Income-tax Officer, V. Swa Ashokrao Bankar Nagari Sah. Pat. Maryadit, Nashik

ITA 1394/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1531 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 26-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Business income; Rule of consistency; Question of law
• Section: 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NO.1394/PN/2015 / ASSESSMENT YEAR : 2011-12 ITO, WARD - 1(1), NASHIK . / APPELLANT V/S SWA ASHOKRAO BANKAR NAGARI SAHAKARI PATSANSTHA MARYADIT, SANSKRUTI, OPP. POLICE STATION, PIMPALGAON (B), TAL. NIPHAD, DIST. NASHIK 422 209 PAN NO. AAAAA2084K . / RESPONDENT / APPELLANT BY : SHRI HITENDRA NINAWE / RESPONDENT BY : SHRI PRAMOD SHINGTE / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 21-08-2015 OF THE CIT(A)-I, NASHIK RELATING TO THE ASSESSMENT YEAR 2011-12. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT FILED ITS RETURN OF INCOME ON 28-09-2011 DECLA RING TOTAL INCOME AT NIL. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE AO NOTED THAT THE SOCIETY HAS RECEIVED INTEREST OF RS.48,16,346/- FROM ITS INVESTMENT WITH BANK OF INDIA, HDFC BANK, STATE BANK OF INDIA, DEVELOPMENT CREDIT BANK AND BANK OF BARODA. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTEREST INCOME RECEIVED FROM THE FIXED DEPOSITS KEPT WITH / DATE OF HEARING :20.07.2016 / DATE OF PRONOUNCEMENT:22.07.2016 2 ITA NO.1394/PN/2015 NATIONALIZED BANKS SHOULD NOT BE DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 80P(2)(A)(D) OF THE I.T. ACT. ACCORDING TO THE AO, INCOME DERIVED BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE COOPERATIVE SOCIETY FROM ITS INVESTMENT WITH ANY OTHER CO OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME IS DEDUCTIBLE UNDER THE S AID SECTION. HE OBSERVED THAT THE HONBLE SUPREME COURT O F INDIA IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY VS. ITO RE PORTED IN 322 ITR 283 HAS HELD THAT INVESTMENT INCOME OF THE SOCIE TY NOT INVOLVED IN THE BUSINESS OF BANKING IS TAXABLE UNDER THE H EAD INCOME FROM OTHER SOURCES. FURTHER, DEDUCTION U/S.80P(2 )(A) OF THE ACT, I.E. THE INCOME IN RESPECT OF WHICH DEDUCTION IS SO UGHT MUST CONSTITUTE THE OPERATIONAL INCOME AND NOT THE OTHE R INCOME WHICH ACCRUES TO THE SOCIETY. HE, THEREFORE, ASKED THE AS SESSEE TO EXPLAIN AS TO WHY SUCH INTEREST INCOME SHOULD NOT BE DISA LLOWED UNDER THE PROVISIONS OF SECTION 80P(2)(D) OF THE ACT. 3. IT WAS SUBMITTED THAT IT HAS INVESTED IN FIXED DEPOSIT S WITH BANKS OTHER THAN COOPERATIVE BANKS OUT OF THE FUNDS RE CEIVED FROM ITS MEMBERS IN THE FORM OF FIXED DEPOSITS WHICH IS APPEARIN G AS ITS LIABILITY IN ITS BALANCE SHEET. WHILE INVESTING THESE FUNDS WITH THE BANKS OTHER THAN COOPERATIVE BANKS, THE ASSESSEE HAS PAID INTEREST ON THESE FUNDS. IT IS SPECIFICALLY TO BE NOTED THAT THE ASSESSEE HAS NOT INVESTED INTO THESE DEPOSITS OUT OF ITS RESERVE FUNDS . RELYING ON VARIOUS DECISIONS AND IN PARTICULARLY IN THE CASE OF DCIT V S. GUJARAT STATE COOPERATIVE BANK LTD., THE ITAT, AHMEDABA D C BENCH VIDE ITA NO.3675/AHD/1997 ORDER DATED 3 RD DECEMBER 1997 IT HAS REPEATEDLY EMPHASIZED AND HAVE UPHELD THE PROPO SITION THAT ONCE THE CIRCULATING CAPITAL OR STOCK IN TRADE IS INVESTED BY THE BANK IN THE COURSE OF ITS BANKING BUSINESS AND THUS EXEMPT 3 ITA NO.1394/PN/2015 U/S.80P(2)(A)(I) WILL BE AVAILABLE BUT IF THIS CONDITION IS NOT FULLY SATISFIED AND INCOME IS EARNED BY DEPLOYMENT OF SURPLUS FU ND ON LONG TERM OR SHORT TERM BASIS, SEPARATELY IDENTIFIED AS R ESERVE OUT OF THE APPROPRIATION OF PROFITS, THE SAME CANNOT BE SAID T O BE INCOME EARNED BY DEPLOYMENT OF FUNDS WHICH ARE IN THE NAT URE OF CIRCULATING CAPITAL OR STOCK IN TRADE AND HENCE THE SAME SHALL NOT BE ENTITLED TO EXEMPTION. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE SOCI ETY IS EXISTING TO PROVIDE CREDIT FACILITY TO ITS MEMBERS. THUS INTEREST EA RNED FROM THE SUMS LEND TO ITS MEMBERS ONLY CONSTITUTES ITS OPERA TIONAL INCOME AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD., THIS IN COME IS ONLY COVERED BY SECTION 80P(2)(A). AS THE INTEREST RECEIVE D ON DEPOSITS WITH NATIONALIZED BANK AT R.48,16,346/- DOES NOT CONSTITUTE THE OPERATIONAL INCOME OF THE ASSESSEE SOCIETY , THEREFORE, DEDUCTION/S.80P(2)(A)(I) IN RESPECT OF THE ABOVE INCOME IS NOT ALLOWABLE. THE ASSESSEE SOCIETY HAS MADE INVESTMENT IN FI XED DEPOSITS OUT OF THE SURPLUS FUND, I.E. FIXED DEPOSITS AVAILABLE WITH IT. THEREFORE, THE EXPENSES WHICH ARE IN THE NATURE OF ADMINISTRATIVE ARE ALLOWED ON PROPORTIONATE BASIS IN RESPE CT OF INTEREST EARNED ON DEPOSITS WITH NATIONALIZED BANKS. THE ADMINISTRATIVE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT , IN RESPECT OF WHICH PROPORTIONATE EXPENSES ALLOWABLE, WERE WO RKED OUT AND A DEDUCTION OF RS.3,63,565/- WAS ALLOWED AND ADDITION O F RS.44,52,781/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 4 ITA NO.1394/PN/2015 5. IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF NIPHAD NAGARI PATSAN STHA LTD. VS. ITO HOLDING THAT THE INCOME FROM SUCH MONEY KEPT IN T HE BANK COULD BE SAID TO BE ATTRIBUTABLE TO THE BUSINESS OF PROVID ING CREDIT FACILITY SO AS TO FALL WITHIN THE AMBIT OF SECTION 80P(2)(A)(I) OF THE I.T. ACT, 1961. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, A ND IN LAW, THE LD.CIT(A)-I, NASHIK WAS NOT JUSTIFIED IN HOLDING THAT ASSESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT, WHEN THE INCOME OF THE SOCIETY ON ACCOUNT OF INTEREST FROM BANKS OTHER THAN C OOPERATIVE BANKS ARE NOT COVERED BY THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND HENCE, NOT ELIGIBLE FOR DEDUCTION U/S.80P (2)(A)(I) OF THE I.T. ACT. 2. THE LEARNED CIT(A)-I, NASHIK HAS ALSO DISREGARDED T HE FACT THAT THE COOPERATIVE SOCIETY IS REQUIRED TO SATISFY THE CRIT ERIA FOR AVAILING BENEFIT OF SECTION 80P(2)(D), I.E. THE INTEREST INCO ME SHOULD BE FROM OTHER COOPERATIVE SOCIETY, WHEREAS IN THE ASSESSEE SOCIET YS CASE THE INTEREST INCOME IS FROM OTHER THAN COOPERATIVE BANKS W ITH REGARD TO INVESTMENT MADE. 3. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFICE R MAY BE RESTORED. 4. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENC E TO SUBSTANTIATE HIS CASE. 5. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEALS. 7. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY OPPOSED T HE ORDER OF THE CIT(A). HE SUBMITTED THAT THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) IS SQUARELY APPLICABLE TO THIS CASE. THE INCOME AMO UNTING TO RS.44,52,781/- IN RESPECT OF INTEREST EARNED ON FIXED DEPOSITS WITH NATIONALIZED BANKS DO NOT CONSTITUTE THE OPERATIONAL INCOME OF 5 ITA NO.1394/PN/2015 THE SOCIETY. HE ACCORDINGLY SUBMITTED THAT THE ORDER O F THE CIT(A) BE REVERSED AND THAT OF THE AO BE RESTORED. 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND FILED A COPY OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CAS E IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AND SUBMITTED THA T UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE TRIBUNAL HAS DISMISSED THE APPEAL FILED BY THE REVENUE. SINCE THE FACTS OF THE CASE A RE IDENTICAL TO THE FACTS OF THE IMMEDIATELY PRECEDING ASSESSM ENT YEAR, THEREFORE, FOLLOWING THE RULE OF CONSISTENCY THE GROUNDS RAIS ED BY THE REVENUE SHOULD BE DISMISSED. 9. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDER ED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND THE ASSESSEE IN THE INSTANT CASE IS A COOPERATIVE SOCIETY AND HAS RECEIVED IN TEREST OF RS.48,16,346/- FROM ITS INVESTMENTS WITH DIFFERENT BANKS. THE ASSESSEE CLAIMED DEDUCTION U/S.80P(2)(A)(I) OF ITS INCOME ON ACCOUNT OF INTEREST FROM BANKS OTHER THAN COOPERATIVE S OCIETIES. THE AO FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD. DISALLOWED AN AMO UNT OF RS.44,52,781/- AFTER ALLOWING DEDUCTION OF RS.3,63,565/- AS PROPORTIONATE EXPENSES FOR EARNING SUCH INTEREST INCOME. I FIND THE LD.CIT(A) FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRIBU NAL IN THE CASE OF NIPHAD NAGARI PATSANSTHA LTD. (SUPRA) HELD T HAT THE SAID INTEREST IS ITS BUSINESS INCOME ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT. I FIND THE TRIBUNAL IN ASSESSEE S OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR HAS A LSO DECIDED IDENTICAL ISSUE AND THE APPEAL FILED BY THE REVENUE HAS 6 ITA NO.1394/PN/2015 BEEN DISMISSED. THE RELEVANT OBSERVATION OF THE TRIBUNAL FR OM PARA 6 ONWARDS READ AS UNDER : 6. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN THE PARTIES THAT AN IDENTICAL CONTROVERSY HAS BEEN CONSIDERED BY T HE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ANOTHER CO-OPERATIVE SOCIETY, NAMELY, ITO VS. NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. VIDE ITA NO .1336/PN/2011 DATED 31.07.2013 WHEREIN THE ISSUE HAS BEEN HELD IN FA VOUR OF THE ASSESSEE AFTER CONSIDERING SIMILAR OBJECTION, WHICH HAS BE EN RAISED BY THE ASSESSING OFFICER IN THE PRESENT CASE. THE LEARNED RE PRESENTATIVE FOR THE ASSESSEE HAS FURNISHED A COPY OF THE SAID ORDER OF THE TRIBUNAL DATED 31.07.2013 (SUPRA) AND HAS ALSO POINTED OUT THAT THE TRIBUNAL HAS DULY CONSIDERED THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA ), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER IN THE PRESENT CASE . THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NEITHER CONTROVERTED THE ABOVE MATRIX AND NOR REFERRED TO ANY CONTRARY DECISION AND THEREFORE FOR THE SAKE OF MAINTAINING CONSISTENCY WE FOLLOW THE DECISION OF OUR CO- ORDINATE BENCH IN THE CASE OF NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. (SUPRA) AND UPHOLD THE PLEAOF THE ASSESSEE. HOWEVER, BEF ORE PARTING, WE MAY REPRODUCE HEREINAFTER THE FOLLOWING PORTION OF THE ORDER OF THE TRIBUNAL DATED 31.07.2013 (SUPRA) WHICH BRINGS OUT TH E REASONING PREVAILING WITH THE TRIBUNAL TO UPHOLD THE PLEA OF THE ASSESSEE :- 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. I N THE INSTANT CASE THERE IS NO DISPUTE TO THE FACT THAT THE ASSES SEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS ACTIVIT Y OF CREDIT COOPERATIVE SOCIETY, I.E. PROVIDING CREDIT FACILITY TO ITS MEMBERS. ACCORDING TO THE REVENUE THE INCOME OF THE SOCIETY ON ACCOUNT OF INTEREST FROM BANKS OTHER THAN COOPERATIVE BANKS, I NTEREST ON MUTUAL FUNDS, LONG TERM AND SHORT TERM CAPITAL GAIN ON SALE OF MUTUAL FUNDS ETC. ARE NOT COVERED BY THE ACTIVITY O F PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND HENCE NOT ELIGIBLE FO R DEDUCTION U/S.80P(2)(A)(I) OF THE INCOME TAX ACT IN VIEW OF T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOTAGARS COOP ERATIVE SALE SOCIETY LTD. (SUPRA). WE FIND THE LD. CIT(A) ALLOWE D THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS ENT ITLED TO DEDUCTION U/S.80P(2)(A)(I) ON ACCOUNT OF INTEREST F ROM BANKS OTHER THAN COOPERATIVE BANKS, INTEREST ON MUTUAL FUNDS LO NG TERM AND SHORT TERM CAPITAL GAIN ON MUTUAL FUNDS ETC. WHILE DOING SO, HE HELD THAT THE DECISION IN THE CASE OF TOTAGARS COOPERAT IVE SALE SOCIETY LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE IN THAT CASE THE AMOUNT INVESTED IN SHORT TERM DEPO SITS AND SECURITIES WAS NOT OUT OF INTEREST BEARING DEPOSITS COLLECTED FROM MEMBERS BUT OUT OF SALE PROCEEDS OF AGRICULTURAL PR ODUCE OF FARMER MEMBERS MARKETED BY THE SOCIETY. FURTHER, THE HONB LE APEX COURT HAS CONSIDERED ONLY THE LATTER PART OF SECTION 80P( 2)(A)(I), I.E. INCOME OF A COOPERATIVE SOCIETY ENGAGED IN PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION AND HAS NOT CONSIDERED THE EARLIER PART OF SECTION 80P(2)(A)(I) , I.E. INCOME OF A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSI NESS OF BANKING IS ELIGIBLE FOR DEDUCTION. 7 ITA NO.1394/PN/2015 11.1 WE FIND THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S. JAFARI MOMIN VIKAS COOPERATIVE CREDIT SOCIETY LTD. (SUPRA) AFTER CONSIDERING THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SU PRA) HAS OBSERVED AS UNDER : 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE EITHER PARTY, PERUSED THE RELEVANT RECORDS AND ALSO THE CASE LAW ON WHICH THE LEARNED AR HAD RESERVATION IN ITS APPLICABLY IN THE CIRCUMSTANCES OF THE ASSESSEE'S C ASE. 18. IT WAS THE STAND OF THE LEARNED CIT (A) THAT TH E ENTIRE INCOME WAS NOT EXEMPT AND THAT IT WAS TO BE EXAMINE D AS TO WHETHER THERE WAS ANY INTEREST INCOME ON THE SHO RT TERM BANK DEPOSITS AND SECURITIES INCLUDED IN THE TOTAL INCOME OF THIS SOCIETY WHICH HAS BEEN CLAIMED AS EXEMPT. ACCO RDING TO THE CIT (A), A SIMILAR ISSUE TO THAT OF THE PRES ENT ONE WAS DEALT WITH BY THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP. SALE SOCIETY LTD V. ITO (SUPRA). THE ISSUE BEFORE THE HON'BLE COURT FOR DETERMINATION WAS WHET HER INTEREST INCOME ON SHORT TERM BANK DEPOSITS AND SEC URITIES WOULD BE QUALIFIED AS BUSINESS INCOME U/S 80P (2)(A )(I) OF THE ACT. 19. THE ISSUE DEALT WITH BY THE HON'BLE SUPREME COU RT IN THE CASE OF TOTGARS (SUPRA) IS EXTRACTED, FOR APPRE CIATION OF FACTS, AS UNDER: 'WHAT IS SOUGHT TO BE TAXED UNDER SECTION 56 OF THE ACT IS THE INTEREST INCOME ARISING ON THE SURPLUS INVESTED IN SHORT TERM DEPOSITS AND SECURITIES WHICH SURPLUS WAS NOT REQUIRED FOR BUSINESS PURPOSES? THE ASSESSEE(S) MARKETS THE PRODUCE OF ITS 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 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 ACCRUE S TO THE MEMBERS' ACCOUNT, COULD BE TAXED AS BUSINESS INCOME UNDER SECTION 28 OF THE ACT? IN OUR VIEW, SUCH INTE REST INCOME WOULD COME IN THE CATEGORY OF 'INCOME FROM O THER SOURCES', HENCE, SUCH INTEREST INCOME WOULD BE TAXA BLE 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 W AS OBSERVED THAT THE FIXED DEPOSITS MADE WERE TO MAINT AIN 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 OF FICER, IT WAS ARGUED BY THE ASSESSEE(S) THAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THE FUNDS WERE NOT REQUIRED IMM EDIATELY FOR BUSINESS PURPOSES AND, CONSEQUENTLY, SUCH ACT O F INVESTMENT CONSTITUTED A BUSINESS ACTIVITY BY A PRU DENT BUSINESSMAN; THEREFORE, SUCH INTEREST INCOME WAS LI ABLE TO BE TAXED UNDER SECTION 28 AND NOT UNDER SECTION 56 OF THE ACT AND, CONSEQUENTLY, THE ASSESSEE(S) WAS ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. TH E ARGUMENT WAS REJECTED BY THE ASSESSING OFFICER AS A LSO BY 8 ITA NO.1394/PN/2015 THE TRIBUNAL AND THE HIGH COURT, HENCE, THESE CIVIL APPEALS HAVE BEEN FILED BY THEASSESSEE(S).' 19.2 FROM THE ABOVE, IT EMERGES THAT (A) THAT ASSESSEE (ISSUE BEFORE THE SUPREME COURT) HAD ADMITTED BEFORE THE AO THAT IT HAD INVESTED SURPLUS FUNDS, WHICH WERE NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF ITS BUSINESS, IN SHORT TERM DEPOSITS; (B) THAT THE SURPLUS FUNDS AROSE OUT OF THE AMOUNT RETAINED FROM MARKETING THE AGRICULTURAL PRODUCE OF THE MEMB ERS; (C) THAT ASSESSEE CARRIED ON TWO ACTIVITIES, NAMELY , (I) ACCEPTANCE OF DEPOSIT AND LENDING BY WAY OF DEPOSIT S TO THE MEMBERS; AND (II) MARKETING THE AGRICULTURAL PRODUC E; AND (D) THAT THE SURPLUS HAD ARISEN EMPHATICALLY FROM M ARKETING OF AGRICULTURAL PRODUCES. 19.3 IN THE PRESENT CASE UNDER CONSIDERATION, THE E NTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AN D THERE WERE NO SURPLUS FUNDS. 19.4 WHILE COMPARING THE STATE OF AFFAIRS OF THE PR ESENT ASSESSEE WITH THAT ASSESSEE (BEFORE THE SUPREME COU RT), THE FOLLOWING CLINCHING DISSIMILARITIES EMERGE, NAM ELY: (1) IN THE CASE OF THE ASSESSEE, THE ENTIRE FUNDS W ERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THAT THER E WERE NO SURPLUS FUNDS; - IN THE CASE OF TOTGARS, IT HAD SURPLUS FUNDS, AS ADMITTED BEFORE THE AO, OUT OF RETAINED AMOUNTS ON MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS; (2) IN THE CASE OF PRESENT ASSESSEE, IT DID NOT CAR RY OUT ANY ACTIVITY EXCEPT IN PROVIDING CREDIT FACILITIES TO I TS MEMBERS AND THAT THE FUNDS WERE OF OPERATIONAL FUNDS. THE O NLY FUND AVAILABLE WITH THE ASSESSEE WAS DEPOSITS FROM ITS M EMBERS AND, THUS, THERE WAS NO SURPLUS FUNDS AS SUCH; - IN THE CASE OF TOTGARS, THE HON'BLE SUPREME COURT HAD NOT SPELT OUT ANYTHING WITH REGARD TO OPERATIONAL FUNDS ; 19.5 CONSIDERING THE ABOVE FACTS, WE FIND THAT THER E IS FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE N OT A CO- OPERATIVE BANK, BUT ITS NATURE OF BUSINESS WAS COUP LED WITH BANKING WITH ITS MEMBERS, AS IT ACCEPTS DEPOSITS FR OM AND LENDS THE SAME TO ITS MEMBERS. TO MEET ANY EVENTUAL ITY, THE ASSESSEE WAS REQUIRED TO MAINTAIN SOME LIQUID F UNDS. THAT WAS WHY, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD INVESTED IN SHORT-TERM DEPOSITS. FURTHERMORE, THE A SSESSEE HAD MAINTAINED OVERDRAFT FACILITY WITH DENA BANK AN D 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, W E ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP SALE SOC IETY LTD (SUPRA) CANNOT IN ANY WAY COME TO THE RESCUE OF EITHER THE LD. CIT (A) OR THE REVENUE. IN VIEW OF THE ABOV E FACTS, WE ARE OF THE FIRM VIEW THAT THE LEARNED CIT (A) WA S NOT JUSTIFIED IN COMING TO A CONCLUSION THAT THE SUM OF 9 ITA NO.1394/PN/2015 RS.9,40,639/- WAS TO BE TAXED U/S 56 OF THE ACT. IT IS ORDERED ACCORDINGLY. 19.7 BEFORE PARTING WITH, WE WOULD, WITH DUE REGARD S, LIKE TO RECORD THAT THE RULING OF THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT V. MANEKBANG CO-OP HOUSING SOCIE TY LTD REPORTED IN (2012) 22 TAXMANN.COM 220(GUJ) HAS BEEN KEPT IN VIEW WHILE DECIDING THE ISSUE. 11.2 WE FIND THE COCHIN BENCH OF THE TRIBUNAL IN TH E CASE OF MUTTOM SERVICE COOPERATIVE APLAPPUZHA BANK LTD. VS. ITO (SUPRA) AFTER CONSIDERING THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) AND VARIOUS OTHER DECISIONS HAS OBSERVED AS UNDER : 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THE LOWER AUTHORITY. NO DOUBT, THE LATEST JUDGMENT IN TOTGAR'S CO-OPERAT IVE SALE SOCIETY LTD VS ITO (SUPRA), THE APEX COURT FOUND TH AT THE DEPOSIT OF SURPLUS FUNDS BY THE CO-OPERATIVE SOCIET Y IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2). IN THE CASE BEFO RE THE APEX COURT IN TOTGAR'S CO-OPERATIVE SALE SOCIETY LT D VS ITO (SUPRA), THE ASSESSEE CO-OPERATIVE SOCIETY WAS TO PROVIDE CREDIT FACILITY TO ITS MEMBERS AND MARKET T HE AGRICULTURAL PRODUCE. THE ASSESSEE IS NOT IN THE BU SINESS OF BANKING. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDGMENT OF THE APEX COURT IN TOTGAR'S CO-OPERATIVE SALE SOCIETY LTD (SUPRA) IS NOT APPLICABLE IN RESPECT OF THE CO- OPERATIVE SOCIETY WHOSE BUSINESS IS BANKING. ADMITT EDLY, THE ASSESSEE HAS INVESTED FUNDS IN STATE PROMOTED T REASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. SINCE GOVERNMEN T OF INDIA HAS WITHDRAWN INDIA VIKAS PATRA, AS A SMALL S AVINGS INSTRUMENT, FUNDS INVESTED AT THE DISCRETION OF THE BANK IS ONE OF THE ACTIVITIES OF THE BANKING AS PER THE BAN KING REGULATION ACT. SINCE THE ASSESSEE CO-OPERATIVE SOC IETY IS IN THE BUSINESS OF BANKING THE INVESTMENT IN THE ST ATE PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT CERTI FICATE SCHEME IS A BANKING ACTIVITY, THEREFORE, THE INTERE ST ACCRUED ON SUCH INVESTMENT HAS TO BE TREATED AS BUSINESS IN COME IN THE COURSE OF ITS BANKING ACTIVITY. ONCE IT IS A BU SINESS INCOME, THE, ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)((A)(I). THEREFORE, THIS TRIBUNAL IS OF THE O PINION THAT THE JUDGMENT OF THE LARGER BENCH OF THE APEX COURT IN KARNATAKA STATE CO- OPERATIVE APEX BANK (SUPRA) IS APPLICABLE TO THE FACTS OF THIS CASE. BY RESPECTFUL LY FOLLOWING THE JUDGMENT OF THE APEX COURT IN KARNATAKA STATE C O- OPERATIVE BANK (SUPRA), THE ORDER OF THE COMMISSION ER OF INCOME-TAX(A) IS UPHELD. 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 11.3 IN THE INSTANT CASE THERE IS NO DISPUTE TO THE FACT THAT THE SOCIETY IS A CREDIT COOPERATIVE SOCIETY AUTHORISED BY THE REGISTRAR OF COOPERATIVE SOCIETIES FOR ACCEPTING DEPOSITS AND LE NDING MONEY TO ITS MEMBERS AS PER LICENSE GRANTED BY THE REGISTRAR OF COOPERATIVE SOCIETIES AND THE MAIN OBJECT OF THE SOCIETY IS TO PROVIDE CREDIT FACILITY TO MEMBERS WHO CAN BE ANY PERSON OF THE SO CIETY. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MAHAV IR NAGARI SAHAKARI PAT SANSTHA LTD. REPORTED IN 74 TTJ 793 (P UNE) HAS HELD THAT THE CREDIT SOCIETY WHICH IS CARRYING ON THE BU SINESS OF BANKING ACTIVITY AND PROVIDING CREDIT FACILITY TO ITS MEMBE RS IS ELIGIBLE FOR 10 ITA NO.1394/PN/2015 DEDUCTION U/S.80P(2)(A)(I). IN VIEW OF THE ABOVE DI SCUSSION AND FOLLOWING THE DECISIONS OF THE AHMEDABAD BENCH OF T HE TRIBUNAL AND COCHIN BENCH OF THE TRIBUNAL WHICH IN TURN HAVE CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) WE FIND NO IN FIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, THE SAME IS UP HELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BEEN RENDERED IN IDENTICAL CIRCUMSTANCES AND FOR THE SAKE OF MAINTAININ G CONSISTENCY, WE AFFIRM THE ACTION OF THE CIT(A) ALLOWING THE CLA IM OF THE ASSESSEE FOR EXEMPTION U/S 80P(2)(A)(I) OF THE ACT IN RELATION T O A SUM OF RS.75,36,432/-. ACCORDINGLY,REVENUE FAILS IN ITS APPE AL. 10. I FIND THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI LAXMI NARAYAN NAGARI SAHAKARI PATSANSTHA MARYADIT VIDE I TA NO.604/PN/2014 ORDER DATED 19-08-2015 FOLLOWING THE DECIS ION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERC HANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO REPORTED IN 55 TAXMANN.COM 447 (TO WHICH I AM A PARTY) HAS OBSERVED AS UNDER : 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HA VE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY DISPUTE TO BE DECIDED IN THE GROUNDS RAISED BY THE ASSESSEE IS THAT W HETHER THE INTEREST AMOUNTING TO RS.25,01,774/- EARNED BY THE ASSE SSEE ON SHORT TERM DEPOSITS WITH BANKS HAS TO BE TREATED AS INCOME FR OM OTHER SOURCES U/S.56 OR THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). WE FIND THE AO FOLLOWING THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) TREATED THE INTEREST EARNED FROM SUCH SHORT TE RM DEPOSITS AS INCOME FROM OTHER SOURCES AND BROUGHT THE SAME TO TA X WHICH HAS BEEN UPHELD BY THE CIT(A). 10. IT IS THE CASE OF THE ASSESSEE THAT IN VIEW OF THE DE CISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR M ERCHANTS SOUHARDS CREDIT COOPERATIVE LTD. (SUPRA) THE INTEREST EARNED FROM SUCH SHORT TERM DEPOSITS WITH BANK IS ENTITLED TO DEDUCT ION U/S.80P(2)(A)(I). WE FIND THE HONBLE HIGH COURT OF KARNATAKA AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) HELD THAT THE INTEREST EARNED BY SUCH COOPERATIVE SOCIETIES ON SHORT TERM DEPO SITS WITH SCHEDULED BANKS IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A) (I). THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT FROM PARA 6 ONWARDS READ AS UNDER : 6. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, TH E UNDISPUTED FACTS WHICH EMERGES IS, THE SUM OF RS. 1,77,305/- REPRESENTS TH E INTEREST 11 ITA NO.1394/PN/2015 EARNED FROM SHORT-TERM DEPOSITS AND FROM SAVINGS BANK AC COUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING CREDIT FACIL ITIES TO ITS MEMBERS. IT IS NOT CARRYING ON ANY OTHER BUSINESS. THE I NTEREST INCOME EARNED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS E ARNED INTEREST. THEREFORE, WHETHER THIS INTEREST IS ATTRIBUTABLE TO TH E BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUE STION. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELEVANT PROVISIO N OF LAW I.E., SECTION 80P(2)(A)(I): 'DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOC IETIES: 80P (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPE RATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTIO N (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE THE FOLLOWING, NAMELY: (A) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PR OVIDING CREDIT FACILITIES TO ITS MEMBERS, OR (II) TO (VII) XX XX XX THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINE SS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 7. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION I S OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSIDE R THE MEANING OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (SC) AS UNDER: 'AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION 'ATTRIBUTABLE TO' OCCURRING IN THE PHRASE 'PROFITS AN D GAINS ATTRIBUTABLE TO THE BUSINESS OF THE SPECIFIED INDUSTRY ( HERE GENERATION AND DISTRIBUTION OF ELECTRICITY) ON WHICH THE LEARNED SOLICITOR-GENERAL RELIED, IT WILL BE PERTINENT TO O BSERVE THAT THE LEGISLATURE, HAS DELIBERATELY USED THE EXPRESSION 'ATTRI BUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED THAT THE EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WID ER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FOR CE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SA LE OF OLD MACHINERY AND BUILDINGS CANNOT BE REGARDED AS PROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF GENER ATION AND DISTRIBUTION OF ELECTRICITY. IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE LEAR NED SOLICITOR-GENERAL, IT HAS USED THE EXPRESSION 'DERIVED FROM', AS, FOR INSTANCE, IN SECTION-80J. IN OUR VIEW, SINCE THE E XPRESSION OF WIDER IMPORT, NAMELY, 'ATTRIBUTABLE TO', HAS BEEN USE D, THE 12 ITA NO.1394/PN/2015 LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOURCES OTH ER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. 8. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERTAINL Y WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LEGI SLATURE WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EXPR ESSION 'DERIVED FROM'. THE EXPRESSION 'ATTRIBUTABLE TO' BEING OF WIDE R IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTE NDED TO GATHER RECEIPTS 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 GAIN S OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTERE ST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP THE SAID AMOUNT IDLE. IF T HEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTERE ST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARR YING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE I NCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS A TTRIBUTABLE TO THE ACTIVITY 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 8 0P 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 WIT H 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 RE CEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETA INED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO I TS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT-T ERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE- SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANC E SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTER EST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTI ONED 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 COUR T HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOM E INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MAD E 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 INVESTED IN B ANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS N OT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCO UNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WA S NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBER'S, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTERE ST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AN D THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. ANDHRA PRADESH STATE CO-OPERATIVE BANK LTD., [2011 ] 200 TAXMAN 220/12 TAXMANN.COM 66. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE 13 ITA NO.1394/PN/2015 AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY I T IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLO WING ORDER: 11. NO DOUBT, A CONTRARY DECISION TO THIS EFFECT WAS A LSO CITED BY THE LD. DEPARTMENTAL REPRESENTATIVE WHERE THE HONBLE DE LHI HIGH COURT IN THE CASE OF MANTOLA COOPERATIVE THRIFT & CREDIT S OCIETY LTD. (SUPRA) HAS HELD THAT WHERE THE ASSESSEE COOPERATIVE SOCIETY WAS E NGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS EARNS INTERE ST INCOME ON SURPLUS FUNDS DEPOSITED AS FIXED DEPOSITS, SUCH INTEREST INC OME WOULD BE ASSESSABLE AS INCOME FROM OTHER SOURCES AND THUS NOT E LIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). HOWEVER, IT IS ALSO THE SE TTLED PROPOSITION OF LAW THAT WHEN TWO VIEWS ARE POSSIBLE, THE VIEW WHIC H IS IN FAVOUR OF THE ASSESSEE HAS TO BE FOLLOWED. SINCE IN THE INSTANT CA SE, TWO DIVERGENT DECISIONS WERE CITED BEFORE US AND NO DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IS AVAILABLE, THEREFORE, FO LLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. V EGETABLE PRODUCTS REPORTED IN 88 ITR 192 WE HOLD THAT THE VIEW IN FAV OUR OF THE ASSESSEE, I.E. THE DECISION OF THE HONBLE KARNATAKA HIGH COUR T HAS TO BE FOLLOWED. ACCORDINGLY, WE HOLD THAT THE INTEREST IN COME EARNED BY THE ASSESSEE ON SHORT TERM DEPOSITS KEPT WITH BANKS HAS TO BE A LLOWED AS DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT. THE ORD ER OF THE CIT(A) IS ACCORDINGLY SET ASIDE AND THE GROUNDS RAISED BY THE ASSESS EE ARE ALLOWED. 11. IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE AS WELL AS THE DECISION OF THE COORDINATE BENCH OF THE TR IBUNAL IN THE CASE OF SHRI LAXMI NARAYAN NAGARI SAHAKARI PATSANSTH A MARYADIT CITED (SUPRA), I DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE CIT(A) HOLDING THAT ASSESSEE IS ENTITLED TO DEDUCTION U/S.8 0P(2)(A)(I) ON THE INTEREST INCOME. ACCORDINGLY, THE SAME IS UPHELD A ND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 22-07-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED : 22 ND JULY, 2016. 14 ITA NO.1394/PN/2015 '# $# / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // // TRUE COPY // // $ % //UE &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - I, NASHIK 4. 5. 6. THE CIT-I, NASHIK $ %%*, *, SMC BENCH / DR, ITAT, SMC BENCH PUNE; 2 / GUARD FILE.