AI Drafter 
TaxTMI 
TaxTMI 
2015 (12) TMI 94
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is also engaged in the purchase of seeds, fertilizers etc., intended for agriculture for the purposes of supplying the same to its members. For the assessment year 2009-10, the net profit earned by the society from all the activities amounting to Rs. 14,34,451/- and the gross total income was Rs. 15,41,553/-. The assessee claimed deduction u/s 80P(2)(a)(i) of Rs. 14,34,510/- towards providing credit facilities to its member and Rs. 50,000/- u/s 80P(2)c) of the IT Act. The assessee submitted before the AO that in the case of M/s Totgar's Co-Operative Sale Society Ltd Vs ITO 322 ITR 283(SC), the assessee was in the business of marketing agricultural produce of its members and earned income from huge bank deposits made out of its sales. This....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble. Accordingly, the AO placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT Vs Dr V.P.Gopinathan (248 ITR 449), wherein it was held that there is direct nexus between the amount borrowed and the deposits made. The AO observed that there are interest free funds in addition to seasonal surplus funds which were not given to its members during the off season and hence, denied deduction u/s 57(iii) of the IT Act, 1961. 4. The CIT(A) confirmed the order of the AO in totality. 5. Aggrieved, the assessee preferred an appeal before the ITAT raising the following grounds; "1. The ld.CIT(A) is not justified in holding that the income earned by the assessee on fixed deposits requires to be assessed under the head "....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of surcharge deserves to be cancelled. 5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG the assessee denies itself liable to be charged to interest u/s 234A, 234B & 234C of the Act, 1961 which under the facts and in the circumstances of the case and the levy deserves to be cancelled". The assessee has also challenged the levy of interest u/s 234A, 234B & 234C of the IT Act, 1961. 6. The learned DR supported the orders of the authorities below by relying on the decision of the Hon'ble Supreme Court in the case of M/s Totgar's Co-operative Sale Society Ltd Vs ITO 383 ITR 283(SC)(Supra). 7. The learned AR on the other hand, produced copy of the decision of the Co-ordinate Bench of the Bangalore Bench Tribunal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest.,. the said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of section 80P(J) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT III, Hyderabad Vs. Andhra Pradesh State Co-operative Bank Ltd., reported in (2011) 200 Taxman 220112. In that view of the matter, the order passed by the appellate authorities denying the benefi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erest income forms art of the business income earned by the assessee and the same is not to be taxed under the head "Other Sources". In view of the matter, the deduction claimed by the assessee under section 80P(2)(a)(i) of the Act in respect of interest of Rs. 26,16,800/- earned from investments in fixed deposits and Govt. Securities out of surplus funds from business, is allowed. Consequently, the grounds raised y the assessee on this issue are allowed. 7. In the result, the assessee's appeal for assessment year :2010-11 is allowed". 8. Since the facts in the present case before me is identical to that of the case which is decided by the Co-ordinate Bench in ITA No.21(Bang.)/2015 for the assessment year : 2010-11, which follows the ....