TaxTMI 
TaxTMI 
2014 (10) TMI 848
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.... ld. CIT(A) was not justified in not allowing proportionate deduction in respect of interest paid/payable to the members out of the interest income earned though the said claim has been allowed in the subsequent year by the Ld.A.O. himself. 4. For that the Ld.CIT(A) was not justified in not allowing proportionate administrative and other expenses as deduction out of the interest income earned. 5. For that the entire income earned by the assessee including the interest income of Rs. 87,25,339/- is totally immune from tax applying the "principle of mutuality". 6. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal. 3. The assessee is a Co-operative Society registered under the Multi-State Co- operative Societies Act. The primary objective of the Co-operative Society is to accept deposits of the members of the society and to provide loan and credit facilities to the members. Usually the deposits are accepted from the members in various forms like CMTD, Savings deposit and Fixed Deposit etc. The assessee had claimed deduction u/s 80P(2)(a)(i) of the Act @ 100% of its profits. During the course of assessment AO observed th....
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....d before ld. CIT(A) that the real income from bank deposit was a loss. This was contended on the ground that the deposits made in the banks were out of deposits from members on which the assessee had to pay interest. However, this contention of the assessee was not entertained by ld. CIT(A) on the ground that no such plea was taken by the assessee during the assessment proceedings and no evidence was produced during the appellate proceedings to justify its contention. The ld. CIT(A) further concluded as under :- "I also find that the issue is covered against the appellant by the following judgement : i) In the case of Totgars Co-operative Sale Society Ltd. Vs. Income Tax Officer, Karnataka - The division bench of the Apex Court held that 'the assessee's business is to provide credit facilities to its members and it retains some funds from the members which is invested in specified securities and interest earned from such deposits would come under the category of income from other source taxable u/s 56 and would not qualify for deduction as business income u/s 80P(2)(a)(i). ii) In another case of Bihar Rajya Sahkari Bhoomi Bikash Co-op.Bank Ltd. Vs. CIT, the division benc....
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.... in the light of the cost the assessee has to incur in getting those funds which are in the shape of interest which the Society pays to its members. The ld. Counsel of the assessee further submitted that the Apex Court's decision in the case of Totgars Co-operative Sale Society Ltd. vs ITO and the decision of Hon'ble Patna High Court in the case of Bihar Rajya Sahkari Bhoomi Bikash Co-op,Bank Ltd. vs CIT relied upon by the ld. CIT(A) are not applicable to the facts of the case. Accordingly the ld. Counsel of the assesse contended that the issue may be decided in favour of the assessee as in the preceding and subsequent years. 6. The ld. DR, on the other hand, relied on the orders of the authorities below. 7. Upon careful consideration, we find that the issue involved in the present case is whether the interest income earned by the assessee society from making deposits in short term deposit in banks will qualify for exemption u/s 80P(2)(a)(i) of the Act. The deposits which are made by the assessee are out of the deposit collected by the assessee from its members. The assessee society also provides loan and credit facilities to its members. When the funds are lying idle the....
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.... disallowance made in those assessment years and it was held that the interest earned by the assessee cooperative society from its short term and fixed deposits with the bans and other institutions were disallowed on the ground that this income was not business profit of the assessee society but was income from other sources. The Ld.Tribunal has also held that income from investment in banks and other financial institutions is the business income of the assessee society and it is eligible to get deduction under Section 80P(2)(a)(i). The Tribunal has overruled the decisions rendered against the assessee in relation to assessment years 1995-96 and 1996-97 on the same issue in relation to subsequent years. It was found by the Tribunal while affirming the order of the Commissioner of Income Tax (Appeal) that there is no change in the facts and circumstances of this case and it was held that the assessee was eligible for deduction under Section 80P(2)(a)(i) on interest on investment amounting to Rs. 1,18,07,645/- in this assessment year also. Since the Tribunal found that this decision of the Tribunal was followed by CIT(A) there is no reason to take a different view. Unde....