TaxTMI 
TaxTMI 
2019 (3) TMI 469
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....18) granted partial relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following effective ground : "On the facts and in the circumstances of the case and in law the lower authorities have erred in denying the deduction u/s 80P(2)(a)(i) for the interest earned from deposits with nationalized bank, a sum of Rs. 19,83,126/- treating it as a income from other sources by disregarding appellant's contention in this regard." 3. During the course of assessment proceedings, on perusing the Profit and Loss account, AO noticed that assessee had earned interest income from Nationalized banks, the details of which are listed at Para 6.1 of the assessment order. The aggregate of such interest was Rs. 19,83,126/- which was claimed as deduction u/s 80P(2)(a)(i) of the Act. AO was of the view that the interest income earned by the assessee from Nationalized Banks do not qualify for deduction u/s 80P(2) of the Act, as it is not out of the main business activity of the assessee. He therefore considered the aforesaid interest income to be taxable as "income from other sources" and denied the claim of deduction u/s 80P of the Act. Agg....
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....i) of the Act on interest income earned by the assessee in the hands of assessee was decided by the Tribunal in ITA No.1584/PN/2012, relating to assessment year 2009-10, vide order dated 30.04.2014; thereafter in ITA No.1394/PN/2015, relating to assessment year 2011-12, vide order dated 22.07.2016 and also in ITA No.2006/PUN/2014, relating to assessment year 2010-11, vide order dated 04.05.2017. The Tribunal in assessment year 2011- 12 had made reference to the ratio laid down in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit in ITA No.604/PN/2014, relating to assessment year 2010-11, order dated 19.08.2015, wherein reliance was placed on the ratio laid down by the Honble High Court of Karnataka in Tumkur Merchants Souhards Credit Cooperative Ltd. Vs. ITO reported in 55 taxmann.com 447, wherein it was held that interest earned from short term deposits with the bank was entitled to deduction under section 80P(2)(a)(i) of the Act. The Honble High Court of Karnataka after considering the decision of the Hon'ble Supreme Court in the case of Totgar‟s Cooperative Sale Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC) held that the interest earned by such Coopera....
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....question. In this regard, it is necessary to notice the relevant provision of law i.e., Section 80P(2)(a)(i): "Deduction in respect of income of cooperative societies: 80P (1) Where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. (2) The sums referred to in subsection (1) shall be the following, namely: (a) in the case of cooperative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) to (vii) xx xx xx the whole of the amount of profits and gains of business attributable to any one or more of such activities." 7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) as u....
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....and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a cooperative society and is liable to be deducted from the gross total income under Section 80P of the Act. 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Cooperative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee Cooperative Society, apart from 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....