State Bank of India Employees Co.Op. Credit & Supply Society Ltd., Ahmedabad V. The Income Tax Officer, Ward-3(4), Ahmedabad

ITA 1202/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0988 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Question of law
• Section: 133A; 147; 56

Judgement Text

I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] I.T.A. NO S . 1201, 1202, 1203, 1204 & 1205 /AHD/ 20 1 5 ASSESSMENT Y EAR S : 20 07 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 STATE BANK OF INDIA EMPLOYEE S CO - OP. CREDIT & SUPPLY SOCIETY LIMITED, . ...... . ... . ... APPELLANT SBI MAIN BRANCH, BHADRA, AHMEDABAD 380 001. [ PAN: A A AAS 7450 B ] VS. INCOME TAX OFFICER, WARD 3(4), AHMEDABAD. ............... . RESPONDENT APPEARANCES BY: M.K. PA TEL , FOR THE APPELLANT SATISH SOLANKI , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : JU LY 26 TH , 201 6 DATE OF PRONOUNCING THE ORDER : JU LY 28 TH , 201 6 O R D E R 1. THESE FIVE APPEALS PERTAIN TO THE SAME ASSESSEE, INVOLVE A COMMON ISSU E AND WERE HEARD TOGETHER. A S A MATTER OF CONVENIENCE, THEREFORE, ALL THESE APPEALS A RE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. THE APPEALS ARE TIME BARRED BY TEN DAYS BUT THE ASSESSEE APPELLANT HAS MOVED A CONSOLIDATION PETITION WHICH STATES AS FOLLOWS : - THE APPLICANT HEREIN ABOVE NAMED MOST RESPECTFULLY SHEWETH : 1.1 BEING AGGRIEVED AND DISSATISFIED WITH THE ORDER DATED 24 - 2 - 2015 PASSED BY CIT(A) - 10 AHMEDABAD FOR A.Y: 2007 - 08 TO 2011 - 12, THE APPLICANT HAS PREFERRED A N APPEAL BEFORE THE HON'BLE TRIBUNAL CHALLENGING THE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF INTEREST INCOME FROM FDRS WITH SBI. I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 2 OF 10 1.2 THE APPLICANT STATES THAT THE IMPUGNED ORDER OF THE AO DATED 24.02.2015 WAS COMM UNICATED TO THE APPLICANT ON 26 - 2 - 2015 AND THEREFORE THE APPEAL WAS REQUIRED TO BE FILED ON OR BEFORE 28.04.2015. HOWEVER, THE SAME WAS FILED 7 - 5 - 2015 AND THUS THERE IS A DELAY OF ABOUT 10 DAYS THAT IS FROM 29 - 04 - 20L5 TO 0 6 - 05 - 2015 IN PREFERRING THE SAID A PPEAL. THE SMALL DELAY IN FILING THE SAME HAS BEEN CAUSED DUE TO THE SUFFICIENT REASONS AS STATED HEREIN BELOW : 1.3 THE APPLICANT STATES THAT THE APPEAL MEMO FOR ALL THESE YEARS WAS ALREADY PREPARED IN THE LAST WEEK OF APRIL, 2015 AS EVIDENT FROM THE DAT E MENTIONED ON THE SOF AND GROUNDS OF APPEAL SO THAT THE SAME WERE SENT FOR SIGNATURE OF THE AUTHORIZED PERSON. HOWEVER, SHRI ANIL DAWAR, SECRETARY OF THE APPLICANT SOCIETY ALSO BEING POST HOLDER IN THE BANK UNION, HE WAS OUT OF STATION TO ATTEND THE MEETI NG OF THE COMMITTEE. THEREFORE AS SOON AS HE RETURNED, HE SIGNED THE APPEAL PAPERS AND THE SAME WERE FILED WITH THE REGISTRY. THE APPLICANT MOST RESPECTFULLY SUBMITS THAT THE DELAY HAS BEEN CAUSED DUE TO SUFFICIENT CAUSE AND IT IS NEITHER INTENTIONAL NOR D ELIBERATE SO THAT IF THE DELAY IS NOT CONDONED, THE APPLICANT WILL SUFFER IRREPARABLE LOSS AND INJURY. ON THE OTHER HAND, IF THE DELAY IS CONDONED, THE RESPONDENT WILL NOT SUFFER IN ANY WAY. THEREFORE, THE DELAY CAUSED DUE TO GENUINE AND BONA FIDE REASONS IS REQUIRED TO BE CONDONED IN THE INTEREST OF JUSTICE AND EQUITY. 1.4 THIS APPLICATION IS BEING MADE BY ME BECAUSE I BEING THE SECRETARY OF THE APPLICANT SOCIETY MADE MYSELF CONVERSANT WITH THE FACTS AS AVAI LABLE FROM RECORDS SO THAT I AM ABLE TO MAKE TH IS APPLICATION. SINCE THE FACTS GIVING RISE TO DELAY ARE IDENTICAL, THIS CONSOLIDATED APPLICATION IS MADE FOR SAKE OF CONVENIENCE. 1.5 IN VIEW OF ABOVE, THE APPLICANT HUMBLY PRAYS THAT YOUR HONOUR MAY BE PLEASED (A) TO CONDONE THE DELAY IN PREFERRIN G THE APPEAL AGAINST THE IMPUGNED ORDERS PASSED ON 24.02.2015 BY THE CIT(A). (B) TO PASS SUCH FURTHER ORDERS AND GIVE SUCH OTHER DIRECTIONS AND AS IN THE NATURE AND CIRCUMSTANCE OF THE CASE MAY REQUIRE. AND FOR THIS ACT OF KINDNESS AND JUSTICE, THE APPL ICANT SHALL AS IN DUTY BOUND EVER PRAY. 3. HAVING PERUSED THE ABOVE PETITION, AND HAVING HEARD RIVAL CONTENTIONS ON THE SAME, I AM INCLINED TO ACCEPT ASSESSEE S EXPLANATION FOR DELAY. I AM SATISFIED THAT THE DELAY IN FILING OF APPEAL WAS DUE TO BONAFIDE REASONS BEYOND THE CONTROL OF THE ASSESSEE . I, THEREFORE, CONDONE THE DELAY AND PROCEED TO TAKE UP THE APPEALS FOR ADJUDICATION. I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 3 OF 10 4. TO ADJUDICATE ON THESE APPEALS ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE ME IS A C O - OPERAT IVE SOCIETY, REGISTERED WITH THE OBJECT OF ACCEPTING DEPOSITS FROM THE MEMBERS, I.E. EMPLOYEES OF THE STATE BANK OF INDIA, SO AS TO ENCOURAGE THRIFT, AND ADVANCING CREDIT FACILITIES TO THEM IN THE TIMES OF THEI R NEED. DURING THE COURSE OF A SURVEY CARRIED OUT AT THE PREMISES OF THE ASSESSEE, I.E. ON 02.08.2013, IT WAS FOUND THAT THE ASSESSEE HAD EARNED INTEREST INCOME ON FIXED DEPOSITS WI TH THE STAT E BANK OF INDIA. THE ASSESSING OFFICER WAS OF THE VIEW THAT DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE INCO ME TAX ACT, 1961 WAS NOT ADMISSIBLE IN RESPECT OF SUCH EARNINGS SINCE STAT BANK OF INDIA, PER SE , WA S NOT A MEMBER OF THE ASSESSEE S OCIETY. ACCORDINGLY, THE ASSESSMENTS WERE REOPENED TO DECLINE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF THE INTEREST EARNINGS FROM THE STATE BANK OF INDIA. THE RESULTANT ADDITIONS MADE BY THE ASSESSING OFFICER HAVE BEEN CONFIRMED BY THE L EARNED CIT(A) . AGGRIEVED BY WHICH ASSESSEE IS IN APPEAL BEFORE ME. 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CA S E IN THE LIGHT OF A PPLICABLE LEGAL POSITION. 6. I FIND THAT, AS LEARNED REPRESENTATIVES FAIRLY AGREE EVEN AS LEARNED DEPARTMENTAL REPRESENTATIVE DUTIFULLY RELIES UPON THE AUTHORITIES BELOW, THE IS SUE IN APPEAL IS SQUARELY COVERED, IN FAVOUR OF THE ASSESSEE , BY A DIVISION BENCH ORDER OF THIS TRIBUNAL IN THE CASE OF S TATE BANK OF INDIA SUPERVISING OFFICIAL S CO - OPERATIVE CREDIT SOCIETY LIMITED VS. ITO (ITA NOS.905 TO 908/AHD/2015; ORDER DATED 10.06.2 016). I N THE SAID ORDER , THE DIVISION BENCH HAS, IN T ER ALIA , OBSERVED AS FOLLOWS : - 3. OUT OF REMAINING GROUNDS, LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE FOLLOWING GROUND IS THE EFFECTIVE GROUND: - I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 4 OF 10 THAT THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LA W AND ON FACTS, IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT OF RS.21,87,277/ - FOR ASSESSMENT YEAR 2007 - 08, RS.22,26,250/ - FOR ASSESSMENT YEAR 2008 - 09, RS.36,54,690/ - FOR ASSESSMENT YEAR 2009 - 10 & RS.41,85,500/ - FOR ASSESSMENT YEAR 201 1 - 12 IN RESPECT OF INTEREST INCOME RECEIVED FROM SBI. 4. BRIEF FACTS ARE THE ASSESSEE IS A CO - OPERATIVE CREDIT SOCIETY OF SUPERVISORY OFFICERS OF STATE BANK OF INDIA. A SURVEY WAS CARRIED OUT U/S 133A OF THE ACT ON 02.08.2013 ON THE PREMISES OF THE ASSE SSEE. IT WAS FOUND THAT INTEREST WAS EARNED ON SBI FDRS AND ALSO RECEIVED INTEREST INCOME FROM THE LOAN ADVANCED TO MEMBERS. ASSESSEE WAS ALLOWED DEDUCTION U/S 80P(2)(A)(I), WHICH ACCORDING TO ASSESSING OFFICER THE ASSESSEE WAS NOT ELIGIBLE TO ASSESSEE. NOTICE U/S 147 WAS ISSUED, DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE ACT ON RS.21,87,277/ - (AY 2007 - 08) RECEIVED AS INTEREST ON FDS WITH SBI AS THE CONDITIONS LAID DOWN IN THE SAID SECTION WERE NOT SATISFIED. FURTHER, THE FD AMOUNTS WERE EQUAL TO THE RESERVE FUND OF THE APPELLANT AND HENCE THE ASSESSEE S CONTENTION THAT OPERATIONAL FUNDS WERE DEPOSITED WITH SBI WAS NOT ACCEPTABLE. THE DEPOSITS WERE FROM SURPLUS FUNDS. THE ASSESSING OFFICER RELYING ON THE JUDGMENT OF THE HON BLE APEX COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY LTD, 322 ITR 283 (SC) DISALLOWED THE DEDUCTION U/S 80P(2)(A)(I) OF THE ACT OF RS.21,87,277/ - (AY 2007 - 08) IN RESPECT OF INTE REST INCOME RECEIVED FROM SBI AND TREATED THE SAME AS INCOME FROM OTHER SOURCES. 4.1 DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDED THAT FUNDS DEPOSITED WITH SBI WERE NOT SURPLUS FUNDS AND THAT THE OPERATIONAL FUNDS WERE DEPOSITED WITH THE BANK . THE ASSESSEE FURTHER SUBMITTED THAT AN OVERDRAFT IS OBTAINED ON THESE FDS AND THE AMOUNT OF OVERDRAFT FACILITY IS USED FOR MEETING THE OBLIGATIONS OF GIVING INTEREST AND LOAN TO ITS MEMBERS WITHOUT RESORTING TO PREMATURE WITHDRAWAL OF FDS. THE OVERDRAF T WAS TO MAINTAIN LIQUIDITY AND OPTIMUM UTILIZATION OF FUNDS OF SOCIETY. ACCEPTING DEPOSITS FROM MEMBERS, GRANTING LOANS TO MEMBERS AND KEEPING OPERATIONAL FUNDS WITH BANK ARE INTEGRAL PART OF ITS OBJECTIVE OF PROVIDING CREDIT FACILITIES TO MEMBERS. THE INTEREST INCOME INCLUDING INTEREST RECEIVED FROM MEMBERS AND ALSO ON FIXED DEPOSITS MADE WITH BANK FORMS PART OF ITS BUSINESS INCOME AND IS ATTRIBUTABLE TO ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. HENCE, THE ASSESSEE IS ENTITLED TO DEDU CTION U/S 80P(2)(A)(I) OF THE ACT OF RS.21,87,277/ - FOR ASSESSMENT YEAR 2007 - 08 IN RESPECT OF INTEREST INCOME RECEIVED FROM SBI. THE ASSESSEE CITED VARIOUS CASE LAWS IN SUPPORT OF ITS VARIOUS CONTENTIONS. 4.2 LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESS ING OFFICER IN DENYING DEDUCTION U/S 80P(2)(A)(I) BY FOLLOWING OBSERVATIONS: - FROM THE ABOVE IT IS CLEAR THAT DEDUCTION U/S 80P IS AVAILABLE TO A CO - OPERATIVE SOCIETY ENGAGED IN ACTIVITIES LISTED IN (A)(I) TO (VII) ABOVE ON THE WHOLE OF THE AMOUNT OF PR OFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ONE OR MORE ACTIVITIES OF THE CO - OPERATIVE SOCIETY. THUS IT IS CLEAR THAT THE DEDUCTION IS AVAILABLE IN RESPECT OF PROFIT AND GAINS OF BUSINESS ATTRIBUTABLE I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 5 OF 10 TO ONE OR MORE BUSINESS ACTIVITIES OF THE SOCIETY I.E. DEDUCTION IS IN RESPECT OF INCOME WHOLLY ATTRIBUTABLE TO BUSINESS ACTIVITY OF THE SOCIETY. IN THE PRESENT CASE THE APPELLANT IS INTO BUSINESS OF PROVIDING CREDIT TO ITS MEMBERS. SBI IS NOT A MEMBER OF THE APPELLANT SOCIETY. FURTHER, PROVIDING LOANS AND ADV ANCES TO BANKS AND EARNING INTEREST ON THE SAME IS NOT PART OF BUSINESS ACTIVITY OF THE APPELLANT. FURTHER, IN RESPECT OF CONTENTION OF THE APPELLANT THAT OPERATIONAL FUNDS HAVE BEEN KEPT AS FDS WITH BANK IS NOT BORNE BY FACTS. DURING THE YEAR UNDER CONSID ERATION, THE APPELLANT HAD RESERVE FUNDS TO THE TUNE OF RS. 3.06 CRORES. THE FDS WITH THE BANK WERE FOR RS.3.15 CRORES WHICH IS ROUGHLY EQUAL TO THE RESERVE FUND THIS CLEARLY SHOWS THAT THE FDS WERE NOT FROM OPERATIONAL FUNDS BUT WERE FROM THE SURPLUS FUND S AVAILABLE WITH THE APPELLANT. THUS WHAT HAS BEEN INVESTED IS SOCIETY'S OWN FUNDS AND THEREFORE THE INCOME BY WAY OF INTEREST ARISING ON DEPOSITS IS A SOURCE OF INCOME APART FROM BUSINESS ACTIVITY OF THE APPELLANT. AS SAID ABOVE ALSO, EARNING INTEREST FRO M BANK DEPOSITS IS NOT A BUSINESS ACTIVITY OF THE APPELLANT. THE HON'BLE APEX COURT HAS DEALT WITH THIS ISSUE IN TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO 322 1TR 283 (SC) AND HELD THAT INTEREST EARNED ON SURPLUS FUNDS NOT REQUIRED FOR BUSINESS IMMEDI ATELY AND INVESTED IN SHORT TERM DEPOSITS IS REQUIRED TO BE TAXED AS INCOME FROM OTHER SOURCES U/S.56 OF THE ACT HON'BLE APEX COURT OBSERVED AS FOLLOWS: - 'THE WORDS 'THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS' EMPHASIZE THAT THE INCOME IN RE SPECT OF WHICH DEDUCTION IS SOUGHT MUST CONSTITUTE THE OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY. IN THIS PARTICULARS CASE, THE EVIDENCE SHOWS THAT THE ASSESSEE - SOCIETY EARNS INTEREST ON FUNDS WHICH ARE NOT REQUIRED FOR BUSIN ESS PURPOSE 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. THE RATIO OF THE ABOVE JUDGMENT IS SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT. WITH DUE REGARD TO RATIO OF JUDGMENTS RELIED UPON BY THE APPELLANT THE SAME ARE NOT APPLICABLE TO THE PRESENT CASE. IN VIEW OF DISCUSSION ABOVE AND RELYING ON THE JUDGMENT OF THE A PEX COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY (SUPRA), I HOLD THAT THE AO WAS JUSTIFIED IN DISALLOWING DEDUCTION U/S 80P(2)(A)(I) OF THE ACT OF RS.21,87,277/ - IN RESPECT OF INTEREST INCOME RECEIVED FROM SBI. ACCORDINGLY, I UPHOLD THE ADDITION OF RS.21,87 ,277/ - MADE ON THIS ACCOUNT. THIS GROUND OF APPEAL IS DISMISSED. 4.3 AGGRIEVED, THE ASSESSEE BEFORE US. 5. LD COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE IN QUESTION AROSE IN ASSESSEE S OWN CASE IN 263 PROCEEDINGS FOR ASSESSMENT YEAR 2010 - 11 BEFORE THE ITAT, WHICH BY ORDER DATED 31.03.2016 IN ITA NO.347/AHD/2014 ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING OBSERVATIONS: - 2.2 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE ORDER OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 6 OF 10 MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD VS. ITO, REPORTED IN [2015] 55 TAXMANN.COM 447 (KARNATAKA), WHEREIN IN SIMILAR SET OF FACTS, THE HON BLE KARNATAKA HIGH COURT HELD AS UN DER: - A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATE LY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO IT S MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CRE DIT FACILITIES TO ITS MEMBERS BY A CO - OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. [PARA 8] 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE T O ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS . THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. (PARA 10] IN THAT VI EW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION ON THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. [PARA 10] 2.3 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF THE REVENUE. IN THE PRESENT CASE, IT IS UNDISPUTED THAT THE AMOUNT IN QUESTION, WHICH WAS INVESTED IN SBI TO EARN INTEREST, WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS ALSO NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. THIS AMOUNT, WHICH IS IN THE NATURE OF PROFITS A ND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE, THE ASSESSEE HAD DEPOSITED THE MONEY IN SBI SO AS TO EARN INTEREST. THE SAID INTEREST INCOME WAS ATTRIBUTABLE TO CARRYING ON THE B USINESS OF BANKING AND THEREFORE IT WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. 2.4 IN VIEW OF ABOVE LEGAL DISCUSSION, WE ARE NOT INCLINED TO CONCUR WITH THE FINDINGS OF THE CIT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA), WE SET ASIDE THE ORDER OF THE CIT AND ALLOW THIS APPEAL OF THE ASSESSEE. 5.1 THEREAFTER, THE LD. COUNSEL FOR THE ASSESSEE ADVERTED TO THE JUDGMENT OF HON BL E KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 7 OF 10 COOPERATIVE LTD VS. ITO, REPORTED IN [2015] 230 TAXMAN 309 (KAR), WHICH CLEARLY HELD AS UNDER: - 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 RE CEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AN D GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTI VITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO - OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF T HE APEX COURT IN THE CASE OF M/S. TOTGARS CO - OPERATIVE SALE SOCIETY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE - COOPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE W AS 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 SAI D 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, THE AMOUNT WHICH WAS INV ESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FO R LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN T ERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX III, HYDERABAD VS. ANDHRA I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 8 OF 10 PRADESH STATE COOPERATIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAIN ST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER: APPEAL IS ALLOWED. 5.2 LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDS THAT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA), THE HON BLE KARNATAKA HIGH COURT HAS DULY CONSIDERED THE HON BLE SUPREME COURT JUDGMENT IN THE CASE OF TOTGARS CO - OPERATIVE SALE SOCIETY LTD AND DISTINGUISHED IT AS IT DEALT WITH ONLY ISSUE OF SURPLUS AMOUNTS DEPOSITED IN THE BANK WHICH WERE HELD ON ACCOUNT OF BEING LIABILITIES PAYABLE TO MEMBERS OF AGRICULTURA L MARKETING CREDIT SOCIETY. IN CLEAR CONTRADICTION, THE FUNDS IN THE INSTANT CASE ARE THE SURPLUS FUNDS AND NOT THE LIABILITY OF THE BANK BUT ITS OWN SURPLUS FUNDS. BASED ON THIS DISTINCTION ON FACTS AND FOLLOWING THE HON BLE ANDHRA PRADESH HIGH COURT JU DGMENT (SUPRA), IT WAS HELD THAT THE INTEREST SO EARNED IS RELATABLE TO ACTIVITIES OF CO - OPERATIVE CREDIT SOCIETY; THEREFORE, THE DEDUCTION U/S 80P(2)(A)(I) IS CLEARLY ALLOWABLE. 5.3 LD. COUNSEL FOR THE ASSESSEE FURTHER RELIED ON THE DECISION OF THIS T RIBUNAL IN THE CASE OF AMALSAD VIBHAG VIVIDH KARYAKARI SAHKARI KHEDUT MANDALI LTD VS. ITO IN ITA NOS 1710 & 1711/AHD/2011, WHEREIN IT HAS BEEN HELD AS UNDER: - 8. WE ARE OF THE VIEW THAT THE FACTS OF THE CASE ARE IDENTICAL TO THAT IN THE CASE OF TUMKUR ME RCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. (SUPRA) WHICH HAS BEEN DECIDED BY HON BLE KARNATAKA HIGH COURT AND THEREFORE CONSIDERING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFORESAID DECISION OF HON BLE KARNATAKA HIGH COURT AND IN THE ABSENCE OF AN Y CONTRARY BINDING DECISION POINTED OUT BY REVENUE, WE ARE OF THE VIEW THAT THE INTEREST EARNED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P. WE THEREFORE SET ASIDE THE ORDER OF THE AO. IN THE RESULT THE GROUND OF THE ASSESSEE IS ALLOWED. 5.4 THE A FORESAID ITAT JUDGMENT HAS BEEN FOLLOWED BY THE ITAT, AHMEDABAD BENCH IN THE CASE OF MAROLI BAZAR VIBHAG VIVIDH KARYAKARI SAHKARI MANDI LIMITED VS. ITO IN ITA NOS. 3130/AHD/2014 & 1834/AHD/2013, BY ALLOWING SIMILAR CLAIM. THE LD. COUNSEL THUS CONTENDS TH AT THE ASSESSEE S CASE IS SUPPORTED BY THE HON BLE KARNATAKA HIGH COURT, ANDHRA PRADESH HIGH COURT AND ITAT JUDGMENTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD, ANDHRA PRADESH STATE COOPERATIVE BANK LTD., AMALSAD VIBHAG VIVIDH KARYAKA RI SAHKARI KHEDUT MANDALI LTD. AND MAROLI BAZAR VIBHAG VIVIDH KARYAKARI SAHKARI MANDI LIMITED (SUPRA). THUS, THE ASSESSEE S CLAIM MAY BE ALLOWED. 5.5 LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, CONTENDS THAT THE ISSUE OF ASSESSEE S APPEAL FOR AY 2010 - 11 WAS ONLY ON THE VALIDITY OF 263 PROCEEDINGS AND NOT THE DECISION ON MERITS. IN THIS REGARD, HE RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO - OP. CREDIT & SUPPLY SOCIETY LTD VS. CIT, REPORTED IN [2015] 57 TAXMANN.COM 367 (AHD TRIB.), WHEREIN THE 263 ACTION OF THE COMMISSIONER HAS BEEN UPHELD. I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 9 OF 10 5.6 LD. COUNSEL FOR THE ASSESSEE IN REJOINDER CONTENDS THAT THERE ARE TWO DIFFERENT VIEWS ON THE ISSUE OF 263 AND NOT ON THE MERITS. IN ASSESSEE S OWN CASE, 263 HAS BEEN QUASHED BY SUBSEQUENT JUDGMENT DATED 31.03.2016; WHEREAS IN CASE OF STATE BANK OF INDIA EMPLOYEES CO - OP. CREDIT & SUPPLY SOCIETY LTD, THE JUDGMENT IS DATED 26.03.2015. THE LATEST KARNATAKA HIGH COURT JUDGMENT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA) HAS BEEN CONSIDERED IN ASSESSEE S CASE AND NOT IN EARLIER CASE. BESIDES, ON MERITS, THERE ARE TWO HIGH COURT JUDGMENTS I.E., HON BLE KARNATAKA HIGH COURT AND ANDHRA PRADESH HIGH COURT (SUPRA), IN FAVOUR OF THE ASSESSEE AND N O HIGH COURT S JUDGMENT HAS BEEN CITED BY THE REVENUE. IT IS A SETTLED LAW THAT HON BLE HIGH COURT JUDGMENTS ARE BINDING ON ALL LOWER AUTHORITIES. SINCE TWO HIGH COURT JUDGMENTS ARE IN FAVOUR OF THE ASSESSEE, THE DEDUCTION U/S 80P(2)(A)(I) DESERVES TO BE ALLOWED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW, THE DECISION OF ITAT IN ASSESSEE S OWN CASE FOR AY 2010 - 11 (SUPRA) AND IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO - OP. CREDIT & SUP PLY SOCIETY LTD. (SUPRA) IS ON THE VALIDITY OF 263 PROCEEDINGS AND IS NOT A DECISION ON MERITS. THE DECISION ON MERITS IN THIS REGARD HAVE BEEN DECIDED BY HON BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD, BY AND HRA PRADESH HIGH COURT IN THE CASE OF ANDHRA PRADESH STATE COOPERATIVE BANK LTD. AND BY ITAT IN THE CASES OF AMALSAD VIBHAG VIVIDH KARYAKARI SAHKARI KHEDUT MANDALI LTD. AND MAROLI BAZAR VIBHAG VIVIDH KARYAKARI SAHKARI MANDI LIMITED. SINCE THESE AUTHORITI ES UNEQUIVOCALLY SUPPORT THE CASE OF THE ASSESSEE, RESPECTFULLY FOLLOWING THEM, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I), WHICH IS ALLOWED. CONSEQUENTLY, SUCH INCOME CANNOT BE HELD AS INCOME FROM OTHER SOURCES. IN VIEW OF THE FOREGOING, WE DECIDE THIS GROUND IN FAVOUR OF THE ASSESSEE FOR ALL ASSESSMENT YEARS UNDER CONSIDERATION. 7. IN THE RESULT, ASSESSEE S APPEALS ARE PARTLY ALLOWED. 7. THE VIEWS SO EXPRESSED BY THE DIVISION BENCH BIND THIS SMC BE N CH. RESPECTFULLY FOLLO WING TH E E STEEMED VIEWS OF THE D IVISION BENCH, I UPHOLD THE GRIEVANCE OF THE ASS E SS E E AND DIRECT THE ASSESSING OFFICER TO GRANT DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST EARNINGS FROM THE STATE BANK OF INDIA. 8. AS THE APPEALS ARE DECIDED ON THE ABOVE CORE ISSUE ON MERITS , I SEE NO NEED TO D E AL WITH OTHER ISSUES RAISED IN THE APPEAL S . I.T.A. NO S . 1201, 120 2, 1203, 1204 & 1205 /AHD/201 5 A SSESSMENT Y EAR S : 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PAGE 10 OF 10 9. IN THE RESULT, THE APPEALS ARE ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JULY , 2016. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 28 TH DAY OF JU LY , 2016. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUA RD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD