TaxTMI 
TaxTMI 
2019 (12) TMI 303
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndia and Central Bank of India fetching interest of Rs. 6,48,17,859/- and 49,02,799/-; respectively. The Assessing Officer quoted hon'ble apex court's decision in Totgars Co-operative Sale Society Ltd. vs. ITO (2010) in 188 Taxman 282 (SC) that such an interest income deposits in non-cooperative bank is aimed to earn interest income only than that of carrying out the regular business activity. He therefore disallowed the impugned deduction claimed. 3. The CIT(A) on the other hand has followed the tribunal's order in assessee's case itself in ITA No.1340/Kol/2015 for Assessment Year 2012-13 dated 29.10.2016 as under: 6. Aggrieved assessee preferred an appeal before the ld. CIT(A). The assessee before the ld. CIT(A) submitted that the surplus funds was kept with the banks for the purpose of providing loan to the members. The assessee also submitted that in the identical issue the Hon'ble Tribunal of Kolkata in the case of S.E, S.E.C. and E.C.O.Railway Employees Cooperative Credit Society Ltd. In ITA NO.1693/Kol/2012 for A.Y.2008-09 after distinguishing the facts of Totgar's Cooperative Sales Society Ltd. (supra) has decided the issue in favour of the assessee. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e facts of Totagars Cooperative Sale Society Ltd. reported in 188 Taxman 282. The relevant extract of the order is reproduced below : 3. After hearing the rival contentions, I find that similar issue has been adjudicated by the Jurisdictional High Court in the case of Commissioner of Income Tax-X, Kolkata vs. South Eastern Railway Employees Co-operative Credit Society in ITAT No. 135 OF 2010 judgment dt. 22.07.2010. The question before the Hon'ble Court was as follows: "i) Whether on the facts and circumstances of the case, the interest earned by the assessee to the tune of Rs. 1,18,07,645/- out of Its investment in banks is not the activity that arose from the activity of providing loan and credit facilities to its members as the society is not engaged in the business of banking and is therefore not qualifying for deduction u/s.80P(2a)(a)(i) of the Act, the learned Tribunal is correct in law in holding that interest earned on such investment is within the purview of section 80P of the Act 7" The Hon'ble Court held as follows:- "It was found by the Tribunal while affirming the order of the Commissioner of Income Tax (Appeal) that there is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....created by such retention 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 BOP(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 BOP(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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase is squarely covered by this tribunal's earlier year in its favour (supra). Relevant factual backdrop however speaks otherwise. It is sufficiently clear by now that the above co-ordinate bench followed yet another tribunal's order declining Revenue's stand on sec. 80P(2)(a)(i) issue as per hon'ble jurisdictional high court's decision in CIT vs. South Eastern Railway Employees Co-operative Credit Society in ITAT No.135 of 2010 GA No.1838 of 2010 dated 22.07.2010. The Revenue had filed said appeal against the tribunal's order holding the concerned assessee's interest income arising from investments in banks to be eligible for sec. 80P(2)(a)(i) deduction. Their lordships' detailed discussion in the said case qua in the instant issue as follows:- "It appears in this matter the Revenue wants us to admit the appeal on the points as formulated hereinbelow; - i) Whether on the facts and circumstances of the case, the interest earned by the assessee to the tune of Rs.l,18,07,64S/- out of its investment in banks is not the activity that arose from the activity of providing loan and credit facilities to its members as the society is not engaged in the business of bank....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Income Tax (A) as well as the Tribunal has followed the earlier unchallenged decision no question of law is involved in this matter. Nothing has been produced before us to show subsequent decision of the Tribunal in relation to the assessment years 1998-99 to 2002-03 and 2003-04 have been challenged by any of the parties before this Court. It is submitted by Mr. Bhowmick that there has been challenge of the decision in relation to assessment years 1995-96, 1996-97 and the same is pending before this Court we think that challenge of the assessee has now become redundant as the earlier view taken in both the assessment years have been reversed by the Tribunal by its subsequent decision. Hence, the pendency of that earlier matter is of no consequence in this matter. Had there been a challenge of the decision of the Tribunal in relation to the assessment years 1998-99 to 2002-03 and also 2003-04 to 2004-05 the matter would have been different. The revenue did not take any step whatsoever. Therefore, we presume the revenue has accepted the subsequent view of the Tribunal and the same now hold the field right now. The appeal is dismissed accordingly." 7. We fin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties to them. What is sought to be taxed under section 56 of the Act is the interest income arising on the surplus invested in short-term deposits and securities which surplus was not required for business purposes The assessee(s) markets the produce of its members whose sale proceed at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is-whether interest on such deposits/securities, which strictly speaking accrues to the member' account, could be taxed as business income under section 28 of the Act? In our view, such interest income would come in the category of 'income from other sources', hence such interest income would be taxable under section 56 of the Act, as rightly held by the Assessing Officer. In this connection, we may analyze section 80P of the Act. This section comes in Chapter VI-A, which, in turn, deals with 'Deductions in respect of certain income'. The headnote to section 80P indicates that the said section deals with deductions in respect of income of co-operat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n taxing the interest income, indicated above, under section 56 of the Act. 9. We are prepared to agree with Mr. Khaitan to the extent that the interest earned from out of the investments made under section 64 read with section 63 of the Multi-State Co-operative Societies Act, 2002 is attributable to the business of providing credit facilities to its members. But we are not able to agree with Mr. Khaitan that the rest of the interest earned by the assessee from the investments is also attributable to the business of providing credit facilities to its members. We have not been impressed by the judgment cited by Mr. Khaitan. 10. We are unable to agree with the views of the Patna High Court in the case of Bihar State Housing Co-op Federation Ltd. (supra). The Division Bench in that case relied upon the judgment of the apex court in the case of CIT v. Karnataka State Co-operative Apex Bank reported in [2001] 251 ITR 194 (SC). That was a case of a co-operative bank. A co-operative bank and a cooperative society do not stand on the same footing. The whole of the income of co-operative bank is deductible whereas in the case of society the income attributable to any one o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of expenditure incurred in earning the approximate sums of Rs. 99 laksh and Rs. 1.12crores respectively. The expenditure incurred for earning those two amounts of income is the amount of interest paid for that money to the members which has to be ascertained and that has to be deducted from the expenditure of the eligible business so that the eligible amount of deduction can be worked out. At the same time, The Assessing Officer has to be directed, according to him, to treat the amount of interest arising out of investments of the funds created under section 63 as an income attributable to the business. Mr. Saraf submitted that this is a new case made out by the assessee before the High Court. This was never the plea before any of the authorities. He is no doubt correct in his submission. But court cannot refuse to give a person what is due to him. As a matter of fact, only that is a good judgment which renders every person his due. Whether the assessee claimed the amount or did not claim the amount, is not of much importance. What is of importance is whether the benefit is allowable in law? If an answer to that question is in the affirmative, then that benefit has to be a....