010) 322 ITR 283]. Assessee replied to this inter alia stating that what were deposited by it was only the statutory reserve that was required to be kept. However AO was of the opinion that of the total deposit of Rs. 2,67,35,492/-, statutory reserves available to the assessee was only Rs. 1,10,09,164/-. According to him interest earned on the balance deposits was ....
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....ve perused the orders and heard the rival contentions. There is no dispute that the deposits giving rise to the interests were made out of surplus funds available with the assessee. This is clear from para 6.2 of the assessment order reproduced hereunder : "6.2 As already stated, total interest free funds (being share capital and reserves) to the extent of Rs. 2,72,28,541/- was available with the society, any investments made out of such interest free funds is free of cost and hence, obviously no deduction towards expenditure is required to be allowed. In similar circumstances, the Hon'ble High Court of Karnataka in the case of The Totgars Cooperative Sale Society Ltd., v. ITO, W-1, Sirsi (322 ITR 272) has held that proportionate expenses ....
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....s 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 ie., Section 80P(2)(a)(i): "Deduction in respect of income of co-operative societies: 80P (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified....
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....that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits 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 Solicitor General, it has used the expression "derived from", as, for instance, in section 80J. 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 wid....
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....ing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a shortterm deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Co....