TaxTMI 
TaxTMI 
2018 (12) TMI 562
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....g interest. The assessee invested its surplus funds in both Central Bank of India, 10, Nellie Sengupta Sarani, Kolkat-87 as well as the West Bengal State Co-operative Bank thereby deriving interest income of Rs.2,20,70,040/-. It claimed the same to be eligible for sec. 80P(2)(a)(i) deduction. The Assessing Officer's assessment order dated 26.12.2016 quoted hon'ble apex court's decision in Tatgar's Cooperative Sale Society Ltd. vs. Income Tax Officer (2010) 188 Taxman 282 (SC) to hold that impugned interest income had been earned from investment in fixed deposits than from carrying on business of banking or providing credit facilities to its members. He accordingly disallowed assessee's impugned deduction claimed. 4. The assessee preferred its appeal. The CIT(A) has reversed the Assessing Officer's action disallowing assessee's deduction claimed mainly on the ground that this issue is already covered in its favour in earlier years as per tribunal's order. His findings in para 4.1 of the lower appellate order are very very much unspeaking. He accepts assessee's written submissions filed during the course of lower appellate proceedings reading as below:- "3 Submission: The AR o....
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....deposits from members to inculcate thrift and savings habits amongst them. The credit to members is provided out of the deposits obtained from the members. The funds obtained as deposits are invested in bank time deposits against which overdraft facilities are obtained and credit facilities are provided to the members. All these activities are closely integrated, interrelated and synergized to carry on the business of providing credit facilities to the members. To take a view that the business of providing credit is only the last step in these chain of activities, will not be reasonable, logical or justified. In the Assessment Year 2014-15 (under Appeal), the Assessing Officer held that the interest income from investments made in time deposits with banks amounting to Rs. 22070040 was allegedly not eligible for deduction u/s 80P(2)(a)(i) on the ground that these funds had allegedly not been used for the purposes of the appellant's business of providing credit facilities to its members. The Assessing Officer just followed his predecessor's Assessment Orders passed for the immediate five preceding Assessment Years 2009-10 to A.Y. 2013-14. As done earlier for the abovereferr....
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....) members' payments to guarantee fund at the time availing of loan facilities, (c) interest receivable from the members in relation to loans taken by them, (d) interest receivable from the deposits made with the bank out of the contributions/payments received from the members, etc. (iii) While in the case of the concerned co-operative society the interest had been received in relation to the investments made out of the sale proceeds arising out of the business, in the appellant's case interest was earned from deposits and payments received from the members, for creation of funds to be lent out to the members as well as to reward the members by paying interest on their respective balances in thrift fund and guarantee fund. From the above-mentioned specific differences it may kindly be appreciated that while in the above-referred Supreme Court case, the interest had been earned from deposits made by utilizing the idle fund, in the case of the appellant the interest was earned from the deposits that had been made for facilitating the business of the appellant. Hence, it is submitted that the interest earned on deposits by the appellant had direct nexus to its business of provi....
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.... had qualified for deduction u/s. 80P(2)(d) as the relevant interest was earned from another cooperative society. The Assessing Officer disallowed this claim without showing any specific reason. The appellant submits that the finding of the Assessing Officer are all wrong on facts and law. WB Co-op. Bank Ltd. is a co-operative society having license to carry on banking business from RBI. It is a scheduled bank and that schedule is mentioned in Banking Regulation Act, 1949 only, which have no relationship with the Income-tax Act or any Co-operative Societies Act. The appellant co-op. society is again a member/shareholder of WB Coop. Bank Ltd. and owns shares worth Rs. 1100 of that Bank as duly reflected in its Balance Sheet. The appellant submits that deduction u/s. 80P(2)(d) is available for interest income from W.B. Cooperative Bank Ltd. The deduction has been allowed in the assessee's cases in the past five A.Yrs. by CIT(A) and ITAT. The Assessing Officer did not allow benefit of deduction u/s. 80P(2)(a)(i) on the Miscellaneous Receipts of Rs. 2472 stating that the receipts under this head had allegedly nothing to do with business of providing credit facilities to the appel....
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....engal State Cooperative Bank (supra) is not eligible for section 80P(2)(a)(i) deduction since not derived or attributable to any banking business activities or from members. Case law CIT vs. South Eastern Railways Employees Co-Op. Credit Society Ltd. (2017) 390 ITR 524 (Cal) is quoted in support deciding the very issue in Revenue's favour. The assessee's case on the other hand is that this issue of allowability of sec.80P(2)(a)(i) deduction is no more res integria since covered in its favour as per tribunal's earlier order(s). It places on record a co-ordinate bench's order in ITA No.2203/Kol/2016 for AY 2013-14 decided on 01.03.2018 as follows:- "3. The issue involved in this appeal by the revenue is as to whether the CIT(A) was justified in allowing deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961 (Act) on interest income earned on Fixed Deposits. The Assessee is a Co-operative Society of the employees of Central Bank of India. It provides loan to its members and earns interest on them. In addition to the loan provided to the employees of the Central Bank of India who are its members the Assessee had also made investments in Fixed Deposits with Banks and other co-operativ....
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.... the interest income as income from other sources and accordingly denied the benefit of deduction u/s 80P(2)(a)(i) of the Act. 5. Aggrieved by the orders of AO, the Assessee preferred appeal before CIT(A). The CIT(A) held that interest income had to be assessed under the head income from business and that the Assessee was entitled to deduction u/s.80P(2)(a)(i) of the Act on the interest income in question. In doing so, he followed his own order in Assessee's own case in AY 2012-13 wherein he had allowed similar claim of the Assessee. 6. Aggrieved by the order of the CIT(A), the revenue is in appeal before the Tribunal. At the time of hearing it was brought to our notice that this tribunal in Assessee's own case adjudicated identical issue in I.T.ANos.158 & 1808 to 1809/Kol/14 & ITA 1126/Kol/15 for Assessment Years : 2009-10 to 2012-13 by order dated 9.11.2016. The tribunal held on identical issue on identical facts as follows: "11. We have given a very careful consideration to the rival submissions. Since the revenue has laid much emphasis on the decision of the Hon'ble Supreme Court in the case of Totagars Co-operative Society 322 ITR 283 (SC), we deem it necessary to deal ....
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....to be regarded as income from business of banking and is entitled for deduction u/s 80P(2)(a)(i) of the Act. The Tribunal had also distinguished the decision rendered by the Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd vs ITO (supra). The following observations of the Hon'ble Tribunal read as under :- "7.1. We further find that the issue involved is covered in favour of the assessee by catena of decisions of the Tribunal in assessee's own case. These decisions are also affirmed by the Hon'ble Jurisdictional High Court in its order for A.Yr.2005- 06. In this order the Hon'ble Jurisdictional High Court has considered all the relevant orders and has decided the issue in favour of the assessee. We may gainfully reproduce the operative order of the Jurisdictional High Court which is as under :- "We have gone through the impugned judgment and order of the Learned Tribunal. It appears that the point involved .is whether interest earned out of the investment earned by the assessee cooperative can be treated to be the income arising out of business activity or from other sources in order to apply the provision of Section 80P(2)(a)(i) of the I.T. Act. It is....
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....n were not required immediately for business purposes, it invested same in specified securities and earned interest income. In these circumstances the Hon'ble Apex Court had held that interest earned would come in category of 'Income from other sources' taxable u/s 56 of the Act and would not qualify for deduction as business 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 Jurisdiction....
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....ly used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. 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....
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....any law. 12. 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 its 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. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State Cooperative Bank Ltd. 336 ITR 516 (AP). 13. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law....." 15. In view of the aforesaid judicial pronouncements, we are of the view that the objections raised by the revenue in the grounds of appeal before us, cannot be sustained." 7. It is not disputed before us by the parties that the facts and circumstances under which the app....
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....that the point involved is whether interest earned out of the investment earned by the assessee cooperative can be treated to be the income arising out of business activity or from other sources in order to apply the provision of Section 80P(2)(a)(i) of the LT. Act. It is an undisputed factual position that similar issue arose before the Commissioner of Income Tax (Appeal) in relation to the assessment year 1998-99 to 2002-2003 as also for the assessment year 1995-96 and 1996-97- Then again in relation to the assessment years 2003-04 and 2004-05 a similar point arose. The Learned Tribunal in relation to the assessment years 1998-99 to 2002-03 by order dated 10.11.2006 in ITA Nos.840 to 844/Kol/2006 and again by order dated 29.12.2006 in relation to assessment years 2003-04 and 2004-05 has deleted the disallowance made in those assessment years and it was held that the interest earned by the assessee cooperative society from its short term and fixed deposits with the banks and other institutions were disallowed on the ground that this income was not business profit of the assessee society but was income from other sources. The Ld. tribunal has also has held that income from invest....
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....see's interest income arising from investment in banks and other financial institutions quantify for sec. 80P(2)(a)(i) deduction or not. The tribunal had admittedly held the same to be eligible for deduction. Hon'ble jurisdictional high court's answers Revenue's substantial question of law as follows:- "7. We have not been impressed by the first submission advanced by Mr.Saraf. If the Multi-State Co-operative Societies At, 2002 does not provide for the consequences of an omission to act in accordance with section 63 thereof, that is no valid reason why the mandate of law should not be followed. When law requires a business to be done in a particular manner the business can be done only in that manner or not at all. 8. We are also not impressed by the submission advanced by Mr. Khaitan that the interest earned by the assessee from the investments made, to the extent of a sum of Rs. 99 lakhs during the assessment year 2003-004 and a sum of Rs. 1.12 crores during the assessment year 2004-05, should be attributable to the business of providing credit facilities to it members Section 80P, it is true provides that "in the case of a cooperative society engaged n carrying on the bu....
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....s in section 80P(2) of the Act, would be eligible for deduction. The word 'income' has been defined under section 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. Parliament has included specifically 'business profits' into the definition of the words 'income'. Therefore, we are required to give a precise meaning to the words 'profits and gains of business' mentioned in section 80P(2) of the Act. In the present case, as stated above, the assesseesociety regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression 'profits and gains of business'. Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its embers or marketing of the agricultural produce of its member. When the assesseesociety provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under section 80P(2)(a)(i) is not in respect of interest received from members. In this case, we are only c....
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....haitan in the case of Guttigedarara Credit Cooperative Society Ltd. (supra) is not applicable because the caution appearing in sub-section (1) of section 80P, that only an income referred to in subsection (2) was deductible, was not taken into account. The sub-section (2) provides for only the income attributable to the business of advancing credit facilities to its members. Income arising from any other source including investment of capital "if not immediately required to be lent to the member" was not contemplated. The assessee cannot claim any deduction which is not provided for by the section. Moreover the judgment in the case of Totgar's Cooperative Sale Society Ltd. (supra is a binding authority for the preposition that "interest income arising on the surplus invested in short-term deposits and securities... would come in the category of income from other sources." Realising his difficulty, MR. Khaitan submitted that the assessee was under the impressions that the income arising out of investments is also attributable to the business of providing credit facilities to its members and on that basis, the assessee did not separately provide for the expenditure incurred for the....