Balairaja Gramin Bigarsheti Sahakari Pat Sanstha Maryadit, V. Income-tax Officer,

ITA 1041/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1489 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation
• Section: 234B; 56

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 992 /PN/201 6 / ASSESSME NT YEAR : 20 1 0 - 11 JIJAMATA MAHILA SAHAKARI BIGAR SHETI SAHAKARI PATSANSTHA LTD., SHIVPREMI CHOWK, MANGALWEDHA, DIST. SOLAPUR 413305 . / APPELLANT PAN: A A AAJ3379E VS. THE INCOME TAX OFFICER, WARD 1(3) , PANDHARPUR (SOLAPUR) . / RESPONDENT / APPELLANT BY : SHRI S.N. PURANIK / RESPONDENT BY : SHRI SUHAS KULKARNI , JCIT . / ITA NO. 1041 /PN/201 6 / ASSESSMENT YEAR : 20 10 - 11 BALIRAJA GRAMIN BIGARSHETI SAH AKARI PATSANSTHA MARYADIT, MANAGALVEDHA, DIST. SOLAPUR . / APPELLANT PAN: AAAA B2931J VS. THE INCOME TAX OFFICER, WARD 1(3), PANDHARPUR (SOLAPUR) . / RESPONDENT / APPELLANT BY : SHRI S.N. PURANIK / RESPONDENT BY : SHRI SUHAS KULKARNI, JCIT ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 2 . / ITA NO. 1138 /PN/201 6 / ASSESSMENT YEAR : 20 10 - 11 STATE BANK OF INDIA STAFF CO - OPERATIVE CREDIT SOCIETY LTD., SOLAPUR 413002 . / APPELLANT PAN: AAHCS0738B VS. THE INCOME TAX OFFICER, WARD 1(1), SOLAPUR . / RESPONDENT / APPELLANT BY : SHRI S.N. PURANIK / RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARIN G : 2 6 . 0 7 .201 6 / DATE OF PRONOUNCEMENT: 29 . 0 7 .201 6 / ORDER / ORDER PER SUSHMA CHOWLA, J M : TH I S BUNCH OF APPEAL S FILED BY DIFFERENT ASSESSEE S ARE AGAINST SEPARATE ORDER S OF CIT (A) - 7 , PUNE , DATED 05 . 0 2 .20 1 6, 05.02.2016 & 16.02.2016 R ELATING TO ASSESSMENT YEAR 20 1 0 - 11 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 14 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . T H IS BUNCH OF APPEALS RELATING TO DIFFERENT ASSESSEE S WERE HEARD SEPARATELY BUT RELATING TO S AME ISSUE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE FACTS AND ISSUES IN ALL THE APPEALS ARE IDENTICAL. HOWEVER, IN ORDER TO ADJUDICATE THE ISSUE, REFERENCE IS BEING MADE TO THE FACTS IN ITA NO. 992 /PN/201 6 . ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 3 3. THE ASSESSEE IN ITA NO. 9 92 /PN/201 6 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. CIT(A) HAS ERRED IN CONFIRMING ASSESSING OFFICERS ORDER OF ASSESSING INCOME OF RS.3,80,660/ - AGAINST RETURN INCOME OF RS.NIL. APPELLANT PRAYS FOR DELETION OF ADDITION / DISALLOWANCE. 2. CIT(A) H AS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN ASSESSING THE RENT INCOME AS INCOME FROM HOUSE PROPERTY AGAINST INCOME FROM BUSINESS AND DISALLOWING DEPRECIATION AND MUNICIPAL TAXES REJECTING DEDUCTION U/S 80P(2). 3. ASSESSING OFFICER HAS ERRED IN ASSESSING THE INCOME FROM INTEREST ON FD WITH NATIONALIZED BANK AT RS.3,08,810/ - AND FURTHER ASSESSING THE SAME AS INCOME FROM OTHER SOURCES AGAINST CLAIM OF BUSINESS INCOME, AND REJECTING DEDUCTION U/S 80P(A)(I). APPELLANT PRAY TO ASSESS THE SAME AS P ART OF BUSINESS INCOME AND ALLOW DEDUCTION U/S 80P(A)(I). 4. APPELLANT PRAYS FOR CANCELLATION OF INTEREST CHARGED U/S 234B ON ADDITION TO INCOME. 5. APPELLANT PRAYS TO JUST 4 EQUITABLE RELIEFS. 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS A CO - OPERATIVE CREDIT SOCIETY AND WAS RECEIVING DEPOSITS FROM ITS MEMBERS AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE HAD MADE A DEPOSIT WITH STATE BANK OF FACILITIES TO ITS MEMBERS. THE ASSESSEE HAD MADE A DEPOSIT WITH STATE BANK OF INDIA OF RS.5 LAKHS, ON WHICH THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.3 ,08,810/ - . THE ASSESSEE HAD DECLARED INTEREST INCOME IN THE RETURN OF INCOME AT RS.2,75,000/ - . WHEN SHOW CAUSED, THE ASSESSEE STATED THAT INTEREST CREDITED / ACCRUED ON THE SAID FD S WAS INTIMATED LATE BY THE BANK AND INTEREST WAS CREDITED IN THE BOOKS OF ACCOUNT ON THE BASIS OF RATE OF INTEREST FOR THE FDS, DUE TO WHICH INTEREST OF RS.33,810/ - WAS REMAINED TO BE SHOWN. THE ASSESSEE HOWEVER, CONSENTED FOR THE AFORESAID ADDITION. THE INTEREST INCOME OF RS.33,810/ - WAS HELD AS UNDISCLOSED RECEIPT OF THE AS SESSEE. THE ASSESSEE FURTHER CLAIMED THAT THE INTEREST DECLARED BY IT AT RS.2,75,000/ - AND THE ADDITIONAL INCOME OF RS.33,810/ - WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 P(2)(A)(I) OF THE ACT, HOWEVER, THE ASSESSING OFFICER IN TURN, RELYING ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN TOTGARS CO - OP. SALE SOCIETY LTD. VS. ITO (2010) 322 ITR 283 (SC), HELD THAT THE ASSESSEE WAS NOT ELIGIBLE ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 4 FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HE FURTHER OBSERVED THAT THE DEPARTMENT HAD NOT ACCEP TED THE DECISION OF TRIBUNAL AND HAD FILED AN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT AND HENCE, THE INCOME OF INTEREST OF RS. 3,08,810 / - WAS ASSESSED AS INCOME FROM OTHER SOURCES. 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER, AGAINST WHICH TH E ASSESSEE IS IN APPEAL. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LTD. VS. ITO IN ITA NO.516/PN/2014, RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER DATED 31.0 5.2016, WHICH IN TURN RELIED ON ITS EARLIER ORDER IN ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT IN ITA NO.900/PN/2014 AND ITO VS. M/S. KAMAL MAHILA NAGARI SAHAKARI PATPEDH I MARYADIT IN ITA NO.898/PN/2014 AND CROSS OBJECTIONS NO.34/PN/2015 AND 32/PN/2015, RELATING TO ASSESSMENT YEAR 2010 - 11, ORDER DATED 29.01.2016. 7. ON PERUSAL OF RECORD, IT IS APPARENT THAT THE ASSESSEE WAS A CO - OPERATIVE CREDIT SOCIETY. IT WAS RECEIVING DEPOSITS FROM ITS MEMBERS AND WAS ALSO PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE WAS EARNING INTEREST ON SUCH CREDIT FACILITIES PROVIDED TO ITS MEMBERS, WHICH WAS CLAIMED AS ITS INCOME FROM BUSINESS BEING ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80P(2)(A)(I) OF THE ACT. THERE IS NO DISPUTE WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF SUCH INTEREST INCOME RECEIVED BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IN ADDITION, THE ASSESSEE HAD ALSO RECE IVED INCOME FROM INTEREST ON FDS WITH STATE BANK OF INDIA , WHICH W AS NOT CO - OPERATIVE BANK . ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 5 8. THE ASSESSEE CLAIMED THAT IT WAS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF THE SAID BANK INTEREST INCOME. HOWEVER, THE SAM E WAS DENIED TO THE ASSESSEE BY THE AUTHORITIES BELOW. 9. AN IDENTICAL ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST INCOME EARNED BY A CREDIT CO - OPERATIVE SOCIETY HAD ARISEN BEFORE THE TRIBUNAL IN ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT (SUPRA) AND THE TRIBUNAL AFTER CONSIDERING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN TOTGARS CO - OP. SALE SOCIETY LTD. VS. ITO (SUPRA), HELD AS UNDER: - 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE RECORD. THE ASSESSEE BEFORE US IS A CREDIT CO - OPERATIVE SOCIETY, WHICH IS ACCEPTING DEPOSITS FROM ITS MEMBERS AND USING THE SAME FOR GIVING LOANS TO ITS MEMBERS. IN ADDITION, THE ASSESSEE IS ALSO MAKING INVESTMENTS WITH OTHER CO - OPERATIVE SOCIET IES, WHICH IT CLAIMS TO HAVE MADE AS PER THE MANDATE OF MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960. THE ISSUE ARISING BEFORE US IS WHETHER THE INTEREST INCOME EARNED BY THE ASSESSEE ON SUCH INVESTMENTS IS LIABLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT IN THE HANDS OF THE ASSESSEE. THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER RELYING ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) WAS OF THE VIEW THAT THE SAID INTEREST EARNED BY THE ASSESSEE WAS NOT ELIGIBLE FO R DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE FOR CLAIMING THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT WAS RAISED BEFORE THE CIT(A), WHO DID NOT ADJUDICATE THE SAME AS HE WAS OF THE VIEW THAT THE ASSESSEE WAS ELIG IBLE TO CLAIM THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. BEFORE US, THE THIRD CONTENTION HAS BEEN RAISED THAT IN CASE, NO DEDUCTION IS AVAILABLE TO THE ASSESSEE, THEN AT BEST ONLY THE NET INCOME ON SUCH RECEIPTS IS TO BE ADDED IN THE HANDS OF TH E ASSESSEE, FOR WHICH THE ASSESSEE HAS PLACED THE CALCULATION SHEET ON RECORD. THE CASE OF THE REVENUE ON THE OTHER HAND, IS THAT THE DECISION OF THE HONBLE APEX COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) IS CLEARLY APPLICABLE. IN TH E ALTERNATE, RELIANCE WAS PLACED ON NEWLY INSERTED SECTION 80P(4) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2006 W.E.F. 01.04.2007 AND IT WAS POINTED OUT THAT THE SAID SECTION HAD OVERRIDING PROVISIONS AND HENCE, THE SAME WAS APPLICABLE. 17. IN ORDER TO ADJUDICATE THE ISSUE, FIRST REFERENCE IS MADE TO THE DECISION OF HONBLE SUPREME COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA). IN THE FACTS OF THE SAID CASE, THE ASSESSEE BEFORE THE HONBLE APEX COURT WAS A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO THE MEMBERS OR MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS. THE ASSESSEE HAD PARKED ITS FUNDS IN SHORT TERM BANK DEPOSITS AND SECURITIES AND THE INTEREST EARNED ON THE SAME WAS CLAIMED AS DEDUCTIBLE UNDER SECTION 80P(2)(A )(I) OF THE ACT. THE REVENUE AUTHORITIES HELD THAT THE SAME WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CLAIM OF THE ASSESSEE WAS THAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THESE WERE NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPO SES AND CONSEQUENTLY, INTEREST RECEIVED BY THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. FURTHER, THE CONTENTION OF THE ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 6 ASSESSEE BEFORE THE COURT WAS THAT UNDER REGULATIONS 23 AND 28 R.W.S. 57 AND 58 OF THE KARNATAKA CO - OP ERATIVE SOCIETIES ACT, 1959, A STATUTORY OBLIGATION WAS IMPOSED ON CO - OPERATIVE CREDIT SOCIETIES TO INVEST ITS SURPLUS FUNDS IN SPECIFIED SECURITIES AND IN VIEW OF THE AFORESAID STATUTORY OBLIGATIONS, THE ABOVE MENTIONED INVESTMENT WAS MADE BY THE ASSESSEE AND THE SAME WAS IN THE NATURE OF ITS BUSINESS ACTIVITY. THE SAID INTEREST INCOME WAS CLAIMED TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT, IRRESPECTIVE OF THE SOURCE OR HEAD UNDER WHICH SUCH INCOME WOULD FALL. THE HONBLE APEX COU RT NOTED THAT THE INTEREST INCOME ARISING ON SURPLUS INVESTMENT IN SHORT TERM DEPOSITS AND SECURITIES, WHICH SURPLUS WAS NOT REQUIRED FOR BUSINESS PURPOSE, WAS TO BE TAXED UNDER SECTION 56 OF THE ACT. THE HONBLE APEX COURT FURTHER NOTED THAT THE ASSESSEE MARKETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT AND THE TAX TREATMENT OF SUCH AMOUNT WAS THE ISSUE BEFORE THEM. THE HONBLE APEX COURT HELD THAT WHERE THE INTEREST ON DEPOSITS / SECURITIES, WHERE THE FUNDS WERE NOT IMM EDIATELY REQUIRED FOR BUSINESS PURPOSES, WAS INVESTED IN SPECIFIED SECURITIES, WOULD BE TAXABLE AS INCOME UNDER SECTION 56 OF THE ACT. IT FURTHER HELD THAT WHERE THE ASSESSEE SOCIETY REGULARLY INVESTS ITS FUNDS NOT IMMEDIATELY REQUIRED FOR BUSINESS PURPOS ES, INTEREST ON SUCH INVESTMENT COULD NOT FALL WITHIN THE EXPRESSION OF PROFITS AND GAINS OF BUSINESS AND THE SAME COULD NOT BE HELD TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY I.E. CARRYING ON OF BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS OR MARKETING THE AGRICULTURAL PRODUCE OF ITS MEMBERS. THE HONBLE APEX COURT FURTHER REITERATED THAT WHERE THE ASSESSEE MARKETS THE AGRICULTURAL PRODUCE OF ITS MEMBERS AND IT RETAINS THE SALE PROCEEDS IN MANY CASES AND WHERE THE RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS, FROM WHOM THE PRODUCE WAS BOUGHT, WAS INVESTED IN SHORT TERM DEPOSITS / SECURITIES, THE SAID AMOUNT WAS LIABILITY OF THE ASSESSEE AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITIES SIDE, THEREFORE, TO THAT EXTENT, THE HON BLE SUPREME COURT HELD THAT SUCH INTEREST INCOME COULD NOT BE SAID TO BE ATTRIBUTABLE EITHER COURT HELD THAT SUCH INTEREST INCOME COULD NOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN 80P(2)(A)(I) OR 80P(3) OF THE ACT. IN VIEW THEREOF, THE HONBLE SUPREME COURT UPHELD THE ORDER OF ASSESSING OFFICER IN TAXING THE SAI D AMOUNT UNDER SECTION 56 OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE THAT EVEN IF THE SAID INTEREST INCOME WAS HELD TO BE COVERED UNDER SECTION 56 OF THE ACT, WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT, WAS REJECTED. 18. IN TH E FACTS OF THE CASE BEFORE HONBLE HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA), THE ASSESSEE CO - OPERATIVE SOCIETY WAS ENGAGED IN THE ACTIVITY OF CARRYING ON OF BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND IT HAD EARNED INTEREST INCOME ON ITS DEPOSITS. ANOTHER FACT NOTED BY THE HONBLE HIGH COURT OF KARNATAKA WAS THAT THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT THE AMOUNT DUE TO ANY MEMBERS AND IT WAS NOT THE LIABILITY OF TH E ASSESSEE. IN FACT, THE SAID AMOUNT WAS IN THE NATURE OF PROFITS AND GAINS, WHICH WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKERS AND THE ASSESSEE IN SUCH CIRCUMSTANCES, DEPOSITED THE MONEY IN BANK SO AS TO EARN INTEREST. THE HONBLE HIGH COURT OF KARNATAKA IN SUCH CIRCUMSTANCES HELD THAT THE INTEREST INCOME WAS ATTRIBUTABLE TO CARRYING ON OF BUSINESS OF BANKING AND THEREFORE, IT WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT, THEY TO OK NOTE OF INSERTION OF SECTION 80P(4) OF THE ACT, WHICH WAS APPLIED BY THE ASSESSING OFFICER TO DENY THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE HONBLE HIGH COURT OF KARNATAKA REFERRED TO THE JUDGMENT OF HONBLE APEX COURT IN TOTGAR CO - OPER ATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) AND POINTED OUT THAT IN THE FACTS OF THE SAID CASE, THE AMOUNT WHICH WAS RETAINED BY THE ASSESSEE WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON LIABILITIES SIDE. WHERE THE INTEREST INCOME WAS EARNED ON SU CH FUNDS, THEN THE SAME WAS HELD BY THE HONBLE APEX COURT TO BE TREATED UNDER SECTION 56 OF THE ACT. HOWEVER, THE DISTINCTION ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 7 WAS DRAWN BY THE HONBLE HIGH COURT OF KARNATAKA IN PARA 10 AND IT WAS POINTED OUT THAT IN THE CASE BEFORE THEM, THE AMOUNT WHIC H WAS INVESTED IN BANKS TO EARN THE INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBER, IT WAS NOT THE LIABILITY AND IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNTS. IN FACT, THE AMOUNT WAS IN THE NATURE OF PROFITS AND GAINS WHICH WAS NOT IMMEDIATELY REQUIRED B Y THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKERS AND HENCE, WAS DEPOSITED IN THE BANKS SO AS TO EARN INTEREST, SUCH INTEREST INCOME EARNED BY THE ASSESSEE WAS HELD TO BE ATTRIBUTABLE TO CARRYING ON THE BUSINESS AND THEREFORE, SAME WA S LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. 19. ANOTHER DECISION REFERRED TO BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS GUTTIGEDARARA CREDIT CO - OPERATIVE SOCIETY LTD. VS. ITO (SUPRA), WHEREIN THE ASSESSEE WAS A CO - OP ERATIVE SOCIETY ENGAGED IN THE ACTIVITY OF CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER IN VIEW OF INSERTION OF SECTION 80P(4) OF THE ACT, HAD DECLINED TO EXTEND THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2 )(A)(I) OF THE ACT. THE INTEREST INCOME EARNED ON SHORT TERM DEPOSITS AND FROM SAVING BANKS ACCOUNT WAS HELD LIABLE TO INCOME TAX. THE HONBLE HIGH COURT HELD THAT WHERE THE ASSESSEE SOCIETY WAS PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND WAS NOT CARR YING ON ANY OTHER BUSINESS, THEN THE SURPLUS FUNDS WHICH IT HAD EARNED AS PROFITS OF ITS BUSINESS WHEN TEMPORARILY NOT REQUIRED WERE INVESTED IN BANKS TO EARN INTEREST WAS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE, LIABLE TO BE DEDU CTED UNDER SECTION 80P(1) OF THE ACT. 20. FURTHER, THE PUNE BENCH OF TRIBUNAL IN ITO VS. NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. (SUPRA) HAD LAID DOWN THE SIMILAR PROPOSITION AS BY THE HONBLE HIGH COURT OF KARNATAKA. 21. THE ISSUE ARISING BEFORE US IS WHETHER THE INTEREST EARNED BY THE ASSESSEE ON ITS INVESTMENTS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) OF ASSESSEE ON ITS INVESTMENTS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS MADE SEVERAL PROPOSITIONS BEFORE US. THE FIRST AND FOREMOST PROPOSITION R AISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THAT THE INTEREST INCOME IS ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER, WITHOUT PREJUDICE TO THE SAME, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE MADE AN ALTERNATE PROPOSITION THAT IN CASE THE INTEREST EARNED BY THE ASSESSEE IS HELD TO BE ASSESSABLE AS INCOME FROM OTHER SOURCES, THEN THE PROPORTIONATE EXPENDITURE RELATABLE TO SUCH INVESTMENTS IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE AND THEN O NLY BALANCE INTEREST INCOME IS TO BE TAXED AS INCOME FROM OTHER SOURCES. ANOTHER PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT WHERE THE INVESTMENTS WERE MADE WITH OTHER CO - OPERATIVE SOCIETIES, THEN THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT AND NO AMOUNT WAS ASSESSED IN THE HANDS OF THE ASSESSEE EXCEPT THE DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND SUNDARAM FINANCE OF RS.87,087/ - AND RS.88,519/ - . THE ASSESSEE HAS PLACE D ON RECORD ITS BALANCE SHEET ALONG WITH PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION AT PAGES 22 TO 31 OF THE PAPER BOOK WITH ITS ENGLISH TRANSACTION. THE PERUSAL OF THE BALANCE SHEET AS ON 31.03.2010 REFLECTS THE ASSETS IN THE FORM OF BANK BAL ANCE, CASH, INVESTMENTS AND OTHER DEPOSITS ALONG WITH THE LOAN ADVANCED TO MEMBERS, PROPERTY HELD BY THE ASSESSEE AND INTEREST RECEIVABLE ON INVESTMENTS AND OUTSTANDING LOAN. ON THE LIABILITIES SIDE, THE ASSESSEE HAS DECLARED SHARE CAPITAL, SHARE CAPITAL FUND OF THE ASSESSEE SOCIETY, THE DEPOSITS RECEIVED FROM ITS MEMBERS AND OTHER DEPOSITS AND THEREAFTER, PROVISION OF RS.41,62,699/ - . THE BREAK - UP OF THE INVESTMENT OF RS.5.55 CRORES IS PROVIDED BY THE ASSESSEE AT PAGE 56 OF THE PAPER BOOK. THE BREAK - UP O F THE INVESTMENT IS IN DIFFERENT FDS WITH CO - OPERATIVE SOCIETIES TOTALLING TO RS.5.47 CRORES AND THE OTHER INVESTMENT IN UTI MUTUAL FUNDS, SUNDARAM FINANCE, GRATUITY FUND AND SHARES TOTALLING ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 8 RS.7,48,216/ - , TOTALLING RS.5.55 CRORES. THE ASSESSEE HAS FURTH ER FURNISHED THE BREAK - UP OF FDS WITH DIFFERENT CO - OPERATIVE BANKS AT PAGES 57 TO 68 OF THE PAPER BOOK WITH SAMPLE COPIES OF FDS AT PAGES 69 TO 75 OF THE PAPER BOOK. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT IT WAS ENGAGED IN THE BUSINESS OF PROVIDING C REDIT FACILITIES TO ITS MEMBERS, OUT OF LOAN RECEIVED FROM ITS MEMBERS ITSELF. THE SURPLUS AMOUNT WHICH WAS ON ACCOUNT OF AMOUNT RECEIVED FROM ITS MEMBERS ONLY, WHICH HAD NOT BEEN ADVANCED TO ANY OF THE MEMBERS WAS INVESTED IN THE BANKS, AGAINST WHICH THE SAID INVESTMENT WAS MADE OUT OF SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE, WHICH IN TURN, WERE AMOUNTS ADVANCED BY THE MEMBERS ITSELF. THE SAID PARKING OF FUNDS WITH THE CO - OPERATIVE BANKS WAS CLAIMED BY THE ASSESSEE TO BE IN THE NATURE OF ITS BUSINESS A CTIVITY AS IT WAS THE REQUIREMENT OF MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960, THAT 20 TO 30% OF TOTAL DEPOSITS ARE TO BE PARKED IN THE INVESTMENTS WITH CO - OPERATIVE BANKS. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE AMOUNT INVESTED BY THE ASSESSEE WAS OUT OF ANY LIABILITIES DUE BY THE ASSESSEE. IN THE ABSENCE OF THE SAME AND FOLLOWING THE SAME PARITY OF REASONING LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA) AND THE FACTS OF T HE PRESENT CASE BEING AT VARIANCE TO THE FACTS BEFORE THE HONBLE SUPREME COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN THE ALTER NATE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT AT BEST THE INCOME WHICH CAN BE ASSESSED IN THE HANDS OF ASSESSEE IS THE NET INCOME AND NOT THE GROSS INCOME AS PROPORTIONATE EXPENDITURE INCURRED IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. HOWEVER, WE ARE NOT ADJUDICATING THIS ISSUE SINCE WE HAVE ALREADY HELD THE ASSESSEE TO BE ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN VIEW THEREOF, WE ALSO DO NOT ADJUDICATE THE SECOND ALTERNATE PLEA RAISED BY THE ASSESSEE THAT IT IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. HOWEVER, THE THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. HOWEVER, THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT RELATING TO DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND SUNDARAM FINANCE OF RS.87,087/ - AN D RS.88,519/ - , WHICH ARE TO BE INCLUDED AS INCOME FROM OTHER SOURCES, ON WHICH THE ASSESSEE IS ENTITLED TO PROPORTIONATE EXPENDITURE. SIMILARLY, THE PROFIT OF RS.25,786/ - FROM OTHER ACTIVITIES AND SERVICES IS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER S ECTION 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, WE PARTLY UPHOLD THE ORDER OF CIT(A). IN VIEW THEREOF, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. 10. THE ISSUE ARISING IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY PUNE BENCH OF TRIBUNAL IN ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT (SUPRA) AND SINCE THE FACTS O F THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT (SUPRA), WHICH IN TURN, ARE AT VARIANCE TO THE FACTS BEFORE THE HONBLE SUPREME COURT IN TOTGARS CO - OP. SALE SOCIETY LTD. VS. ITO (SUPRA), I HOLD TH AT THE AS SESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT . THE ADDITIONAL INTEREST INCOME OF RS.33,810/ - IS ALSO ARISING ON ACCOUNT OF INTEREST DUE ON FDS AND ON THE SAID AMOUNT ALSO, THE ASSESSEE IS ITA NO S . 992, 104 1 & 1138 /PN/20 1 6 JIJAMATA MAHILA SAH. BI GAR SHETI SAH. PATSANSTHA LTD. & ORS 9 ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 11 . THE FACTS AND ISSUE IN ITA NO S .1 041 /PN/201 6 & 1 138 /PN/201 6 ARE IDENTI CAL TO THE FACTS AND ISSUE IN ITA NO. 992 /PN/201 6 AND THE DECISION IN ITA NO. 992 /PN/201 6 SHALL APPLY MUTATIS AND MUTANDIS TO ITA NO S .1 041 /PN/201 6 & 1 138 /PN/201 6 . 1 2 . IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DA Y OF JU LY , 201 6 . SD/ - (SUSHMA CHOWLA) (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 29 TH J U LY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARD ED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 7 , PUNE ; 4. / THE PR. CIT - 6 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE