TaxTMI 
TaxTMI 
TaxTMI 
2015 (12) TMI 291
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..... refund for Rs. 3,65,508/- in aggregate without granting prorate deduction of interest expenses and administrative overhead claimed. 3. On the facts and in the circumstances of the case, the ld. CIT(A)-Valsad has erred in confirming the addition made by the AO adopting the electricity collection income of Rs. 68,932/- instead of Rs. 57,350/- actually earned by the appellant. 4. The ld.CIT(A)-Valsad has erred in overlooking and in summarily rejecting the detailed statements of facts submitted along with memorandum of appeal, various documents and evidences placed in the written submissions filed, while accepting the lopsided and factually incorrect version of the AO and hence, the action of the AO taxing the entire amount of interest from nationalized banks, denying the claim of prorate deduction of interest expenses and administrative overheads is liable to be struck down. 5. Your appellant further reserves its rights to add, alter, amend or modify any of the aforesaid grounds before or at the time of hearing of an appeal. 2. Ground No.1 is not pressed by the assessee being misconceived ground. Hence the same is rejected as not pressed and effective ground nos.2 & 3 are to be ....
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.... 209 wherein it held that (assessee, a co-op. society, being engaged in providing credit facility to its members and marketing the agricultural produce of its members, interest earned by investing surplus funds in short term deposits and Govt. securities fell under the head income from the other sources" taxable u/s 56 and it cannot be said to be attributable to one of the activities of the society and therefore, the interest income did not qualify for deduction u/s 80P(2)(a)(i). According to the SC, 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 case, it was admitted that the appellant earned interest on fund which are not required for the business purposes at the given point of time. In view of the above, respectfully following the decision of the Hon'ble SC, my humble opinion is that interest earned from the short term deposits does not qualify for the exemption in this case. With regards to the setting off of expenses on pro-rata basis, it is difficult to ascertain what was the amount spent....
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....n the case of Totgars Co-op. Sale Society Ltd. (supra). The ld. DR submitted that in the case referred above, the Apex court held that assessee society which was involved in providing credit facilities as well as selling agricultural produce ot its members, may have on various occasions had accumulated fund in the society on account of advance money received from sale of agricultural produce on behalf of members and the land was part of the liability side in the balance sheet of the assessee society. The ld. DR submitted that similarly in the case of assessee which apart from being a credit society for credit facilities to its members was also indulging providing services to its members by way of depositing electricity bills to the Electricity Department. The ld. DR further elaborated that assessee society used to collect the electricity bills as well as the bill amount from its members and used to deposit the same with the Electricity Department on scheduled banks and in view thereof used to charge electricity collection charges and during the year under appeal assessee society has earned Rs. 57,350/- from electricity collection charges. 7. We have heard the rival contentions and....
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....h retention was not required immediately for business purposes, it was invested in specified securities. 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 assessee(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 t....
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....eposits. Furthermore, the assessee had maintained overdraft facility with Dena Bank and the balance as 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." 8. In the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO (supra) Hon'ble Karnataka High Court has decided the issue by observing as under :- "10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was 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 taker....