TaxTMI 
TaxTMI 
2018 (1) TMI 1154
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.... of this common order for the sake of convenience. 2. The concise grounds of appeal raised by the assessee for Assessment Year 2013-14 are as under. "1. The Assessing Officer as well as the Appellate authority failed to consider that the petitioner in appeal is a co-operative society engaged exclusively in providing credit facilities to its members and as such invests its surplus funds as are not immediately required for use in its business in co-operative societies as well as nationalized / commercial banks. Therefore, the entire interest income of Rs. 3,28,286/- derived by the appellant forms part of its profits and gains attributable to its business and chargeable u/s. 28 of the Act and qualifies for full deduction u/s. 80P(2....
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....ies for full deduction u/s. 80P(2)(a)(i) of the Act. The citation of Totgars Co-operative Sale Society Ltd. relied upon by the Respondent is not applicable to the appellant's case since Totgars Co-op. Sale Society was engaged in numerous activities unlike the appellant. 2. The appellant submits that the impugned orders passed by the authorities below are illegal and are liable to be set aside in view of the judgment of the Hon'ble High Court of Karnataka in ITA 29/2015 - M/s. Guttigedarara Credit Co-op. Society Ltd. Mysore Vs. ITO, Ward 2(2), Mysore and ITA 307/2014 - M/s. Tumkur Merchants Souharda Credit Co-op. Ltd. Vs. ITO, Ward-1, Tumkur and also the recent judgement dated 15.12.2017 of ITAT, Hyderabad in ITA No. 673/Hyd....
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.... the assessment order that the assessee was having surplus and reserve funds created out of accumulated profits of the society and such funds are not immediately required for the business as there were no loan takers and hence, the society has invested such funds with nationalized and co-op banks. He submitted that the facts of the present case are similar to the facts in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO(supra) and therefore, the judgment of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO(supra) is applicable in the present case and not the later judgment of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Tot....
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....ce the relevant para from the judgement of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Cooperative Sale Society (supra) being second Para on page 616 of 395 ITR. The same is asunder. "Further, as state above, the assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this 'retained amount' which was payable to its members, from whom produce was bought, which was invested in short-term deposits/ securities. Such an amount, which was retained by the assesseesociety, 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....
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....set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order:Appeal is allowed. The impugned order is hereby set aside. Parties to bear their own cost." 8. When I go through both these judgements of Hon'ble Karnataka High Court, I find that there is no contradiction in both these judgements. Both these judgements are in the same line that if the deposit in bank are out of own funds of society then the interest on same is eligible for deduction u/s. 80P (1) and if the deposit in bank is out of the fund available with the society in the form of liability then the same is not eligible for deduction u/s. 80P (2) of IT Act. The conclusion is different in both ....