TaxTMI 
TaxTMI 
2020 (10) TMI 1193
X X X X Extracts X X X X
X X X X Extracts X X X X
....in respect of interest income of Rs. 86.53 lacs earned from providing credit facilities to its members on the principal of mutuality. 1.2 While doing so, the Id. CIT (A) erred in: (i) Basing his action only on surmises, suspicion and conjecture; (ii) Taking into account irrelevant and extraneous considerations: and (iii) Ignoring the thet that the said interest income is earned by the Appellant only from providing credit facilities to its members. 1.3 Meanwhile supporting the order of the Ld. CIT(A) in granting relief on the above mentioned amount u/s 8011(2)(a)(i) of the Income Tax Act, 1961 ["the Act"], it is submitted that in the facts and the circumstances of the case, and in law, the said interest should have been exempted on the principal of ci iuttialitr itself. 2.1 The Id. CIT (A) erred in not allowing deduction ti/s 80P(2)(d) of the Act in respect of Interest Income of Rs.I6.74 lacs earned by the Appellant on investment in deposits kept with Bombay Mercantile Co-operative Bank Ltd. and Maharashtra State Cooperative Bank Ltd. 2.2 While doing so, the Id. CIT (A) failed to appreciate that: (i) The deposit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies. The society was availing overdraft facility against its own deposits from the Bombay Mercantile Co-operative Bank Ltd. and paid interest on the same. The assessee by virtue of letter dated 21.11.2012 also stated that the society was eligible for deduction u/s 80P(2)(a)(i) as the society was not a Cooperative Bank as defined under Part V of the Banking Regulation Act, 1949 and the new Proviso to Section 80P(4) was applicable only to Cooperative Banks and not to Credit Co-operative Societies. The case of the assessee was examined and the claim of the assessee was declined by the AO. Feeling aggrieved, the assessee filed an appeal before the CIT(A) and the CIT(A) has held that the assessee was eligible for deduction u/s 80P(2)(a)(i) but was not eligible for deduction u/s 80P(2)(d) in respect of the interest income of Rs. 16.74 lacs earned by the appellant on the deposits kept with Bombay Mercantile Co-operative Bank Ltd and Maharashtra State Co-operative Bank Ltd. The revenue filed an appeal against the order of the CIT(A) by virtue of ITA. No.2937/M/2014 dated 27.10.2015 and it was held that the assessee was entitled for deduction u/s 80P(2)(a)(i) of the Act. The appeal of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m its fixed deposits which is taxable under Section 56 of the Act. In this respect, our attention was invited to relevant provisions of Section 80P. It was further submitted that the assessee was not eligible for deduction u/s 80P(2)(d) also as the fixed deposit was not placed with a cooperative society. It was submitted that Ld. CIT(A) has passed a non speaking order and has not given any finding and after recording submissions of assessee, had deleted the additions. It was submitted that order of Ld. CIT(A) was violative of principles of natural justice. Regarding case laws relied upon by Ld. CIT(A), Ld. D.R. submitted that before Ld. CIT(A), assessee had relied upon a number of case laws which were pronounced by either Hon'ble High Court or Hon'ble ITAT whereas the case law of Totgar's cooperative Society as relied upon by A.O. is by Hon'ble Supreme Court of India which is a final authority and, therefore, the order of A.O. should be upheld. 7. Inviting our attention to page 8 of Ld. CIT(A)'s order, Ld. D.R. submitted that Ld. CIT(A) has given wrong finding that the case of the assessee was not similar to case law of Totgar's Cooperative Society as the ratio ema....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was eligible for deduction under that section. 9. We have heard rival parties and have gone through the material placed on record. We find that total income earned by the assessee included income on fixed deposits placed with Bombay Mercantile Bank, interest income from a scheduled bank and dividend income from Delhi Cooperative Bank. From the certificate as placed at paper book page 30, we find that Bombay Mercantile Cooperative Bank is a cooperative society registered under Maharashtra Cooperative Societies Act and we further find that the said society has been assessed u/s 143(3) as a cooperative society and its income was allowed to be exempt u/s 80P(2)(i) as held by Mumbai Tribunal in I.T.A. No. 4128 and 4129 vide its order dated 30.11.2005, for Assessment Year 1990-91 and 1991-92 and further by Mumbai Tribunal vide order dated 07.09.2011 in I.T.A. No. 5292 for Assessment Year 1997-98. Therefore it is held that fixed deposits placed with Bombay Mercantile Bank falls within the exemption granted by Section 80P(2)(d) of the Act. The assessee was also eligible under the provisions of Section 80P(2)a(i) as the funds placed by assessee in the form of fixed deposits can be said to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 under: 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature, has deliberately 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. 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 the members, as there were no takers. Therefore they had deposited the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd. (Supra) and even the revenue's Reference Application against the said decision was rejected. The Revenue has not challenged the said order further thereby accepting the same. Even on the said ground, the contention of the assessee is required to be accepted. 8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar v. ITO [1993] 204 ITR 856/[1994] 72 Taxman 223 (Ker.), the Kerala High Court has held as under: '4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r dividends derived by the co-operative society from its investments with any other co- operative society, the whole of such income." 6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 : "...In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used," 7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759. 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment beca....