AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 850
X X X X Extracts X X X X
X X X X Extracts X X X X
....fter considering the submissions furnished by the assessee completed the assessment by disallowing the deduction claimed u/s. 80P. 2.2 Aggrieved by the order of the Ld.AO, the assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) observed and held as under: "5.4 However I find that the Appellant has earned 'a total interest income of Rs. 21,56,028/- on its investment with various Banks. In my view this is not an income which is eligible for deduction u/s. 80P(2)(a) or 80P(2)(d), since the said banks are neither members of the assessee society nor are they co-op societies/banks Moreover, the said interest income has arisen from deposits which in turn is made out of funds which stand in the balance sheet as liability. Therefore, the said income of Rs 21,56.028/- is held to be assessable as income from other sources u/s. 56 of the Act, subject to allowing administrative expenses and cost of fund. This will be worked out and allowed by the AO at the time of giving appeal effect to this order." Aggrieved by the impugned order, the assessee is in appeal before this Tribunal. 2.3 The Ld.AR submitted that, the Ld.CIT(A) failed to appreciate that the interest earned....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come from Business". Interest earned on investment of surplus funds not immediately required in short term deposits and securities by a Co-operative Society providing credit facilities to members or marketing agricultural produce to members is not business income but income from other sources and the society is not entitled to special deduction. 2.7. While Ld.AR relied on the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Credit Cooperative Ltd., reported in 230 taxman 309. We have carefully gone through the said judgment. 2.8. We have also considered, whether the co-operative bank wherein the assessee made deposits out of its surplus fund be considered as a co-operative society, for if a co-operative bank is considered to be a co-operative society than only the interest earned by the assessee on the deposits would be eligible for deduction u/s 80P(2)(d). We find that co-operative society is a broad and larger umbrella under which the co-operative banks do perform. We also note that all co-operative societies may not be banks, but all co-operative banks are deemed to be cooperative societies. According to banking Regulations Act, a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of facts, contentions and the findings of the Tribunal in the case of M/s.The Jayanagar Co-operative Society Ltd. (supra) reads as follow:- "4. The issues that arise for consideration in this appeal by the assessee are as to whether the Revenue authorities were justified in holding that the assessee was not entitled to the benefit of deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 (in short 'the Act') on interest income earned and under section 80P(2)(d) of the Act in respect of interest received from Cooperative institutions. The Assessing Officer (AO) denied the claim of the assessee on the ground that interest income earned by making investment of surplus funds has to be assessed under the head "Income from Other Sources" and not income from business and since interest income is not assessed as business income, the claim for deduction under section 57 of the Act cannot be allowed. In upholding the above conclusions, the CIT(A), inter alia, relied on the decision of the Hon'ble Supreme Court in the case of The Totgar's Co-operative Sales Society Ltd., Vs. ITO 322 ITR 283 (SC) wherein the Hon'ble Supreme Court held that the benef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that interest earned from Schedule bank or cooperative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d)of the Act was not applicable to such interest income. It is thus clear that the source of funds out of which investments were made remained the same in AY 2007-08 to 2011- 12 and in AY 1991-92 to 1999-2000 decided by the Hon'ble Supreme Court. Therefore whether the source of funds were Assessee's own funds or out of liability was not subject matter of the decision of the Hon'ble Karnataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra) still holds good. Hence, on this aspect, the issue should be restored back to the AO for a fresh decision after examining the facts in the light of these judgment of the Hon'ble Apex Court rendered in the case of The Totgars Co-operative Sale Society Ltd. (supra) and of Hon'ble Karnataka high Court rendered in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra)." 9.2 In the light of the above order of the Tribun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income; [(iv) in the case of income of the nature referred to in clause (viii) of subsection (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.]" 2.14. We have heard the submissions advanced by both sides on this aspect. We direct the Ld.AO to allow the expenditure incurred while computing income under the head, 'Income from Other Sources', in relation to earning of interest from the commercial banks. Accordingly the grounds raised by the assessee for assessment year 2015-16 stands allowed for statistical purposes. Assessment Year 2017-18: 3. Issue - 1: Disallowance of cash deposited by the members during demonetisation period. Issue - 2: Disallowance of claim u/s. 80P(2)(d) in respect of interest earned from Co-operative Banks / other Banks. 3.1 For the Assessment Year under consideration, assessee filed its return of income on 26/10/2017 declaring total income of Rs.1,17,760/- after claiming e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of natural justice in respect of not granting sufficient time to the assessee for representing its case before the Ld.PCIT. However, considering the fact that in any event, the issue would have to be remanded to the Ld.AO in order to verify the cash deposit of Rs.1,23,80,000/- in specified bank notes during the demonetisation period in its bank account in accordance with various instructions referred to by the Ld.DR hereinabove. 4.2 Admittedly, the assessee had accepted the SBNs which were no longer a legal tender and were to be explained in accordance with the relevant circular mentioned hereinabove. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases. 4.3 In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note th....