M/s. The Sant Taluka Teachers Co.-Op. Credit Society Ltd., Mahisagar V. The ACIT, Panchmahal Circle, Godhra

ITA 1313/AHD/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1326 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 21-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Initiation of penalty proceedings
• Section: 56; 28; 271(1)(c); 143(3); 234B; 80P; 143(2); 64; 194A; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SL. NO. ITA NO. A.Y. ASSESSEE REVENUE D.R. A.R. 1 1992 /AHD/2 017 2014 - 15 THE NARSANDA MERCANTILE CO.OP. CREDIT SOCIETY LTD. DCIT, NADIDAD SHRI V.K. SINGH SHRI SULABH PADSHA D 2 1313/AHD/2 018 2015 - 16 THE SANT TALUKA TEACHERS CO - OP. CREDIT SOCIETY LTD. ACIT, PANCHMAH AL CIRCLE, GODHRA SHRI V.K. SINGH SHRI SAKAR SHARM A 3 1314/AHD/2 018 2015 - 16 THE SATYAPRAKAS H CO - OP. CREDIT SOCIETY LTD. ACIT, PANCHMAH AL CIRCLE, GODHRA SHRI V.K. SINGH NONE 4 1295/AHD/2 018 2015 - 16 SHRI FRIENDS CO - OP. CREDIT SOCIETY LTD. ITO, WARD - 3(1)(2), VADODARA SHRI V.K. SINGH NONE 5 1296/AHD/2 018 2015 - 16 SHRI SHRAMJIVI NAGRIK SAHAKARI MANDLI LTD. ITO, WD - 3(1)(2), VADODARA SHRI V.K. SINGH SHRI M.J. SHAH D ATE OF HEARING : 27 - 06 - 2018 DATE OF PRONOUNCEMENT : 29 - 08 - 2018 / ORDER PER : AMARJIT SINGH , ACCOUNTANT MEMBER THESE FIVE APPEAL S FILED BY DIFFERENT ASSESSEES FROM ORDER OF THE CIT(A) , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . ITA NOS. 1992/AHD/2017, 1313, 1314 , 1295 AND 1296/AHD/2018 FIVE DIFFERENT ASSESSEES VS. REVENUE 2 2. AS THE FACTS IN THESE FIVE APPEALS FILED BY DIFFERENT ASSESSEES ARE COMMON, SO, WE TAKE ITA NO. 1296/AHD/2018 AS A LEAD CASE AND ITS FINDINGS WILL BE APPLICABLE FOR THE REMAINING APPEALS FOR THE SAKE OF CONVENIENCE. 3 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEALS: - ITA N O . 1296/AHD /2018 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3, VADODARA ['THE CIT(A)'] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF INCOME TAX OFFICER, WARD 3(1)(1), BARODA ['THE AO'] IN NOT ALLOWING THE DEDUCTION U/S 80P(2)(A)(I) OF RS. 29,34,28 0/ - CLAIMED BY THE APPELLANT. 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO HOLDING THAT THE INTEREST EARNED BY THE APPELLANT FROM DEPOSITS MADE WITH NATIONALIZED BANKS IS ASSESSABLE U/S 56 AND NOT ELIGIBLE FOR D EDUCTION U/S.80P(2)(A)(I) AS IT IS NOT RELATED TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE APPELLANT. 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN IGNORING THE PROVISIONS OF SECTION 80P(2)(A)(I) WITH CLEARLY PROVIDES T HAT THE DEDUCTION IS AVAILABLE TO A CO OPERATIVE SOCIETY WHICH IS ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 4. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGIN G INTEREST U/S. 234B OF THE ACT. 5. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INITIATING PENALTY PROCEEDING U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ('THE ACT). 4 . THE BRIEF FACT OF THE ACT IS THAT ASSESSE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. NIL ON 30 - 08 - 2015. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) ON 29 - 09 - 2016. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EARNED INTEREST INCOME TOTALING TO RS 1,33,22,271 ON SURPLUS FUNDS DEPOSITED WITH NATIONALIZED BANK AND THE COOPERATIVE BANK . HE HAS FURTHER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER CHAPTER VIA O F THE ACT U/S. 80P(2)(A)(I) IN RESPECT OF AFORESAID INTEREST INCOME DERIVED FROM INVESTMENT IN FIXED DEPOSIT WITH COMMERCIAL BANKS AND COOPERATIVE BANKS . THE ASSESSING OFFICER OBSERVED THAT EXEMPTION U/S. ITA NOS. 1992/AHD/2017, 1313, 1314 , 1295 AND 1296/AHD/2018 FIVE DIFFERENT ASSESSEES VS. REVENUE 3 80P(2)(A)(I) IS AVAILABLE ON INCOME WHICH IS ATTRIB UTABLE TO BUSINESS OPERATION OF THE ASSESSEE CO - OPERATIVE SOCIETY AND THE INTEREST EARNED ON THE FUND INVESTED WITH THE COMMERCIAL BANK AND COOPERATIVE BANK IS NOT OPERATIONAL INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. CONSEQUENTLY, HE HAS TR EATED THE INTEREST INCOME OF RS 1,33,22,271 AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT AND DISALLOWED THE CLAIM OF DEDUCTION U/S. 80P ON THE AFORESAID INTEREST INCOME. 5 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTA INED THE DISALLOWANCE AFTER PLACING RELIANCE ON THE DECISION OF JURISDICTIONAL HON BLE HIGH COURT OF GUJARAT IN THE CASE OF SBI VS. CIT (2016) 72 TAXMANN.COM 64 6 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE CONTENTION WAS RAISED BY THE ASSESSEE THAT INTEREST INCOME EARNED FROM SURPLUS AMOUNT INVESTED IN FIXED DEPOSIT MAINTAINED WITH CO - OPERATIVE BANK IS TO BE ALLOWED DEDUCTION U/S. 80P(2)(D) OF THE ACT. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS VEHEMENTLY OPPOSED THIS CONTE NTION OF THE LD. COUNSEL AND STATED THAT THE DEDUCTION U/S. 80P(2)(D) ON SURPLUS AMOUNT EVEN DEPOSITED WITH CO - OPERATIVE BANK IS NOT ENTITLED FOR DEDUCTION TO THE ASSESSEE. HE HAS ALSO SUPPORTED THE ORDER OF THE LD.CIT(A). 7 . WE HAVE HEARD BOTH THE S IDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER HAS NOTICED THAT IN ADDITION TO THE INTEREST INCOME EARNED ON LOAN AND ADVANCES TO ITS MEMBERS , THE ITA NOS. 1992/AHD/2017, 1313, 1314 , 1295 AND 1296/AHD/2018 FIVE DIFFERENT ASSESSEES VS. REVENUE 4 ASSESSE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON INTEREST INCOME EARNED FROM FIXED DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK AND COOPERATIVE BANKS . AS PER SECTION 80P(2)(A)(I) OF THE ACT THE INTEREST INCOME EARNED ON PROVIDING CREDIT FACILITY TO ITS MEMBERS IS DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE ACT. AFTER PERUSAL OF THE AFORESAID PROVISION OF THE ACT WE OBSERVE THAT DEDUCTION U/S 80P(2)(A)(I) IS NOT AVAILABLE ON THE INTEREST EARNED ON DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. WE F IND THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVENUE VIDE STATE BANK OF INDIA VS. CIT (2016) 72 TAXMANN.COM 64 (GUJARAT) WHEREIN IT IS HELD THAT INTEREST INCOME ON DEPOSIT PLACED WITH THE COMMERCIAL BANKS IS NOT EXEMPT U/S. 80P(2)(A)(I) OF THE ACT. IN RESPECT OF THE CLAIM OF THE LD. COUNSEL THAT INTEREST EARNED FROM INVESTMENT OF SUR PLUS FUNDS WITH THE COOPERATIVE BANK IS ENTITLED FOR DEDUCTION U/S 80P(2)(D) OF THE ACT WE HAVE NOTICED THAT A S PER SECTION 80P(2)(D) OF THE ACT , THE WHOLE OF INTEREST AND DIVIDEND INCOME DERIVED BY A CO - OPERATIVE SOCIETY FROM ITS INVESTMENT IN ANY OTHER CO - OPERATIVE SOCI E TY IS DEDUCTIBLE U/S. 80P(2) ( D ). WE FIND THAT THE HON BLE HIGH COURT OF KARNATAKA, IN TH E CASE OF (2017 ) 83 TAXMANN.COM 140 (KAR) PRINCIPAL CIT VS. TATAGARS CO - OPERATIVE SALE SOCIETY ON IDENTICAL ISSUE AND FACTS HAS HELD THAT IT IS ONLY PRIMARY AGRICULTURAL CREDIT SOCIETY WITH ITS LIMITED WORK OF PROVIDING CREDIT FACILITIES TO ITS MEMBER WHICH IS GOVERNED BY AMBIT AND SCOPE OF DEDUCTION U/S. 80P AND FURTHER STATED THAT INTEREST INCOME EARNED FROM SURPLUS DEPOSIT WITH CO - OPERATIVE BANK IS NOT ENTITLED FOR DEDUCTION 80P(2)(D). THE RELEVANT PART OF THE DECISION OF THE HON BLE HIGH COURT OF KARNATAKA, IN TH E CASE OF (2017) 83 TAXMANN.COM 140 (KAR) PRINCIPAL CIT VS. TATAGARS CO - OPERATIVE SALE SOCIETY ON IDENTICAL ISSUE AND FACTS IS REPRODUCED AS UNDER: - ITA NOS. 1992/AHD/2017, 1313, 1314 , 1295 AND 1296/AHD/2018 FIVE DIFFERENT ASSESSEES VS. REVENUE 5 ADMITTEDLY AND UNDOUBTEDLY, THE ASSESSEE IS A CO - OPERATIVE SOCIETY ENGAGED MAINLY IN THE ACTIVITY OF MARKETING OF AGRICULTURAL PRODUCES GROWN BY ITS MEMBERS. THE ASSESSEE CO - OPERATIVE SOCIETY ALSO ACCEPTS DEPOSITS FROM ITS MEMBERS AND PROVIDES CREDIT FACILITY TO ITS MEMBERS, RUNS KIRANA STORES, RICE MILLS, LIVE STOCKS, VAN SECTION, MEDICAL SHOPS, LODGING, PLYING AND HIRING OF GOODS CARRIAGE, ETC. [PARA 10] THE ASSESSMENT YEARS INVOLVED IN THE INSTANT APPEALS ARE ASSESSMENT YEARS 2007 - 08 TO 2011 - 12. THE BONE OF CONTENTION IS THAT THE DEDUCTION UNDER SECTION 80P(2) IS NOW CLAIMED BY THE ASSESSEE UNDER SECTION 80P(2)(D) AND NOT UNDER SECTION 80P(2)(A) OF THE AC T. THE REASON IS THAT NOW THE INVESTMENTS AND DEPOSITS AFTER THE SUPREME COURT'S DECISION AGAINST THE ASSESSEE IN TOTGAR'S CO - OPERATIVE SALE SOCIETY LTD. V. ITO [2010] 322 ITR 283/188 TAXMAN 282 (SC) , THE ASSESSEE HEREIN HAS SHIFTED THE DEPOSITS AND INVESTMENTS FROM SCHEDULE BANKS TO CO - OPERATIVE BANK AND SUCH CO - OPERATIVE BANK IS ESSENTIALLY A CO - OPERATIVE SOCIETY ALSO AND CLAUSE (D) ALLOWS DEDUCTION OF INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE ASSESSEE CO - OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO - OPERATIVE SOCIETY. [PARA 11] THE SHEET ANCHOR OF THE CONTENTION OF THE ASSESSEE MISSES TWO ESSENTIAL POINTS REQUIRED FOR CLAIMING THE DEDUCTION FROM GROSS TOTAL INCOME FOR A CO - OPERATIVE SOCIETY; (I) THAT THE CHARACTER OR NATURE OF INCOME, NAMELY INTEREST ON INVESTMENTS OR DEPOSITS, DOES NOT CHANGE IRRESPECTIVE OF THE FACT WHETHER IT IS EARNED OR RECEIVED FROM A SCHEDULE BANK OR CO - OPERATIVE BANK, (II ) THAT WHAT THE SUPREME COURT HELD IN THE CASE OF THE ASSESSEE ITSELF, AGAINST ASSESSEE, WAS THAT SUCH INTEREST INCOME ON ITS SURPLUS AND IDLE FUNDS NOT IMMEDIATELY REQUIRED FOR ITS BUSINESS, IS NOT INCOME FROM BUSINESS TAXABLE UNDER SECTION 28 OF THE ACT, BUT WAS TAXABLE AS 'INCOME FROM OTHER SOURCES' UNDER SECTION 56, WHEREAS FOR AVAILING THE EXEMPTION OR 100 PER CENT DEDUCTION UNDER SECTION 80P, THE INCOME IS SPECIFIED IN CLAUSES (A) TO (F) OF SUB SECTION (2) OF SECTION 80P WHICH SHOULD BE ITS BUSINESS O R OPERATIONAL INCOME. [PARA 12] WHAT SECTION 80P(2)(D) WHICH WAS THOUGH NOT SPECIFICALLY ARGUED AND CANVASSED BEFORE THE SUPREME COURT, ENVISAGES IS THAT SUCH INTEREST OR DIVIDEND EARNED BY AN ASSESSEE CO - OPERATIVE SOCIETY SHOULD BE OUT OF THE INVESTMENTS WITH ANY OTHER CO - OPERATIVE SOCIETY. THE WORDS 'CO - OPERATIVE BANKS' ARE MISSING IN CLAUSE (D) OF SUB SECTION (2) OF SECTION 80P. EVEN THOUGH A COOPERATIVE 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. ONLY THE PRIMARY AGRICULTURAL CREDIT SOCIETY WITH THEIR LIMITED WORK OF PROVIDING CREDIT FACILITY TO ITS MEMBERS CONTINUED TO BE GOVERNED BY THE AMBIT AND SCOPE OF DEDUCTION UNDER SECTION 80P OF THE ACT. [PARA 13] THE BANKING BUSINESS, EVEN THOUGH RUN BY A CO - OPERATIVE BANK IS SOUGHT TO BE EXCLUDED FROM THE BENEFICIAL PROVISIONS OF EXEMPTION OR DEDUCTION UNDER SECTION 80P OF TH E ACT. THE PURPOSE OF BRINGING ON THE STATUTE BOOK SUB - SECTION (4) IN SECTION 80P WAS TO EXCLUDE THE APPLICABILITY OF SECTION 80P ALTOGETHER TO ANY CO - OPERATIVE BANK AND TO EXCLUDE THE NORMAL BANKING BUSINESS INCOME FROM SUCH EXEMPTION/DEDUCTION CATEGORY. THE WORDS USED IN SECTION 80P(4) ARE SIGNIFICANT. THEY ARE: 'THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY .' THE WORDS 'IN RELATION TO' CAN INCLUDE WITHIN ITS AMBIT AND SCOPE EVEN THE INTEREST INCOME EARNED BY THE ASSESSEE, A CO - OPERATIVE SOCIETY FROM A CO - OPERATIVE BANK. THIS EXCLUSION BY SECTION 80P(4) EVEN THOUGH WITHOUT ANY AMENDMENT IN SECTION 80P(2)(D) IS SUFFICIENT TO DENY THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON UNDER SECTION 80P(2)(D). THE ONLY EXCEPTION IS THAT OF A PRIMARY AGRICULTURAL CREDIT SOCIETY. THE DEPOSITORY KANARA DISTRICT CENTRAL BANK LIMITED IN THE PRESENT CASE IS ADMITTEDLY NOT SUCH A PRIMARY AGRICULTURAL CREDIT SOCIETY. [PARA 14] ITA NOS. 1992/AHD/2017, 1313, 1314 , 1295 AND 1296/AHD/2018 FIVE DIFFERENT ASSESSEES VS. REVENUE 6 THE AMENDMENT OF SECTION 194A(3)(V) EXCLUDING THE CO - OPERATIVE BANKS FROM THE DEFINITION OF 'CO - OPERATIVE SOCIETY' BY FINANCE ACT, 2015 AND REQUIRING THEM TO DEDUCT TAX AT SOURCE UNDER SECTION 194A ALSO MAKES THE LEGISLATIVE INTENT CLEAR THAT THE CO - OPERATIVE BANKS ARE NOT THAT SPECIE OF GENUS CO - OPERATIVE SOCIETY, WHICH WOULD BE ENTITLED TO EXEMPTION OR DEDUCTION UNDER THE SPECIAL PROVISIONS OF CHAPTER VIA IN THE FORM OF SECTION 80P OF THE ACT. [PARA 15] IF THE LEGISLATIVE INTENT IS SO CLEAR, THEN IT CANNOT BE CONTENDE D THAT THE OMISSION TO AMEND CLAUSE (D) OF SECTION 80P(2) OF THE ACT AT THE SAME TIME IS FATAL TO THE CONTENTION RAISED BY THE REVENUE BEFORE THIS COURT AND SUB SILENTIO , THE DEDUCTION SHOULD CONTINUE IN RESPECT OF INTEREST INCOME EARNED FROM THE CO - OPERAT VE BANK, EVEN THOUGH THE SUPREME COURT'S DECISION IN THE CASE OF ASSESSEE ITSELF IS OTHERWISE. [PARA 16] AS STATED ABOVE, IT IS THE CHARACTER AND NATURE OF INCOME WHICH DETERMINES ITS TAXABILITY OR EXEMPTION FROM TAXABILITY. IT IS NEEDLESS TO SAY THAT THE PROVISIONS RELATING TO EXEMPTION AND DEDUCTION NEED TO BE STRICTLY CONSTRUED AND NO LIBERAL INTERPRETATION OR INTENDMENT CAN BE INFERRED IN SUCH PROVISIONS. WHAT WAS CLEARLY HELD TO BE NOT EXEMPT AND NOT DEDUCTIBLE UNDER SECTION 80P(2)(A) BY THE SUPREME C OURT IN THE CASE OF ASSESSEE, CANNOT BE CONTRARILY HELD AS EXEMPTED AND DEDUCTIBLE NOW FOR THESE YEARS, MERELY BECAUSE THE DEPOSITORY BANK, WITH WHOM THE INVESTMENTS WERE MADE BY THE ASSESSEE HAPPENS TO BE A CO - OPERATIVE BANK. ONE CANNOT APPRECIATE THIS DI STINCTION SO AS NOT TO APPLY THE BINDING PRECEDENT OF THE SUPREME COURT FOR SUBSEQUENT YEARS MERELY ON ACCOUNT OF THE CHANGE OF THE BANK WHERE SUCH DEPOSITS WERE MADE BY THE ASSESSEE, ALL OTHER FACTS REMAINING THE SAME, PARTICULARLY THE NATURE AND CHARACTE R OF THE INCOME EARNED BY IT. THE INTEREST INCOME OF ASSESSEE CONTINUES TO BE NOT ATTRIBUTABLE TO ITS BUSINESS OPERATIONS EVEN IN THESE SUBSEQUENT YEARS. [PARA 17] THE CHARACTER OF INCOME DEPENDS UPON THE NATURE OF ACTIVITY FOR EARNING THAT INCOME AND THO UGH ON THE FACE OF IT, THE SAME MAY APPEAR TO BE FALLING IN ANY OF THE SPECIFIED CLAUSES OF SECTION 80P(2) OF THE ACT, BUT ON A DEEPER ANALYSIS OF THE FACTS, IT MAY BECOME INELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT. HENCE, THE INCOME BY WAY O F INTEREST EARNED BY DEPOSIT OR INVESTMENT OF IDLE OR SURPLUS FUNDS DOES NOT CHANGE ITS CHARACTER IRRESPECTIVE OF THE FACT WHETHER SUCH INCOME OF INTEREST IS EARNED FROM A SCHEDULED BANK OR A CO - OPERATIVE BANK AND, THUS, CLAUSE (D) OF SECTION 80P(2) OF THE ACT WOULD NOT APPLY IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE PERSON OR BODY CORPORATE FROM WHICH SUCH INTEREST INCOME IS RECEIVED WILL NOT CHANGE ITS CHARACTER, VIZ. INTEREST INCOME NOT ARISING FROM ITS BUSINESS OPERATIONS, WHICH MADE IT IN ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. [PARA 23] IN VIEW OF THE AFORESAID, THE APPEAL FILED BY THE REVENUE DESERVES TO BE ALLOWED. : [PARA 24] IN THE LIGHT OF THE ABOVE FACTS AND LEGAL FINDINGS WE CONSIDER THAT T HE INCOME BY WAY OF INTEREST EARNED BY DEPOSIT OR INVESTMENT OF IDLE OR SURPLUS DOES NOT CHANGE ITS CHARACTER IRRESPECTIVE OF THE FACT WHETHER SUCH INCOME OF INTEREST IS EARNED FROM A SCHEDULE BANK OR A CO - OPERATIVE BANK AND THUS CLAUSE (D) OF SECTION 80P( 2) OF THE ACT WOULD NOT APPLY IN THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE. THE ASSESSEE HAS EARNED INTEREST ITA NOS. 1992/AHD/2017, 1313, 1314 , 1295 AND 1296/AHD/2018 FIVE DIFFERENT ASSESSEES VS. REVENUE 7 INCOME ON SURPLUS FUNDS DEPOSITED WITH NATIONALIZED BANK AND THE COOPERATIVE BANK AND THE SAME IS NOT ATTRIBUTABLE TO BUSINESS OPERATI ON OF THE ASSESSEE CO - OPERATIVE SOCIETY AS INTEREST EARNED ON THE FUND INVESTED WITH THE COMMERCIAL BANK IS NOT OPERATIONAL INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. WE CONSIDER THAT EARNING OF SUCH INTEREST INCOME EITHER FROM NATIONALIZED O R COOPERATIVE BANK WILL NOT CHANGE NATURE AND CHARACTER OF THE INCOME . ON PERUSAL OF THE PROVISION OF SECTION WE OBSERVE SUCH DEDUCTION IS PERTINENT TO THE OPERATIONAL INCOME EARNED BY THE CO - OPERATIVE SOCIETY FROM THE ACTIVITIES IN WHICH IT IS ENGAGED AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY IN THE FORM OF INT EREST FROM INVESTMENT OF SURPLUS FUNDS WITH THE COOPERATIVE BANK. AFTER CONSIDERING THE F ACTS AN D LEGAL FINDING , WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE, THEREFORE, THE SAME IS DISMISSED . HOWEVER AS DECIDED IN THE VARIOUS DECISION OF THE CO - ORDINATE BENCHES OF ITAT AHMEDABAD WE DIRECT THE ASSESSING OFFICER TO ALLOW PRO RATA EXPENSES IN RESPECT OF INTEREST EARNED FROM DEPOSIT HELD WITH NATIONALIZED BANK TO THE ASSESSEE FOR COMPUTING THE DEDUCTION U/S. 80P AFTER EXAMINING/VERIFICATION AND AF FORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8 . ASSESSEE S GROUND OF APPEAL REGARDING LEVY OF INTEREST U/S. 234A/B/C IS OF GENERAL NATURE WHICH IS TO BE CHARGED MANDATORY AS PER PROVISION OF THE ACT. THEREFORE, THE SAME IS DISMISSED. THE OTHER GROUND OF APPEAL AGAINST INITIATION OF PENALTY PROCEEDINGS U/S. 271C IS PREMATURE WHICH DO NOT REQUIRE ANY ADJUDICATION AT THIS STAGE , THEREFORE, THE SAME IS ALSO DISMISSED. ITA NOS. 1992/AHD/2017, 1313, 1314 , 1295 AND 1296/AHD/2018 FIVE DIFFERENT ASSESSEES VS. REVENUE 8 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE COMBINED RESULT, ALL THE FIVE APPEALS FILED BY DIFFERENT ASSESSEES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC ED IN THE OPEN COURT ON 2 9 - 08 - 2018 S D / - S D / - (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 2 9 /08 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,