ITO, New Delhi V. M/s. The Mantola Cooperative Thrift & Credit Society Ltd., New Delhi

ITA 1025/DEL/2012

• Counselvise Citation: 102520114 RSA 2012
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS MEETA SINGH SENIOR
• Assessee Lawyers: SUNIL JAIN
• Keywords: Question of law
• Section: 148; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) SHRI RAJPAL YADAV, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1025/DEL./2012 (ASSESSMENT YEAR : 2008-09) ITO, WARD 38 (4), VS. M/S. THE MANTOLA COOPERATIV E THRIFT & NEW DELHI. CREDIT SOCIETY LIMITED, 541, MANTOLA, PAHARGANJ, NEW DELHI 110 055. (PAN : AAAJT1976A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL JAIN, CA REVENUE BY : MRS. MEETA SINGH, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE CIT (APPEALS)-XXVIII DATED 21.12.201 FOR THE ASSESSMENT YEAR 2008-09. 2. THE RETURN OF INCOME WAS FILED ON 31.10.2008. T HE ASSESSEE IS A COOPERATIVE THRIFT AND CREDIT SOCIETY. IT IS PROVI DING CREDIT FACILITY TO ITS MEMBERS. THE AO TREATED THE INCOME EARNED BY THE A SSESSEE ON THE SURPLUS FUNDS DEPOSITED WITH THE BANK AS INCOME FROM OTHER SOURCES AS BANKS ARE NOT MEMBER OF ASSESSEE SOCIETY. THE CIT (A) HAS GR ANTED THE RELIEF AGAINST ITA NO.1025/DEL./2012 2 WHICH REVENUE IS IN APPEAL BEFORE US BY TAKING THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A) GROSSLY ERRED IN DELETING THE AD DITION MADE BY THE AO BY TREATING THE INTEREST RECEIVED BY THE ASSESSEE FROM ITS INVESTMENTS OF SURPLUS FUNDS IN BANKS I.E. FROM NON- MEMBERS AMOUNTING TO RS.1,43,11,462/- AS INCOME FRO M OTHER SOURCES AND HENCE SUCH INCOME NOT ELIGIBLE FOR DEDU CTION U/S.80P OF I.T. ACT, 1961. 2. THE LD. CIT(A) GROSSLY ERRED IN DELETING THE ADD ITION MADE BY THE AO NOT APPRECIATING THE FACT THAT THE A SSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80P OF THE I.T. ACT, 1961 W.R.T. INTEREST EARNED BY THE ASSESSEE FROM ITS INVESTMENT S OF SURPLUS FUNDS IN BANKS I.E. FROM NON-MEMBERS AMOUNTING TO RS.1,43,11,462/-. 3. THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO E ACH OTHER. 4. THE APPELLANT CRAVES TO ADD, AMEND OR MODIFY THE GROUNDS OF APPEAL AT ANY TIME. 3. INCOME OF RS.1,43,11,462/- HAS BEEN EARNED ON TH E INVESTMENTS OF FUND WITH THE BANKS. THESE BANKS WERE NOT MEMBERS OF TH E ASSESSEE SOCIETY. THE ASSESSEE IS NOT REGISTERED WITH THE RESERVE BANK OF INDIA AS A BANKING INSTITUTION. IT HAS NOT COMPLIED WITH THE BANKING REGULATION ACT OR RESERVE BANK ACT. THE ASSESSEE WAS NOT UNDER ANY LEGAL OBL IGATION TO MAINTAIN INVESTMENTS WITH THE SCHEDULED BANK FOR COMPLYING O F ANY STATUTORY LIQUIDATED RATIO OR CASH RESERVE RATIO. THE ASSESS EE WAS ENGAGED IN THE ACTIVITY OF PROVIDING LOANS AND ADVANCES TO ITS MEM BERS OUT OF THE THRIFT MONEY COLLECTED / MOBILIZED FROM ITS MEMBERS ONLY. ASSESSEE WAS NOT AUTHORIZED OR ALLOWED TO ACCEPT DEPOSITS FROM PUBLI C. THE ASSESSEES CLAIM ITA NO.1025/DEL./2012 3 THAT OBJECTS OF THE SOCIETY AS PER BYE LAWS WERE AL SO BANKING AND CREDIT BUSINESS. THE SOCIETY WAS ENGAGED WITH BUSINESS OF PROVIDING LOANS AND ADVANCE TO ITS MEMBERS OUT OF THRIFT MONEY MOBILIZE D/COLLECTED FROM MEMBERS ONLY AND CREDIT BUSINESS WAS WITH THE MEMBE RS ONLY. ASSESSEE WAS ALSO NOT A COOPERATIVE BANK. THE ASSESSEE WAS NOT AUTHORIZED BY THE BYE LAWS OF THE SOCIETY TO DO THE BANKING AND CREDIT BUSINES S WITH THE OUTSIDERS PUBLIC. LD. DR SUBMITTED THAT THE INTEREST EARNED ON THE FU ND INVESTED / PARKED WITH THE SCHEDULED BANK WAS NOT IN ANY WAY CONNECTED WIT H THE OBJECTS OF THE ASSESSEES SOCIETY AS PROVIDED IN BYE LAWS. THEREF ORE, THE ASSESSEES CASE IS NOT COVERED BY THE PROVISIONS OF SECTION 80P(2)(A)( I). SIMILARLY, THE ASSESSEES CASE ALSO DOES NOT FALL UNDER THE PROVIS IONS OF SECTION 80P(2)(D) BECAUSE IN THIS PROVISION, THE INCOME BY WAY OF INT EREST OR DIVIDEND IS EXEMPTED ONLY WHEN IT IS DERIVED BY THE SOCIETY FRO M ITS INVESTMENT WITH ANY OTHER COOPERATIVE SOCIETY. HERE, THE ASSESSEE SOCI ETY HAS RECEIVED THE INTEREST INCOME FROM THE SCHEDULED BANK WHICH ARE NOT COOPER ATIVE SOCIETIES. THE PROVISIONS OF SECTION 80P(2)(D) WERE TO PROMOTE COO PERATIVE SOCIETY MOVEMENT AND TO CONTRIBUTE TO THE GROWTH OF COOPERA TIVE MOVEMENT. IN VIEW OF THESE FACTS, ASSESSEES CASE ALSO DOES NOT FALL UNDER SECTION 80P(2)(D) ALSO. THE SCOPE OF PROVISIONS OF SECTION 80P(2)(A)(I) OF A COOPERATIVE SOCIETY IS LIMITED TO ITS BUSINESS ACTIVITIES FOR PROVIDING CR EDIT FACILITY TO ITS MEMBERS ONLY. IT WILL NOT ENCOMPASS UNDER ITS SCOPE THE IN COME GENERATED FROM THE ITA NO.1025/DEL./2012 4 NON-MEMBERS. THE SIMILAR PROPOSITION HAS BEEN UPHE LD BY THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE S ALE SOCIETY LTD. VS. ITO REPORTED IN 322 ITR 283. THE FACTS OF THE CASE ARE SIMILAR TO THE ASSESSEE AS THE ASSESSEE IS ALSO NOT A COOPERATIVE BANK. IN TH AT CASE ALSO, THE ASSESSEE WAS NOT A COOPERATIVE BANK. ASSESSEE WAS ALSO NOT ENTI TLED TO DO ANY BANKING BUSINESS ACTIVITIES WHICH COULD FALL WITHIN THE AMB IT OF SECTION 80P(2)(A)(I). IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LT D., CITED SUPRA, THE ASSESSEE WAS NOT REQUIRED TO MAKE STATUTORY DEPOSIT S AS REQUIRED BY A SOCIETY DOING THE BANKING BUSINESS. IN THE CASE UNDER CONS IDERATION, THE SOCIETY WAS ALSO NOT REQUIRED TO MAKE STATUTORY DEPOSITS. IN S UCH A SITUATION, THE INTEREST EARNED ON THE SURPLUS FUND PARKED WITH THE SCHEDULE D BANK COULD NOT BE ATTRIBUTABLE TO THE BANKING BUSINESS. IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD., THERE WAS NO EVIDENCE WHICH COULD EST ABLISH THAT IT WAS AUTHORIZED TO ACCEPT THE DEPOSITS UNDER THE COOPERA TIVE SOCIETY ACT. IN THE ASSESSEES CASE, INTEREST RECEIVED ON THE DEPOSITS WITH THE BANK ON THE SURPLUS FUND CANNOT BE TERMED AS AN INTEREST RECEIVED FROM THE SECURITY DEPOSITS WITH THE COOPERATIVE BANK WHICH COULD BE COVERED BY THE PROVISIONS OF SECTION 80P(2)(D). SUCH EARNING OF THE INTEREST WAS NOT FR OM THE BUSINESS ACTIVITY OF THE ASSESSEE, THEREFORE, THE AO HAS RIGHTLY ASSESSE D THE SAME AS INCOME FROM OTHER SOURCES AND SUCH INCOME DOES NOT QUALIFY FOR DEDUCTION U/S 80P. THE ITA NO.1025/DEL./2012 5 LD. DR PLEADED TO SET ASIDE THE ORDER OF THE CIT (A ) AND RESTORE THE ORDER OF THE AO. 4. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ASSESSEE IS A COOPERATIVE THRIFT AND SOCIETY ENGAGED IN THE BUSIN ESS OF MOBILIZING DEPOSIT FROM ITS MEMBERS ONLY AND UTILSING THESE FUNDS PART LY IN EXTENDING CREDIT TO ITS MEMBERS ONLY. THE SURPLUS FUNDS ARE PARKED WITH CO MMERCIAL BANKS. ASSESSEE IS NOT A COOPERATIVE BANK AND NOT DEALING WITH PUBLIC HENCE BANKING REGULATION ACT IS NOT APPLICABLE. THE SOCI ETY IS PROVIDING LOANS AND ADVANCES TO ITS MEMBERS OUT OF THE THRIFT MONEY COL LECTED FROM ITS MEMBERS. WHILE CONDUCTING THIS BUSINESS AS A PRUDENT COMMERC IAL BUSINESS PERSON THE ASSESSEE SOCIETY HAS PARKED ITS SURPLUS / IDLE FUND S WITH VARIOUS COMMERCIAL / CO-OPERATIVE BANKS TO MAXIMIZE THE RETURNS ON ITS F UNDS. INCOME SO EARNED ON THESE DEPOSITS IS PART AND PARCEL OF THE BUSINESS O F THE ASSESSEE. THE LD. AR ALSO SUBMITTED THAT ASSESSEE SOCIETY DOING TWO BUSI NESS ACTIVITIES, VIZ., BANKING FOR ITS MEMBERS AND INCOME FROM CREDIT FACI LITY TO MEMBERS. THE ASSESSEE IS NOT A CO-OPERATIVE BANK WHICH HAS BEEN EXCLUDED FROM THE BENEFIT OF SECTION 80P BY INSERTING SUB-SECTION 4 BY FINANC E ACT, 2006 W.E.F. 1.4.2007. THE BENEFIT OF SECTION 80P STILL REMAINS FOR CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR P ROVIDING CREDIT FACILITIES TO ITS MEMBERS. THAT IS WHY CARRYING OF BUSINESS OF B ANKING REMAINED IN CLAUSE (I) OF SECTION 80P(2)(A) EVEN AFTER INSERTION OF SU B-SECTION (4) DENYING BENEFIT ITA NO.1025/DEL./2012 6 TO COOPERATIVE BANKS. THE LD. AR SUBMITTED THAT LA W ITSELF HAS DIFFERENTIATED BETWEEN BUSINESS OF BANKING AND CREDIT FACILITY TO ITS MEMBERS. THUS, EVEN IF ONLY BANKING BUSINESS IS DONE THAN ALSO ASSESSEE EL IGIBLE FOR DEDUCTION UNDER THE SECTION 80P(2)(A). IN THE PRESENT CASE, THE ASS ESSEE WAS DOING BOTH. LD. DR FURTHER SUBMITTED THAT CLAUSE (D) OF SECTION 80P (2) IS OVER AND ABOVE CLAUSE 80P(2)(A)(I) GIVING ADDITIONAL BENEFIT TO AL L TYPES OF SOCIETY LISTED IN CLAUSE (I) EVEN IF THE INTEREST INCOME ASSESSABLE A S INCOME FROM OTHER SOURCES. THE LD. AR ALSO SUBMITTED THAT THE FACTS OF THE CAS E OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LT D., CITED SUPRA BY THE LD. DR, WERE DIFFERENT FROM THE FACTS OF ASSESSEES CAS E. THAT SOCIETY WAS NOT IN BANKING BUSINESS FOR ITS MEMBERS AND ONLY INTO THE SALE OF PRODUCE OF ITS MEMBERS AND EXTENSION OF CREDIT FACILITIES WHEREAS THE ASSESSEE IS INTO BANKING BUSINESS FOR ITS MEMBERS AND EXTENDING CRED IT FACILITY TO ITS MEMBERS. THE LD. AR ALSO RELIED ON THE FOLLOWING CASE LAWS : - (I) CIT-III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERA TIVE BANK LTD. (AP) - 336 ITR 516; (II) ELECTRO URBAN COOPERATIVE CREDIT SOCIETY LTD. VS. I TO 76 ITD 43 (CALCUTTA)(TM); (III) CIT, CHANDIGARH VS. PUNJAB STATE COOPERATIVE BANK L TD. 169 TAXMAN 290 (P&H); ITA NO.1025/DEL./2012 7 (IV) JUDGMENT OF HON'BLE HIGH COURT OF HIMACHAL PRADESH IN THE CASE OF CIT VS. HIMACHAL GRAMIN BANK - APPEAL NO.28 / 2010 DATED 27.07.2010; (V) CIT VS. NAWANSHAHAR CENTRAL COOPERATIVE BANK LTD. 289 ITR 6 (HON'BLE SUPREME COURT); (VI) CIT VS. PUNJAB STATE COOPERATIVE BANK LTD. - 300 IT R 24; AND (VII) DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARD A SAHAKARI LTD. (2012) 23 TAXMANN.COM 313 (PANAJI TRIB.) 5 WE HAVE HEARD BOTH THE SIDES. AFTER HEARING BOTH SIDES, WE ARE OF THE VIEW THAT FOLLOWING FACTS ARE UNDISPUTED. FIRST, T HE ASSESSEE IS A REGISTERED SOCIETY UNDER THE DELHI CO-OPERATIVE SOCIETY ACT, E NGAGED IN THE BUSINESS OF MOBILISING THRIFT MONEY FROM ITS MEMBERS AND PROVID ING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE ASSESSEE IS NOT A CO-OPERATIVE B ANK AND DOES NOT DEAL WITH THE PUBLIC. IT EXTENDS SERVICES TO THE MEMBER S ONLY. THE INTEREST WAS EARNED ON DEPOSITS WITH BANKS. THE INTEREST OF RS. 1,43,11,462/- WAS RECEIVED FROM THE SCHEDULED BANKS AND OTHER COMMERCIAL BANKS WHICH WERE NOT MEMBER OF THE ASSESSEE COOPERATIVE SOCIETY. THE AS SESSEE WAS NOT SUBJECTED TO THE REGULATION UNDER THE RESERVE BANK OF INDIA A CT AND BANKING REGULATION ACT. THE ASSESSEE WAS NOT HAVING LICEN SE UNDER THE BANKING REGULATION ACT FOR DOING THE BUSINESS OF BANKING. THE AR RELIED ON THE DECISION OF ITAT, KOLKATA IN THE CASE OF ELECTRO UR BAN CO-OPERATIVE CREDIT ITA NO.1025/DEL./2012 8 SOCIETY LTD. VS. ITO (CAL) (SUPRA) FOR THE PROPOSIT ION THAT SOCIETY WAS ENGAGED IN COLLECTING MEMBERSHIP FEES AS WELL AS DE POSITS FROM ITS MEMBERS AND IN RENDERING CREDIT FACILITIES TO ITS MEMBERS A ND IN RENDERING CREDIT FACILITIES TO THESE MEMBERS ON PAYMENT OF INTEREST BASIS. IN THAT WAY, IT COULD BE SAID TO BE CARRYING ON A BANKING BUSINESS ON A L IMITED BASIS. ASSESSEE HAD ALSO RELIED ON THE DECISION OF HON'BLE ITAT, PANAJI BENCH WHERE IT HAS BEEN HELD THAT WHERE THE AIMS & OBJECTS OF SOCIETY DO NO T PERMIT TO ACCEPT DEPOSIT FROM PUBLIC THEN IT CANNOT BE SAID ON DOING BANKING BUSINESS. WE ALSO OBSERVE THAT FROM THE RECORDS, WE FIND THAT ASSESSE E HAS NEVER TAKEN THIS STAND BEFORE THE AUTHORITIES BELOW. ASSESSEES RELIANCE ON THE CASE OF CIT VS ANDHRA STATE CO-OPERATIVE BANK LTD (SUPRA) IS OF NO HELP AS IN THAT CASE, THE SOCIETY WAS ENGAGED IN THE BANKING BUSINESS (CO-OPE RATIVE BANK) AND WAS ALSO GOVERNED BY THE REGULATION UNDER RBI ACT, BANK ING REGULATION & SOCIETIES ACT. THE ANDHRA STATE CO-OPERATIVE BANK LTD. WAS A LICENSED HOLDER FOR DOING THE BUSINESS UNDER THE BANKING REG ULATION ACT. CONTRARY TO IT THE ASSESSEE UNDER CONSIDERATION WAS NOT SUBJECT TO REGULATION UNDER RBI ACT, BANKING REGULATION ACT. THE ASSESSEE WAS ALSO NOT A LICENSED HOLDER FOR DOING THE BANKING BUSINESS. THE FACTS SUGGEST THAT ASSESSEE WAS NOT ENGAGED IN THE BANKING BUSINESS. THE BUSINESS OF BANKING I S NOT DEFINED IN THE INCOME TAX ACT. THE WORD BANKING HAS BEEN DEFINED IN SE CTION 5(B) OF THE BANKING REGULATION ACT, 1949. AS PER THE DEFINITIO N, THE BANKING MEANS ITA NO.1025/DEL./2012 9 ACCEPTING DEPOSITS OF MONEY FROM THE PUBLIC WHICH I S REPAYABLE ON DEMAND OR OTHERWISE WITHDRAWAL OF THESE DEPOSITS AND THESE DE POSITS ARE ACCEPTED FOR THE PURPOSE OF LENDING AND INVESTING. AS PER THIS DEFI NITION, THE DEPOSITS MUST BE ACCEPTED FROM THE PUBLIC FOR THE PURPOSE OF LENDING OR INVESTMENT AND THESE DEPOSITS MUST BE REPAYABLE ON DEMAND OR OTHERWISE A ND COULD BE WITHDRAWN BY THE DEPOSITOR BY CHEQUE, DRAFT OR OTHERWISE. TH E ASSESSEES CLAIM THAT IT WAS CARRYING ON A BANKING BUSINESS ON A LIMITED BAS IS IS FACTUALLY INCORRECT. THE ISSUE IS NOT COVERED BY THE DECISION OF HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS ANDHRA STATE CO-OPERATI VE BANK LTD. IN THAT CASE, INCOME RECEIVED BY A CO-OPERATIVE BANK FROM BOTH ST ATUTORY AND NON- STATUTORY RESERVES WAS HELD TO BE FROM BANKING BUSI NESS AND HELD TO BE ELIGIBLE U/S 80P. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE IS A CO- OPERATIVE SOCIETY REGISTERED UNDER THE DELHI SOCIET IES ACT AND IT IS NOT REGISTERED UNDER THE BANKING REGULATION ACT, 1949. ALTHOUGH, ONE OF THE OBJECTS OF THE SOCIETY ALSO MENTIONS THE BANKING AN D CREDIT BUSINESS, BUT THE FACTS OF THE CASE SHOWS THAT THE SOCIETY WAS NOT EN GAGED IN THE BANKING BUSINESS. A SOCIETY CANNOT OPEN SAVING A/C, CURRE NT A/C NEITHER IT CAN DO BUSINESS WITH CHEQUE, DDS, PAY ORDERS AND OTHERS. THE BANKS WAS REGULATED BY THE RESERVE BANK OF INDIA AND BANKING REGULATION ACT BUT THE ACTIVITIES OF THE CO-OPERATIVE SOCIETIES ARE REGULATED BY THE REG ISTRAR OF SOCIETY TO WHOM THE YEARLY RETURN IS SUBMITTED BY THE SOCIETY. THE REGISTRAR HAS THE POWER TO ITA NO.1025/DEL./2012 10 INSPECT ACCOUNTS AND ALL FUNCTIONS OF THE SOCIETY. HOWEVER, IN THE CASE OF INSTITUTIONS DURING THE BANKING BUSINESS, THE RESER VE BANK HAS POWER TO INSPECT THE ACCOUNTS AND OVERALL FUNCTIONING. IT I S A FACT THAT CO-OPERATIVE SOCIETY WAS NOT ENGAGED IN ACCEPTING THE DEPOSITS F ROM THE PUBLIC FOR THE PURPOSE OF LENDING OR INVESTMENT. THEREFORE, THE R ATIO DECIDED BY HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS AND HRA PRADESH STATE CO- OPERATIVE BANK LTD, IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. THE INTEREST INCOME AROSE ON THE SURPLUS FUND INVESTED IN DEPOSIT WITH BANK WHICH WAS NOT REQUIRED FOR THE BUSINESS PURPOSE OF THE AS SESSEE. IN OUR CONSIDERED VIEW, THE CO-OPERATIVE SOCIETY IS NOT A CO-OPERATIV E BANK. THE PROFIT AND GAINS OF A CO-OPERATIVE SOCIETY FROM ITS BUSINESS A CTIVITY WITH ITS MEMBERS ONLY SHALL BE ENTITLED FOR DEDUCTION U/S 80P. NO O THER INCOME WHICH IS NOT ATTRIBUTABLE TO ITS BUSINESS ACTIVITY WITH ITS MEMB ERS SHALL BE ENTITLED FOR SUCH DEDUCTION. IN OUR CONSIDERED VIEW, THE CIT(A) FIND ING THAT ASSESSEES SOCIETY WAS DOING TWO BUSINESS ACTIVITIES I.E BANKING FOR I TS MEMBERS AND CREDIT FACILITIES TO ITS MEMBERS IS NOT FACTUALLY CORRECT IN VIEW OF THE FACT OF THE CASE. THE ASSESSEE SOCIETY WAS ENGAGED ONLY IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND IT WAS NOT ENGAGED IN ANY BANKING ACTIV ITY WITH ITS MEMBERS. WE ALSO DO NOT AGREE WITH THE FINDING OF THE LD. CI T(A) THAT THE FACT OF CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. CITED (S UPRA) WERE DIFFERENT FROM THE FACTS OF THE APPELLANTS CASE. IN OUR CONSIDER ED VIEW THE FACTS OF THE ITA NO.1025/DEL./2012 11 TOTGARS CO-OPERATIVE SALE SOCIETY LTD. ARE SIMILAR TO THE ASSESSEES CASE. THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS C O-OPERATIVE SALE SOCIETY LTD. VS ITO REPORTED IN 322 ITR 283 (SC) HELD AS U NDER :- THE WORDS THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS IN SECTION 80P(2) OF THE INCOME TAX AC T, 1961, EMPHASISE THAT THE INCOME IN RESPECT OF WHICH DEDUC TION IS SOUGHT BY A CO-OPERATIVE SOCIETY MUST CONSTITUTE TH E OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO TH E SOCIETY. THE INTEREST INCOME ARISING TO A CO-OPERATIVE SOCIE TY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILI TIES TO ITS MEMBERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS, ON THE SURPLUS, WHICH IS NOT REQUIRED IMMEDIATELY F OR BUSINESS PURPOSES, FROM INVESTMENT IN SHORT-TERM DEPOSITS AN D SECURITIES, HAS TO BE TAXED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE INCOME TAX ACT, 1961. SUCH INTEREST CANNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY, VIZ. , CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. INTEREST INCOME OF SUCH SOCIETY FROM AMOUNTS RETAINED BY IT CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENT IONED IN SECTION 80P(2)(A)(I) OF THE ACT. SECTION 80P(2)(A)(I) CANNOT BE PLACED ON A PAR WITH EXPLANATION(BAA) TO SECTION 80HHC, SECTION 80HHD(3) AND SECTION 80HHE(5). HELD ALSO, ON THE FACTS, THAT THE COURT WOULD NOT I NTERFERE WITH THE FINDING OF FACT BY THE APPELLATE TRIBUNAL THAT THE NOTICE ISSUED UNDER SECTION 148 OF THE INCOME TAX ACT, 196 1, WAS VALID AND THAT THE ADDITIONAL COMMISSIONER HAD ACCORDED H IS SANCTION PRIOR TO MAY, 31, 2001, EVEN THOUGH THE WR ITTEN COMMUNICATION THEREOF WAS RECEIVED BY THE ASSESSING OFFICER ON JUNE, 8,2001. [THE SUPREME COURT HELD FURTHER, THAT THE QUESTION WHETHER INTEREST ON DEPOSITS WAS CHARGEABLE TO TAX WITHOUT ALLOWING ANY DEDUCTION IN RESPECT OF COST OF FUNDS AND PROPORTIONATE ADMINISTRATIVE CHARGES AND OTHER EXPE NSES UNDER SECTION 57 WAS A QUESTION OF LAW INVOLVING THE APPL ICABILITY OF SECTIONS 56 AND 57 TO THIS CASE, WHICH WAS RAISED B Y THE ASSESSEE BEFORE THE AUTHORITIES BUT HAD REMAINED UNANSWERED AND HAD TO ITA NO.1025/DEL./2012 12 BE ANSWERED AND REMITTED THE MATTER TO THE HIGH COU RT FOR CONSIDERATION OF THAT QUESTION]. DECISION OF THE KARNATAKA HIGH COURT IN TOTGARS CO- OPERATIVE SALE SOCIETY LTD. VS ITO [2010] 322 ITR 2 72 AFFIRMED. CONSIDERING THESE FACTS AND VIEWS, WE SET ASIDE THE ORDER OF LD. CIT(A) AND ALLOW THE REVENUES APPEAL. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 28TH DA Y OF SEPTEMBER, 2012. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 28 TH DAY OF SEPTEMBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.