TaxTMI 
TaxTMI 
2024 (9) TMI 1930
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....t earned from other Co-operative Banks and nationalised banks u/s 56 of the Act. 2. Whether on the facts and circumstances of the case and in law, the learned CIT(A) was correct in deciding the appeal without considering the facts of the case and discussion on merits and legal provisions and merely basing conclusion on decisions quoted by ITAT without even discussing the ratio of these decisions and how there were applicable to the present case and which shows non-application of mind. 3. Whether on the facts and circumstances of the case, the decision of the learned CIT(A) is without merits and against the law as the same is against the decision of the Hon'ble High Court of Karnataka in case of PCIT, Hubballi Vs. Totgars Co-operative Sale Society Ltd. wherein at Para 13, it was held by the Hon'ble High Court that Even though a co-operative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949, further at Para 14 of this decision the Hon'ble Court held that the exclusion by Sectio....
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....uestion was raised. "Whether the interest income received by a Co-operative Bank from investments made in Kisan Vikas Patra ("KVP" for short) and Indira Vikas Patra ("IVP" for short) out of voluntary reserves is income from banking business exempt under Section 80P(2)(a)(i) of the Income Tax Act, 1961?" After considering the issue, the Hon'ble Jurisdictional High Court has concluded as under : "12. Therefore, in all these cases, where the surplus funds not immediately required for day-to-day banking were kept in voluntary reserves and invested in KVP/IVP, the interest income received from KVP/IVP would be income from banking business eligible for deduction under section 80P(2)(i) of the Act. 13. In the result, there being no dispute that the funds in the voluntary reserves which were utilized for investment in KVP/IVP by the co-operative banks were the funds generated from the banking business, we hold that in all these cases the Tribunal was justified in holding that the interest income received by the co-operative banks from the investments in KVP/IVP made out of the funds in the voluntary reserves were eligible for deduction under section 80P(....
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....s members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. The question before us, is whether interest on such deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under section 28 of the Act? In our view, such interest income would come in the category of "income from other sources" hence, such interest income would be taxable under section 56 of the Act, as rightly held by the assessing officer....." 19.1 However, in the present case, on verification of the balance sheet of the assessee as on 31.3.2009, it was observed that the fixed deposits made were to maintain liquidity and that there was no surplus funds with the assessee as attributed by the Revenue. However, in regard to the case before the Hon'ble Supreme Court - "(on page 286) 7 ........ Before the assessing officer, it was argued by the assessee(s) that it had invested the funds on short term basis as the funds were not required immediately fo....
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....embers, as it accepts deposits from and lends the same to its members. To meet any eventuality, the assessee was required to maintain some liquid funds. That was why, it was submitted by the assessee that it had invested in short-term deposits. Furthermore, the assessee had maintained overdraft facility with Dena Bank and the balance as at 31.3.2009 was Rs. 13,69,955/- [source : Balance Sheet of the assessee available on record]. 19.6 In overall consideration of all the aspects, we are of the considered view that the ratio laid down by the Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd (supra) cannot in any way come to the rescue of either the Ld. CIT (A) or the Revenue. In view of the above facts, we are of the firm view that the learned CIT (A) was not justified in coming to a conclusion that the sum of Rs. 9,40,639/- was to be taxed u/s 56 of the Act. It is ordered accordingly." 5. Respectfully following the above decision of the Co-ordinate Bench, we hereby hold that the benefit of deduction u/s 80P(2)(a)(i) was rightly granted by ld. CIT(A), however, he has wrongly held that the interest income is taxable u/s 56 of the Act so do not fall ....