TaxTMI 
TaxTMI 
2016 (8) TMI 465
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....m it convenient to pass a common order. 2. The only common issue involved in the appeal by the revenue is as to whether the CIT(A) was justified in allowing deduction u/s.80P(2)(a)(i) of the Act on interest income earned from transactions with non-members and nominal members and interest income earned from non-SLR (Statutory Liquidity Ratio) investments, i.e., investments made not owing to any compulsion of Reserve Bank of India regulations to maintain Statutory Liquidity Ratio (SLR). The relevant provisions of Sec.80P(2)(a)(i) of the Act reads thus: "Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject 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 a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its ....
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....AO as not eligible for deduction u/s 80P(2) (a)(i) of the Act, was eligible for such deduction. The following were the relevant observations of the ITAT in the aforesaid order: "9. On consideration of the rival submissions, we find force in the counter arguments of the Ld. A.R. factually as well as legally. The case laws cited by him are analysed hereunder ;- Mehsana District Central Co-Opt. Bank Ltd. vs. ITO [2001) 251 ITR 522 (SC) "Held, (i) that the assessee was entitled to deduction u/s. 8P(2)(a)(i) of the Income-tax Act, 1961, in respect of the interest earned from funds utilised for the statutory reserves. (ii) That provision of safe deposit vaults was part of the ordinary banking business of a bank as shown by section 6(1)(a) of the Banking Regulation Act, 1949, and, therefore, income derived by the assessee from the hiring out of safe deposit vaults was income from the business of banking and deductible u/s. 80P(2)(a)(i)." "Held also, that the question whether income derived by the assessee co-operative bank from the investment of its' voluntary reserves other than statutory reserves is exempt u/s. 80P(2)(a)(i) depended upon ....
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....e was entitled to deduction u/s.80P(2)(a)(i) of the Act on the interest income in question. The following were the relevant observations of the CIT(A): "13. I have perused the assessment order and the relevant appellate orders. I have also considered the submissions of the appellant and the material on record. I find that the issues raised in this appeal regarding allowability of deduction u/s 80P in respect of interest income from non-members and nominal members, and, that on non-SLR investment are covered by the orders of the appellate authorities in appellant's own case for different assessment years. In particular, the issues are covered by the decision of the jurisdictional ITAT. In view of the facts of the case, and, the principles laid down by the Hon'ble ITAT, it is held that the interest income arising from transactions with nonmembers and nominal members, and, that from investment in bonds (i.e., interest income from non-SLR investment) is eligible for deduction u/s 80P. Accordingly, the AO is directed to allow appellant's claim of deduction u/s 80P on interest income from non-members and nominal members, and, that on non-SLR investment. 14 -....
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....96-97. "1.On the facts and in the circumstances of the case, the Ld. CIT(A) was perverse in holding that every income of the Co-operative Bank is eligible for deduction u/s. 80P (2)(a)(i). 2. That the Ld. CIT(A) erred in interpreting Sec.80P(2)(a)(i) to mean that every income earned from non-members of the Co-operative Bank is eligible for deduction u/s. 80P. 3. That the learned CITCA) was perverse in the sense that the principle of mutuality cannot be extended to non-members of the society. 4. That the learned CIT(A) erred in understanding the provisions of mutuality, and extending it to the general public who are not members of the co-operative. While no one can make profit from oneself on the principle of mutuality, the learned CIT(A) failed to appreciate the basic concept of mutuality, and held that the assessee could make profits from non-members and still claim the profits from such activity to be exempt from tax. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate the plain meaning of the words in section 80P(2)(a)(i) in the sense that the assessee did not derive its income from extending bank....
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....e learned CIT(A) erred in routinely applying the decisions in the cases of Mehsana District Central Co-operative Bank Ltd. Vs ITO (2001) 251 ITR 522 (SC); CIT vs. Baroda Peoples Co-operative Bank Limited [2006} 280 ITR 282 (Guj.) and Milli Co- operative Urban Bank Ltd. Vs. ITO [2007] 291 ITR (AT) 163 (Hyd.) to the facts of the case while ignoring the recent decisions of the Hon'ble Supreme Court ,in the case of Totgars' Co-operative Sale Society Ltd-Vs- Income Tax Officer, Karnataka, [2010), 188 Taxman 282. 11. That the learned CIT(A) erred in ignoring the decisions in U.P. Co-operative Cane Union Federation Ltd. Vs. CIT 237 ITR 574 (All.) as well as Assam Co-operative Apex Marketing Society Ltd. Vs. CIT 201 ITR 332 while granting tax exemption to income earned from non-members. 12. That the learned CIT(A) failed to notice that the assessee co-operative bank is functioning on purely commercial basis and accorded tax exemption to the co-operative bank functioning on commercial basis whereas no such exemption is available to commercial banks. 13. That the learned CIT(A) erred in failing to understand the import of law that income earned from volunta....
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....(SC) interest earned on deposits had to be regarded as income under the head 'Income from other sources' and therefore deduction u/s 80P(2)(a)(i) of the Act ought not to have allowed to the assessee as only the whole of the amount of profits and gains of business attributable to carrying on the business of banking or providing credit facilities to its members is allowed as deduction under the said provision. On further appeal by the Assessee before the Tribunal, the Tribunal held as follows: "6. At the time of hearing of this appeal the ld. Counsel for the assessee filed before me a copy of the decision rendered by ITAT, Kolkata Bench in the case of S.E., S.E.C. & E.Co. Railways Employees'Co-operative Credit Society ltd. Vs ACIT in ITA NO.1693/Kol/2012 order dated 30.10.2014. In the aforesaid case the identical question as to whether interest income had to be regarded as income from business or income from other sources had come up for consideration. The Assessee in the aforesaid decision accepted loans and deposits from its members and utilized the same towards providing loans and credit facilities to its members. However excess funds were utilized in making deposits in b....
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....rom 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. Under these circumstances, we feel that when the Commissioner of Income Tax (A) as well as the Tribunal has followed the earlier unchallenged decision no question of law is involved in this matter. Nothing has been produced before us to show subsequent decision of the Tribunal in relation to the assessment years 1998-99 to 2002-03 and 2003-04 have been challenged by an....
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....ness income u/s 80P(2)(a)(i). From the above it is amply evident in the present case the assessee has not retained any amount due to its members and instead of paying the same had invested the same and earned interest. Thus this case law is not applicable on the facts of the present case. 7.4. As regards the decision of Hon'ble Patna High Court in the case of Bihar Rajya Sahkari Bhoomi Bikash Co-op.Bank Ltd. (supra) the same is also not applicable to the facts of the present case. In that case the question was the treatment of interest earned on provident fund and rental income as attributable to banking business and this qualifying for deduction u/s 80P(2)(a)(i) of the Act. 7.5. In the background of the aforesaid discussion and precedent we hold that the issue is squarely covered in favour of the assessee by the decision of the Tribunal and the Jurisdictional High Court in assessee's own case. The decision relied upon by the ld. CIT(A) are not applicable in the facts of the case. The principle of consistency as conveyed by the Hon'ble Apex Court mandates that the Revenue does not take a different stand. Accordingly we set aside the orders of the authorities below....
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....y. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor- General, it has used the expression "derived from", as, for instance, in section 80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.' 10. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Co-operative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to t....