TaxTMI 
TaxTMI 
2016 (2) TMI 491
X X X X Extracts X X X X
X X X X Extracts X X X X
....td., for the Asstt.Year 2008-09. There also the Tribunal has granted exemption to the assessee under section 80P(2)(a)(i) of the Act on the interest income earned by the assessee from the fixed deposits with the schedule bank. Decision of the Hon'ble Karnataka High Court in the case of Guttigedarara Credit Co-op. Society Ltd., ITO (2015) 60 taxmann.com 215 (Kar) has also been brought to our notice. In this case, the assessee was a credit co-operative society. It is engaged in the activity of carrying on business of providing credit facilities to its members. It is governed by the provisions of the Karnataka Co-operative Societies Act, 1959 and the Karnataka Co-op. Societies Rules, 1960. The assessee had interest income from deposits made by the assessee in nationalized banks out of the amounts which was used by the assessee for providing credit facilities to its members. According to the assessee, the said interest amount is attributable to the credit facilities provided by the assessee and form part of profits and gains of business. The assessee claimed benefit in terms of subsection (2) of section 80P. It was denied to the assessee and the action of the AO is upheld upto the Trib....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely: (a) in the case of co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or ** ** the whole of the amount of profits and gains of business attributable to any one or more of such activities." 9. The word 'attributable' used in the said Section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT[1978] 113 ITR 84 (at page 93) as under:- 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x Court in Totgars Co-operative Sale Society's case (supra), on which reliance is placed, the Supreme Court was dealing with a case where the assessee/Co-operative Society, apart from providing 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 short-term 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 Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear. Supreme Court was not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....members this surplus fund was given as deposit in nationalized bank to fetch some income. Similar type of issues has been dealt by Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. reported in (2015) 55 Taxman.com 447 (Kar). The relevant portion from the above referred judgment is reproduced below :- "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 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 (1) of the Act. I fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v/s. Andhra Pradesh State Co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com 66. In that view of the matter, the order passed by the appellate authorities de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act is the interest income arising on the surplus invested in short term deposits and securities which surplus was not required for business purposes? The assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such by such 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 Suprem....