TaxTMI 
TaxTMI 
2018 (4) TMI 446
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....e cooperative banks is not eligible for exemption u/s. 80P(2)(a)(i) of the Act. 2. We have heard the parties and perused the record. The assessee is a credit cooperative society and its main object is to collect deposits from its members and provide loans to them. The assessee claimed exemption u/s. 80P(2)(a)(i) of the Act in respect of its entire income. The Assessing Officer, however, invoked provisions of section 80P(4) and held that the assessee is not eligible for deduction u/s. 80P of the Act. 3. The learned CIT(A) held that the assessee is eligible for deduction u/s. 80P(2)(a)(i) of the Act in respect of income earned from loan given to its members and in this regard, the learned CIT(A) followed the decision rendered by Hon'....
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....n is eligible for deduction u/s. 80P(2)(a)(i) of the Act in respect of interest income earned from fixed deposits kept with banks, since the provisions of sec. 80P(2)(a)(i) uses the expression "attributable to business of the assessee" and the said expression is wider in nature than the expression "derived from". The Learned AR further submitted that Hon'ble Karnataka High Court in the above said case has also considered decision rendered by Hon'ble Apex court in the case of M/s. Todgars Cooperative Sales Society Ltd. Vs. ITO (2010) 322 ITR 283, and finally held that the interest income earned by the assessee from the deposits kept with the banks is attributable to the profit and gains of business of providing credit facility to its....
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.... Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd (supra) squarely applies to the facts of the present case. In the case before the Hon'ble Karnataka High Court also, the assessee claimed deduction u/s 80P(2)(a)(i) on the interest income earned from deposits kept with banks on the reasoning that the same shall form part of its business income. The Hon'ble High Court upheld the said view by duly considering the decision rendered by Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd (supra). For the sake of convenience, I extract below the observations made by the Hon'ble Karnataka High Court:- "8. Therefore, the word "attributable to" is certainly wider in import than the e....
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....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 A....