TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1268
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....esent appeal is against claim of deduction under section 80P of the Act on interest accrued on bank deposits with nationalized banks. 4. The learned Authorized Representative for the assessee pointed out that the issue raised in the present appeal is squarely covered by the decision of Pune Bench of Tribunal with lead order in Jijamata Mahila Sahakari Bigar Sheti Sahakari Patsanstha Ltd. Vs. ITO in ITA No.992/PN/2016, relating to assessment year 2010-11, order dated 29.07.2016. 5. The only issue raised is the claim of deduction under section 80P(2) of the Act on the income arising from interest on fixed deposits with nationalized banks at Rs. 2,25,441/-. The said issue has been decided by the Tribunal in series of decisions including the latest decision in the case of ITO Vs. M/s. Maharashtra Bank Employees Co-op. Credit Society Ltd. in ITA Nos.454 to 456/PUN/2015, relating to assessment years 2007-08, 2008-09 & 2010-11 along with CO Nos.16 & 17/PUN/2017, relating to assessment years 2007-08 & 2008-09, order dated 22.12.2017, wherein reliance was placed on the ratio laid down by the Hon'ble High Court of Punjab & Haryana in CIT Vs. Nawanshahar Central Co-operative Bank Ltd. (2003....
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....er, the said reserve funds as per directions of the State Government by general or special order are to be invested in one of the securities, which are provided under section 70 of the said Act. Clause (d) clearly lays down that the investment or deposit of funds could be in any Co-operative Bank or Banking company approved for this purpose by the Registrar. The assessee society belonging exclusively to the employees of Bank of Maharashtra, had invested its reserve funds in FDs with Bank of Maharashtra. Accordingly, the assessee society applied for requisite permission from the Registrar of Co-operative Societies under section 70 to do so. The Registrar vide its letter dated 18.10.1995 in respect of investment of reserve funds consequent to Society's Resolution dated 25.08.1994 and Management Committee's Resolution dated 29.07.1991 and further the assessee's letter dated 11.07.1995, granted permission under section 70 of the Maharashtra Co-operative Societies Act, 1960 and Rule 54 of the Rules 1961 to transfer reserve funds amount with Pune District Central Co-operative Bank to the Bank of Maharashtra with condition of investment and also that the amount invested in the Bank of Mah....
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.... Act and whether the interest income earned by the assessee on such investments was liable for deduction under section 80P(2)(a)(i) of the Act. The Assessing Officer had denied the claim relying on the ratio laid down by the Hon'ble Supreme Court in Totgar's Co-operative Sale Society Ltd. Vs. ITO (supra), the Tribunal after considering the factual and legal aspects held as under:- "17. In order to adjudicate the issue, first reference is made to the decision of Hon'ble Supreme Court in Totgar Co-operative Sale Society Ltd. Vs. ITO (supra). In the facts of the said case, the assessee before the Hon'ble Apex Court was a co-operative society providing credit facilities to the members or marketing agricultural produce of its members. The assessee had parked its funds in short term bank deposits and securities and the interest earned on the same was claimed as deductible under section 80P(2)(a)(i) of the Act. The Revenue authorities held that the same was taxable under the head 'income from other sources'. The claim of the assessee was that it had invested the funds on short term basis as these were not required immediately for business purposes and consequently, interest received....
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....P(3) of the Act. In view thereof, the Hon'ble Supreme Court upheld the order of Assessing Officer in taxing the said amount under section 56 of the Act. The alternate plea of the assessee that even if the said interest income was held to be covered under section 56 of the Act, was eligible for deduction under section 80P(2)(a)(i) of the Act, was rejected. 18. In the facts of the case before Hon'ble High Court of Karnataka in Tumkur Merchants Souharda Credit Co-operative Ltd. Vs. ITO (supra), the assessee co-operative society was engaged in the activity of carrying on of business of providing credit facilities to its members and it had earned interest income on its deposits. Another fact noted by the Hon'ble High Court of Karnataka was that the amount which was invested in banks to earn interest was not the amount due to any members and it was not the liability of the assessee. In fact, the said amount was in the nature of profits and gains, which was not immediately required by the assessee for lending money to the members as there were no takers and the assessee in such circumstances, deposited the money in bank so as to earn interest. The Hon'ble High Court of Karnataka in such....
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....was attributable to carrying on the business of banking and therefore, liable to be deducted under section 80P(1) of the Act. 20. Further, the Pune Bench of Tribunal in ITO Vs. Niphad Nagari Sahakari Patsanstha Ltd. (supra) had laid down the similar proposition as by the Hon'ble High Court of Karnataka. 21. ......... 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 co-operative 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 liabilit....
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.... Vs. Nawanshahar Central Co-operative Bank Ltd. (2007) 289 ITR 6 (SC), wherein it has been held that where a Co-operative bank carrying on the business of banking, statutorily required to place part of its funds in approved security, then the income attributable thereto is deductible under section 80P(2)(a)(i) of the Act. The Hon'ble Supreme Court relied on earlier decisions of the Apex Court in this regard. 16. The Hon'ble Punjab & Haryana High Court in CIT Vs. Punjab State Co-operative Agricultural Development Bank Ltd. (2016) 389 ITR 607 (P&H) has remanded the issue back to the Tribunal to decide whether the assessee was carrying on business of banking and thereafter, decide the issue of eligibility of deduction under section 80P(2)(a)(i) of the Act on the interest income attributable to the business of banking. 17. However, we find that the Hon'ble High Court of Gujarat in State Bank of India Vs. CIT (supra) while deciding similar issue of eligibility of deduction under section 80P(2)(a)(i) of the Act on interest income from deposits of surplus funds in banks held that neither it was business income nor income from investment in any other Co-operative societies. It may ....