TaxTMI 
TaxTMI 
2016 (3) TMI 1481
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.... has claimed deduction under section 80P(2)(a)(i) in respect of interest on fixed deposits with banks, reserve fund, bad debts funds, PF loan etc. as well as on other receipts such as subsidy and guese house income. In the assessment completed under section 143(3) for assessment year 2008-09, the deduction claimed by the assessee under section 80P(2)(a)(i) in respect of said income was disallowed by the AO, relying on the decision of the Hon'ble Supreme Court in the case of Totgars' Co-operative Sale Society Limited -vs- I.T.O. 188 Taxman 282(SC) holding that the same was not derived by the assessee society from its members by providing loans/credit facilities during the course of carrying on its business of providing credit facilities to its members. Since the deduction claimed under section 80P(2)(a)(i) in respect of similar income was allowed in the assessment completed in the case of the assessee for earlier years i.e. assessment years 2006-07 and 2007-08, the assessments for the said years were reopened by him and vide orders passed under section 147/143(3) on 31.10.2011, the deduction claimed by the assessee in respect of similar receipts amounting to Rs. 12,99,896/- ....
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....herein both AO as well as ld.CIT(A) has placed reliance. After careful perusal of material and the details of income as shown by the assessee, we observe that the Hon'ble Apex Court while allowing the deduction u/s 80P(2)(a)(i) of the IT Act has observed as under :- "Deduction under s. 80P(2)(a)(i)--Allowability--Interest from bank deposits and Government securities--Assessee, a co-operative society, markets the produce of its members and at times retained the sale proceeds--Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities--Interest on such deposits/securities fell under the head "Income from other sources" and hence it is taxable under s. 56--It cannot fall within the expression "profits and gains of business"--Such interest income cannot be said to be attributable to the activities of the society namely, business of providing credit facilities to its members or marketing of agricultural produce of its members--Sec. 80P(2)(a)(i) cannot be placed at par with cI. (baa) of Explanation to s. 8OHHC or s. 8OHHD(3) or s. 8OHHE(5) as argued by the assessee--Clause (baa) of Explanation to s. 8O....
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....t even though the same has been decided by the Tribunal in assessee's own case for assessment year 2008-09 by relying on the decision of the Hon'ble Supreme Court in the case of Totgars' Co-operative Sale Society Limited (supra), the Hon'ble Karnataka High Court in the decision rendered subsequently in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. -vs- ITO [2015] 55 taxmann.com 447 has distinguished the decision of the Hon'ble Supreme Court in the case of Totgars' Co-operative Sale Society Limited (supra) on certain specific aspects and after taking into consideration this distinction pointed out by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra), the Tribunal in the case of ITO-vs- The Baskara Cooperative Credit Society Ltd. decided vide its order dated 18th November, 2015 passed in ITA No. 1890/Kol/2012 has restored the similar issue to the file of the AO after recording its observations in paragraph nos. 11 and 12 as under: "11. We have considered the rival submissions and carefully perused the relevant material available on record. In the case of Totgar's Cooperati....
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....e by the assessee-Society and which has fetched interest income in question, is made out of its own surplus fund, as was the case in Tumkur Merchants Souharda Credit Cooperative Limited (supra) or the same is made out of the amount payable by the assessee-Society to its members, which represent its liability as was the case in Totgar's Cooperative Sale Society Limited. In this regard, it is observed that this aspect has not been specifically considered either by the Assessing Officer or by the ld. CIT(Appeals) in their respective orders and, therefore, there is no finding specifically given by them on this relevant aspect. In this regard, a perusal of the relevant balance-sheet of the assessee as on 31.03.2009 (copy of which at pages 67 & 68 of the paper book), shows that the total investment made by the assessee-Society was Rs. 22.08 crores as on 31.03.2009, whereas the Reserves & Surplus and Profit & Loss A/c. balance as on the said date were Rs. 1.76 crores and 1.73 crores respectively. The major amount appearing on the liability side of the balance-sheet as on 31.03.2009 was deposit and other account aggregating to Rs. 28.89 crores, which comprised of various funds and depo....