TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 1806
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....hat interest income of Rs. 2,83,02,934/- earned by the appellant co-operative society on FDR(s) with the Schedule banks and interest on Personal Loan to members of Rs. 21,98,448/- and interest on HBL to staff of Rs. 1,76,490/- are not an income derived by it from its business activities and is in the nature of receipts from other sources and thereby upholding working of Income from business by the Ld AO. 1.1. The Ld. CIT(A), NFAC is also wrong and has erred in law in confirming disallowance of deduction of Rs. 3,06,77,872/- by the Ld AO under section 80P(2)(a)(i) of the I.T. Act, 1961. 1.2 The Ld CIT(A), NFAC is also wrong and has erred in law in confirming disallowance of deduction of Rs. 11,57,981/- being the Other Business related Income viz Commission, Miscellaneous and Sundries by the Ld AO under section 80P(2)(a)(i) of the I. T. Act, 1961. 2. The Ld. CIT(A) NFAC was not made any comments against the action of the Ld. AO in respects of wholly unjustified in addition of Overdue Interest amounting to Rs. 17,76,82,947/- which is against the Prudential Norms in respect of non-performing assets, interest is not recognized on accrual basis but is booked as income only when ....
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....s. 10,49,660/-. The return was selected for scrutiny and the Assessing Officer passed the impugned assessment order dated 30th March, 2016 under section 143(3) of the said Act, making addition in respect of Overdue Interest amounting to Rs. 17,76,82,947/- and also disallowed the deduction u/s 80P of the Act 1961. 5. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who confirmed the addition after making elaborate discussion and dismissed the appeal of the assessee. Aggrieved with the appeal order, the assessee has filed this appeal before the Tribunal. 6. We have heard the rival contentions and have also gone through the submission filed. Ground Nos. 1 & 1.1 relate to disallowance under section 80P(2)(a)(i) of the Act out of the interest income of Rs. 2,83,02,934/- earned by the assessee on FDRs with the Scheduled Banks, interest on Personal Loans to members of Rs. 21,98,448/- and interest on HBL to staff of Rs. 1,76,490/- while Ground No. 3 is against the Ld. CIT(A) applying the decision in Totgars' Cooperative Sale Society Ltd. v ITO (supra). The Assessing Officer noticed that the assessee had claimed the sum of Rs. 11,35,000/- u/s 80P and....
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..... 2,83,02,934/- was ineligible for deduction under section 80P(2)(d) of the Act. The Assessing Officer relied upon the decision in the case of The Totgars' Co-operative Sale Society Ltd. vs. ITO 322 ITR 283 (SC) in which it has been held that interest earned by the appellant cooperative society on surplus funds invested in short-term deposits with banks and in government securities is not eligible for deduction under section 80P. In response to the query in this regard, the Ld. AR of the assessee submitted that during the relevant year, NABARD had granted loan of Rs. 100 crore and Rs. 56.34 crore which in turn was lent to the members in several instalments. The assessee borrowed wholesale and lent on retail basis. It claimed that there is always some floating fund which has a cost, i.e. the interest payable to NABARD. It was also stated that repayments from the borrowers were received in hundreds of instalments while the repayment to the lender viz. NABARD took place only twice a year, i.e. on 31st January and 31st July. The society has to accumulate funds to pay the instalments on the scheduled dates. The interest income so derived or the capital, if not immediately required t....
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....rgeable as income from other sources and therefore a sum of Rs. 23,74,938/- was also included as other interest. The assessee had received commission of Rs. 97,706/- on non-life UIIC to the tune of Rs. 59,635/- and miscellaneous receipts to the tune of Rs. 2,47,506/-, none of which were directly relatable to the principal business activities of the assessee and formed part of ineligible income for the purpose of deduction under section 80P(2)(d) of the Act. Another sum of Rs. 7,53,134/- shown under the head 'sundries' was also treated as ineligible for the purpose of deduction under section 80P(2)(d) of the Act. Thus, aggregate sum of Rs. 11,57,981/- was also treated as 'other income' and a sum of Rs. 3,18,35,853/- was treated as ineligible for consideration while computing deduction under section 80P of the Act. 7. The Ld. CIT(A), after analysing the decision in The Totgars' Co-operative Sale Society Ltd. vs. ITO 322 ITR 283 (SC) and the decision of the Bangalore Bench of the Tribunal in the case of M/s. Vasavamba Co-operative Sciety Ltd. which has held in para 13 that the Hon'ble Karnataka High Court in the case of Totgars' Cooperative Sales Society in 395 ITR 611 (Kar) in t....
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.... the present case. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of M/s. The Totgars' Cooperative Sale Society Ltd. vs ITO in Civil Appeal No. 1622 of 2010 The Hon'ble Supreme Court has held as under "An important point needs to he mentioned. The words "the whole of the amount of profits and gains of business" emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society. In this particular case, the evidence shows that the assessee-Society earns interest on funds which are not required for business purposes at the given point of time. Therefore, on the facts and circumstances of this case, in our view, such interest income falls in the category of "other Income" which has been rightly taxed by the Department under section 56 of the Act". In view of the above the appeal of the assessee is dismissed. 10. In respect of the additional grounds raised by the assessee the ld. DR did not object to the admission of the additional ground. 11. The Id. AR has prayed before the Tribunal that in case the aforesaid incomes if treated under the head income from....
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....essed under the head "income from other sources" was allowed and the Tribunal held that the net income should be brought to tax after deducting the expenses incurred to earn that income. Therefore, the claim of deduction under section 80P was rejected and decided against the assessee. However, the income was to be assessed after deducting the expenses in accordance with law. Hence subsequent to the order of the Tribunal the ld. Assessing Officer passed another order on 30.12.2016, in which expenses incurred for earning interest on fixed deposits and short-term investments with Banks amounting to Rs. 8,26,200/-, corresponding expenses to interest income of Rs. 55,08,000/- as against the assessee's claim of Rs. 54,50,166/- were allowed and the claim of corresponding expenses to other heads was rejected. 10. Aggrieved, the assessee went in appeal before the ld. CIT(Appeals) and also submitted the additional ground of appeal. The ld. CIT(Appeals) upheld the expenses as allowed by the ld. Assessing Officer incurred for earning interest income and rejected the other claims primarily on the ground that no separate books of account were maintained with regard to the income under dispute....
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....all under the category of members, therefore, the claim of allowing deduction under section 80P(2)(a)(i) for interest on HBL to staff and on personal loans is also rejected. Similarly, on the same reasons, as income from commission, miscellaneous income and sundry income also do not relate to the business activities of the assessee, the same do not qualify for deduction under section 80P(2)(d) of the Act or 80P(2)(a)(i) of the Act and Ground No. 1.2 relating to disallowance of deduction for Rs. 11,57,981 is also rejected and the addition is confirmed. Thus Ground Nos. 1, 1.1, 1.2, and 3 are rejected. The total disallowance made by the Ld. AO at Rs. 3,18,35,853/- is hereby confirmed. 10. As regards ground no. 4 relating to the allowability of expenses against the interest received from the banks and on personal loans, the Ld. AO has held that as regards expenses on other income, such expenses have already been claimed to the tune of Rs. 30,65,000/- as attributable to earning other income the compression of income, which have been allowed. Hence no more expenses are liable as attributable to earning interest on fixed deposit with other banks and other income as above. Thus, Ground N....