TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 912
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....T(A) failed to appreciate that the assessee was a credit cooperative society engaged in the business of providing credit facility to its members and hence, the investments made in fixed deposits of Jalna Dist.Central Co-operative Bank Ltd. were made in the course of the assessee's business and thus, there was no reason to deny the deduction u/s 80P(2)(a)(i) in respect of the income derived from the above investments. 4] Without prejudice to the above grounds, the assessee submits that Jalna Dist Central Co-op. Bank Ltd. was registered under the Maharashtra Coop. Societies Act, 1960 and hence, the assessee was eligible to claim the deduction u/s 80P(2)(d) in respect of the income derived by way of interest and dividend on investments made in the said co-op. society. 5] The learned CIT(A) erred in holding that the interest income earned of Rs. 6,31,391/- was taxable as income from other sources without appreciating that the said interest income was earned in the course of the business of the assessee society and therefore, the same was taxable as business income of the assessee. 6] Without prejudice to the above grounds, the assessee submits that assuming without admitti....
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....er the mandate of Maharashtra Cooperative Societies Act, 1960. The issue arising before us is whether the interest income earned by the assessee on such investments is liable for deduction under section 80P(2) of the Act in the hands of the assessee. The Assessing Officer relying on the ratio laid down by the Hon'ble Supreme Court in Totgar Co-operative Sale Society Ltd. Vs. ITO (supra) was of the view that the said interest earned by the assessee was not eligible for deduction under section 80P(2)(a)(i) of the Act. The alternate plea of the assessee for claiming the deduction under section 80P(2) of the Act was raised before the CIT(A), who did not adjudicate the same as he was of the view that the assessee was eligible to claim the deduction under section 80P(2)(a)(i) of the Act. Before us, the third contention has been raised that in case, no deduction is available to the assessee, then at best only the net income on such receipts is to be added in the hands of the assessee, for which the assessee has placed the calculation sheet on record. The case of the Revenue on the other hand, is that the decision of the Hon'ble Apex Court in Totgar Co -operative Sale Society Ltd. Vs. ITO ....
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....curities, would be taxable as income under section 56 of the Act. It further held that where the assessee society regularly invests its funds not immediately required for business purposes, interest on such investment could not fall within the expression of profits and gains of business and the same could not be held to be attributable to the activities of the society i.e. carrying on of business of providing credit facilities to its members or marketing the agricultural produce of its members. The Hon'ble Apex Court further reiterated that where the assessee markets the agricultural produce of its members and it retains the sale proceeds in many cases and where the retained amount which was payable to its members, from whom the produce was bought, was invested in short term deposits / securities, the said amount was liability of the assessee and it was shown in the balance sheet on the liabilities side, therefore, to that extent, the Hon'ble Supreme Court held that such interest income could not be said to be attributable either to the activity mentioned in 80P(2)(a)(i) or 80P(3) of the Act. In view thereof, the Hon'ble Supreme Court upheld the order of Assessing Officer in taxing....
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....ed in the banks so as to earn interest, such interest income earned by the assessee was held to be attributable to carrying on the business and therefore, same was liable to be deducted in terms of section 80P(1) of the Act. 19. Another decision referred to by the learned Authorized Representative for the assessee is Guttigedarara Credit Co-operative Society Ltd. Vs. ITO (supra), wherein the assessee was a co-operative society engaged in the activity of carrying on the business of providing credit facilities to its members. The Assessing Officer in view of insertion of section 80P(4) of the Act, had declined to extend the benefit of deduction under section 80P(2)(a)(i) of the Act. The interest income earned on short term deposits and from saving banks account was held liable to income tax. The Hon'ble High Court held that where the assessee society was providing credit facilities to its members and was not carrying on any other business, then the surplus funds which it had earned as profits of its business when temporarily not required were invested in banks to earn interest was attributable to carrying on the business of banking and therefore, liable to be deducted under sectio....
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....t in UTI Mutual Funds, Sundaram Finance, gratuity fund and shares totalling Rs. 7,48,216/-, totalling Rs. 5.55 crores. The assessee has further furnished the break-up of FDs with different co-operative banks at pages 57 to 68 of the Paper Book with sample copies of FDs at pages 69 to 75 of the Paper Book. The claim of the assessee before us is that it was engaged in the business of providing credit facilities to its members, out of loan received from its members itself. The surplus amount which was on account of amount received from its members only, which had not been advanced to any of the members was invested in the banks, against which the said investment was made out of surplus funds available with the assessee, which in turn, were amounts advanced by the members itself. The said parking of funds with the cooperative banks was claimed by the assessee to be in the nature of its business activity as it was the requirement of Maharashtra Co-operative Societies Act, 1960, that 20 to 30% of total deposits are to be parked in the investments with co-operative banks. It is not the case of the Department that the amount invested by the assessee was out of any liabilities due by the as....