TaxTMI 
TaxTMI 
2022 (6) TMI 1553
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....the facts and in the circumstances of the case, and also in law, the Ld. CIT(A) erred in holding that interest of Rs. 58,27,522/- (restricted to Rs. 35,21,707/-) received by the appellant-society on fixed deposits kept with co-operative banks did not form part of the appellant's business income, and therefore, it was not eligible for deduction u/s. 80P(2)(a)(i) of the Act. The appellant, therefore, prays that deduction u/s. 80P(2)(a)(i) be allowed also in respect of aforesaid interest income. 2. On the facts and in the circumstances of the case, and also in law, the Ld. CIT(A) erred in confirming the addition of Rs. 35,21,707/- made by the Ld. AO due to denial of the deduction u/s. 80P(2)(d) claimed by the appellant in respect ....
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....viding credit facilities to its member. Further, assessee also invested the surplus funds in short term deposit, which is not immediately required in the business. Therefore, assessee is not entitled for deduction u/s 80P(2)(a)(i) of the Act in this case. 7.4 The Co-operative banks are not the co-operative society but these are banks and governed by the principal of banking formulated by the Reserve Banks of India (RBI). In case of number of co-operative banks, the RBI has put restriction for their being deviating from normal banking principal. Thus, Co-operative Banks are the sub species of normal banks and not the normal co-operative society. 7.5 From the above it is stated that assessee is neither entitled to get deduct....
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....duction under section 80P(2)(a)(i) of the Act on the ground that interest income earned on fixed deposit is not from the business of providing credit facility to its members and therefore the assessee is not eligible for said deduction. The relevant finding of the Ld. CIT(A) is reproduced as under: "6.7.1 On perusal of Profit & Loss Account it has been observed that the appellant society has earned interest income of Rs 58,27,522/- from investment in Co-operative Banks Out of this interest income available to the extent of Rs 35,21.707/- is not the business income being it has been not earned through the business activity carried out by it i.e. by credit facilities to its members. Rather it has been earned from investment of surplu....
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....t is undoubtedly "attributable" to its business of providing credit facility to its members. The Ld. counsel referred to section 80P(2)(a)(i) of the Act and submitted that profit "attributable" to the activities of credit societies is eligible for deduction. He submitted that word attributable is wider in scope as compared to the expression 'derived from'. 5. He submitted that Hon'ble Karnataka High Court in the case of Tumkur merchants Souharda Credit Cooperative Ltd versus ITO (2015) 55 taxmann.com 447 (Karnataka) has held that interest income from fixed deposits is attributable to the business of providing credit facility to its members and therefore it was deductible under section 80P(2)(a)(i) of the Act in the case of cr....
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.... the same shall form part of its business income. The Hon'ble High Court upheld the said view by duly considering the decision rendered by Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd (supra). For the sake of convenience, I extract below the observations made by the Hon'ble Karnataka High Court :- "8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduc....
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....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, ....