Mohol Nagari Sahkari Pat Purvatha Sanstha Maryadit, Solapur V. Income-tax Officer,

ITA 1405/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1512 (ITAT-PUNE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 29-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Question of law
• Section: 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NOS.1405 TO 1407/PN/2016 / ASSESSMENT YEARS : 2008-09, 2010-11 & 2001-12 MOHOL NAGARI SAHAKARI PAT PURVATHA SANTHA MARYADIT, NEAR DCC BANK, MARKET YARD, MOHOL, DIST. SOLAPUR - 413213 PAN NO. AAAAM1185F . / APPELLANT V/S ITO, WARD - 1(4), PANDHARPUR . / RESPONDENT / APPELLANT BY : SHRI S.N. PURANIK / RESPONDENT BY : SHRI SUHAS KULKARNI / ORDER PER R.K.PANDA, AM : THE ABOVE 3 APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 12-02-2016 OF THE CIT(A)-7 , PUNE RELATING TO THE ASSESSMENT YEARS 2008-09, 2010-11 AND 2011-12 RESPECTIVELY. SINCE COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN THE ABOVE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP ITA NO.1405/PN/2016 FOR A.Y. 2008-09 AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT FILED ITS RETURN OF INCOME ON 20-10-2008 DECLARING TOTAL INCOME AT NIL. THE ORIGINAL ASSE SSMENT ORDER WAS PASSED U/S.143(3) ON 27-10-2010 DETERMINING TH E TOTAL / DATE OF HEARING :28.07.2016 / DATE OF PRONOUNCEMENT:29.07.2016 2 ITA NOS.1405 TO 1407/PN/2016 INCOME ON NIL. SUBSEQUENTLY, IT WAS NOTICED BY THE AO THA T THE ASSESSEE HAD WRONGLY CLAIMED DEDUCTION U/S.80P(2)(A)(I) ON ACC OUNT OF INTEREST INCOME ACCRUED/RECEIVED ON FDRS WITH NATIONALIZED /PRIVATE SECTOR/SCHEDULED BANKS. SUCH INCOME WAS LIABLE TO BE TAX ED AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME OF THE ASSESSEE. THEREFORE, THE AO ISSUED NOTICE U/S.148 OF THE ACT TO WHICH THE ASSESSEE REPLIED THAT THE RETURN ORIGINALLY FILED ON 2 0-10-2008 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S.148. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS SHOWN NET PROFIT AS PER PROFIT AND LOSS ACCOUNT AT RS.39,89,893/- AND AFTER MAKING VARIOUS DISALLOWANCE AND CONSIDERING ALLOWABLE EXPENSES NET INCOME FROM BUSINESS OF RS.64,91,869/- HAS BEEN SHOWN IN THE RETURN OF INCOME AND THE SAME HAS BE EN CLAIMED AS DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT. FROM THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE THE AO NOTED THAT TH E ASSESSEE CREDIT COOPERATIVE SOCIETY HAS EARNED INCOME UNDER THE FOLLOWING HEADS: SR.NO. PARTICULARS AMOUNT 1 INTEREST ON LOANS ADVANCED TO MEMBERS RS.3,14,22,437/ - 2 OTHER BUSINESS INCOME, DD COMMISSION, STATIONERY, KASAR RS,2,21,166/ - 3 INTEREST ON INVESTMENTS/BANK FDRS RS.77,50,069/ - TOTAL RS.3,93,93,672/ - 4. FROM THE DETAILS OF INTEREST ON INVESTMENTS/BANK FDR S OF RS.77,50,069/- THE AO NOTED THAT THE BREAK-UP OF THE SA ME IS AS UNDER : SR.NO. PARTICULARS AMOUNT 1 INTEREST ON INVESTMENT WITH COOPERATIVE BANKS/DIVIDEND FROM CO-OP. SOCIETY RS.34,21,268/ - 2 INTEREST ON INVESTMENT WITH NATIONALISED/PRIVATE SECTOR/SCHEDULED BANKS RS.43,28,801/ - TOTAL RS.77,50,069/ - 3 ITA NOS.1405 TO 1407/PN/2016 5. THE AO OBSERVED THAT THE ASSESSEE CREDIT COOPERAT IVE SOCIETY IS HAVING FUNDS UNDER THE HEADS RESERVES AND SURPLUS TOTA LING TO RS.4,32,89,950/- WHICH IS NOTHING BUT SURPLUS FUNDS OF EARLIER PERIODS ON WHICH THE ASSESSEE HAS EARNED INTEREST INCOME FROM I NVESTMENT AMOUNTING TO RS.77,50,069/-. THIS INDICATES THAT THE MAIN INTENTION WAS TO EARN INTEREST INCOME FROM SUCH SURPLUS FUNDS FROM OUTSIDE SOURCES JUST LIKE ANY OTHER ORDINARY DEPOSIT. HE, THEREFO RE, ASKED THE ASSESSEE TO EXPLAIN THE ALLOWABILITY OF DEDUCTION U/S.80P(2)(A)(I) O N THE ABOVE AMOUNT. REJECTING THE VARIOUS EXPLANATIONS GIVEN B Y THE ASSESSEE AND FOLLOWING THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY VS. ITO REPORT ED IN 322 ITR 283 THE AO REJECTED THE CLAIM OF DEDUCTION U/S.80P(2)(A)(I) O N THE INTEREST INCOME ON FIXED DEPOSITS WITH COMMERCIAL BANKS T REATING THE SAME AS INCOME FROM OTHER SOURCES. 6. IN APPEAL THE LD.CIT(A) DISTINGUISHING THE VARIOUS DECISIO NS RELIED ON BY THE ASSESSEE AND FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY (SUPRA) AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MANTOLA CO-OPERATIVE THRIFT & CREDIT SOCIETY LTD. VS. CIT REPORTED IN 229 TAXMANN 68 HELD THAT THE ASSESSEE IS NOT ENTITLED TO DE DUCTION U/S.80P(2)(A)(I) ON THE INTEREST INCOME OF RS.43,28,800/- FROM THE NATIONALIZED BANKS. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE FOLLOWING GROUNDS : LD. AO, WARD-1(4) PANDHARPUR AS WELL HONBLE CIT(A) -7, PUNE IS NOT JUSTIFIED FOR FOLLOWING : 1. TO TREAT INTEREST EARNED ON FIXED DEPOSITS WITH NA TIONALISED BANKS AS INCOME FROM OTHER SOURCES 4 ITA NOS.1405 TO 1407/PN/2016 2. TO DISALLOW THE DEDUCTION AS AVAILABLE U/S.80P(2)(A ) OF THE ACT WITH RESPECT TO INTEREST INCOME ON FIXED DEPOSITS WITH NATI ONALISED BANKS/PRIVATE & SCHEDULED BANKS. 3. ANY OTHER GROUND WHICH YOUR HONOUR MAY ALLOW TO ADD/DELETE OR RAISE. 8. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE FOR ASSESSMENT YEARS 2010-11 AND 2011-12 RESPECTIVELY. 9. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET FILED T HE FOLLOWING DECISIONS OF THE TRIBUNAL AND SUBMITTED THAT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE COORDINA TE BENCH OF THE TRIBUNAL AS WELL AS HONBLE KARNATAKA HIGH COURT. 1. SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LT D. VS. ITO VIDE ITA NO.516/PN/2014 ORDER DATED 31-05-2016 2. SHRI LAXMI NARAYAN NAGARI SAHAKARI PAT SANSTHA MA RYADIT VS. ITO VIDE ITA NO.604/PN/2014 ORDER DATED 19-08-2015 3. TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO REPORTED IN 55 TAXMANN.COM 447 (KARNATAKA) HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) MA Y BE SET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 10. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDERS OF THE CIT(A). 11. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PA PER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VA RIOUS DECISIONS CITED BEFORE ME. THERE IS NO DISPUTE TO THE FACT THAT TH E ASSESSEE IN THE INSTANT CASE IS A COOPERATIVE CREDIT SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE COOPERATIVE CREDIT SOCIETY IS HAVING ITS FUNDS UNDER THE HEAD RESERV ES AND SURPLUS TOTALING TO RS.4,32,89,950/-. THE ASSESSEE HAS EA RNED 5 ITA NOS.1405 TO 1407/PN/2016 INTEREST INCOME OF RS.77,50,069/- FROM INTEREST AND DEPOSITS WITH COOPERATIVE BANKS, NATIONALISED AND OTHER SCHEDULED BANKS WHICH INCLUDES AN AMOUNT OF RS.43,28,801/- BEING INTEREST ON INVES TMENT WITH NATIONALISED/PRIVATE SECTOR/SCHEDULED BANKS. I FIND TH E AO DISALLOWED THE CLAIM OF DEDUCTION U/S.80P(2)(A)(I) ON RS.43,28,80 1/- HOLDING THAT SUCH INTEREST INCOME CANNOT BE CHARACTER IZED AS INCOME FROM BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS OF THE SOCIETY AND THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S.80 P(2)(A)(I) ON THE ABOVE AMOUNT TREATING THE SAME AS INCOME FROM OT HER SOURCES. I FIND THE LD.CIT(A) FOLLOWING THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA ) AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MANTOLA C O- OPERATIVE THRIFT & CREDIT SOCIETY LTD. (SUPRA) UPHELD THE A CTION OF THE AO. 12. I FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUN AL IN THE CASE OF SWA ASHOKRAO BANKAR NAGARI SAHAKARI PATSANSTH A MARYADIT VIDE ITA NO.1394/PN/2015 ORDER DATED 22-07-2016. FOLLOW ING THE DECISION OF THE TRIBUNAL IN THE CASE OF NIPHAD NAGARI SAHAK ARI PATSANSTHA LTD. (SUPRA) AND THE DECISION OF THE HONBLE KA RNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CR EDIT COOPERATIVE LTD. (SUPRA) THE TRIBUNAL HELD THAT ASSESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) ON THE INTEREST INCOME ON DEPOSITS W ITH BANKS OTHER THAN COOPERATIVE BANKS/COOPERATIVE SOCIETIE S. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 9 ONWARDS READ AS UNDER : 9. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARI OUS DECISIONS CITED BEFORE ME. I FIND THE ASSESSEE IN THE INSTANT CASE IS A COOPERATIVE SOCIETY AND HAS RECEIVED INTEREST OF RS.48,16,346/- FROM ITS IN VESTMENTS WITH 6 ITA NOS.1405 TO 1407/PN/2016 DIFFERENT BANKS. THE ASSESSEE CLAIMED DEDUCTION U/S.80P( 2)(A)(I) OF ITS INCOME ON ACCOUNT OF INTEREST FROM BANKS OTHER THAN C OOPERATIVE SOCIETIES. THE AO FOLLOWING THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD. DISALLOWED AN AMOUNT OF RS.44,52,781/- AFTER ALLOWING DEDUCTION OF RS.3,63,56 5/- AS PROPORTIONATE EXPENSES FOR EARNING SUCH INTEREST INCOME. I FIND THE LD.CIT(A) FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF NIPHAD NAGARI PATSANSTHA LTD. (SUPRA) HELD THAT THE SAID INTEREST IS I TS BUSINESS INCOME ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT. I FIND THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT Y EAR HAS ALSO DECIDED IDENTICAL ISSUE AND THE APPEAL FILED BY T HE REVENUE HAS 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 THE PU NE BENCH OF THE TRIBUNAL IN THE CASE OF ANOTHER CO-OPERATIVE SOCIETY, NAMELY, ITO VS. NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. VIDE ITA NO.13 36/PN/2011 DATED 31.07.2013 WHEREIN THE ISSUE HAS BEEN HELD IN FAVOUR O F THE ASSESSEE AFTER CONSIDERING SIMILAR OBJECTION, WHICH HAS BEEN RAISED BY THE ASSESSING OFFICER IN THE PRESENT CASE. THE LEARNED REPRESENTATIV E 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 SUPREME 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 REFER RED TO ANY CONTRARY DECISION AND THEREFORE FOR THE SAKE OF MAINTAINING CO NSISTENCY WE FOLLOW THE DECISION OF OUR CO-ORDINATE BENCH IN THE CASE OF NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. (SUPRA) AND UPHOLD THE PLEAO F THE ASSESSEE. HOWEVER, BEFORE PARTING, WE MAY REPRODUCE HEREINAFT ER THE FOLLOWING PORTION OF THE ORDER OF THE TRIBUNAL DATED 31.07.20 13 (SUPRA) WHICH BRINGS OUT THE 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. IN THE INSTA NT CASE THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS A COOPERAT IVE SOCIETY ENGAGED IN THE BUSINESS ACTIVITY OF CREDIT COOPERATIVE SOCI ETY, I.E. PROVIDING CREDIT FACILITY TO ITS MEMBERS. ACCORDING TO THE RE VENUE THE INCOME OF THE SOCIETY ON ACCOUNT OF INTEREST FROM BANKS OTHER THAN COOPERATIVE BANKS, INTEREST ON MUTUAL FUNDS, LONG TERM AND SHOR T TERM CAPITAL GAIN ON SALE OF MUTUAL FUNDS ETC. ARE NOT COVERED BY THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND HENCE NOT ELIG IBLE FOR 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 ENTITLE D TO DEDUCTION U/S.80P(2)(A)(I) ON ACCOUNT OF INTEREST FROM BANKS OTHER THAN COOPERATIVE BANKS, INTEREST ON MUTUAL FUNDS LONG TE RM AND SHORT TERM CAPITAL GAIN ON MUTUAL FUNDS ETC. WHILE DOING SO, H E HELD THAT THE DECISION IN THE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE IN THAT CASE THE AMOUNT INVESTED IN SHORT TERM DEPOSITS AND SECURITI ES WAS NOT OUT OF INTEREST BEARING DEPOSITS COLLECTED FROM MEMBERS BU T OUT OF SALE PROCEEDS OF AGRICULTURAL PRODUCE OF FARMER MEMBERS MARKETED BY THE SOCIETY. FURTHER, THE HONBLE APEX COURT HAS CONSID ERED ONLY THE LATTER PART OF SECTION 80P(2)(A)(I), I.E. INCOME OF A COOP ERATIVE SOCIETY 7 ITA NOS.1405 TO 1407/PN/2016 ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBE RS IS ELIGIBLE FOR DEDUCTION AND HAS NOT CONSIDERED THE EARLIER PART O F SECTION 80P(2)(A)(I), I.E. INCOME OF A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING IS ELIGIBLE FOR DEDUCTIO N. 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 COURT I N THE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) HAS OBSERVED AS UNDER : 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE EITHER PARTY, PERUSED THE RELEVANT RECORDS AND ALSO THE CA SE LAW ON WHICH THE LEARNED AR HAD RESERVATION IN ITS APPLIC ABLY IN THE CIRCUMSTANCES OF THE ASSESSEE'S CASE. 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 SHORT TERM BANK DEPOSITS AND SECURITIES INCLUDED IN THE TOTAL INCOM E OF THIS SOCIETY WHICH HAS BEEN CLAIMED AS EXEMPT. ACCORDING TO THE CIT (A), A SIMILAR ISSUE TO THAT OF THE PRESENT 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 T HE HON'BLE COURT FOR DETERMINATION WAS WHETHER INTEREST INCOME ON SHORT TERM BANK DEPOSITS AND SECURITIES WOULD BE QUALIFIE D 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 APPRECIAT ION 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 REQUI RED FOR BUSINESS PURPOSES? THE ASSESSEE(S) MARKETS THE PROD UCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAI NED BY IT. IN THIS CASE, WE ARE CONCERNED WITH THE TAX TREATME NT OF SUCH AMOUNT. SINCE THE FUND CREATED BY SUCH BY SUCH RETE NTION WAS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SECURITIES. THE QUESTION, BEFORE US, I S-WHETHER INTEREST ON SUCH DEPOSITS/SECURITIES, WHICH STRICTL Y SPEAKING ACCRUES TO THE MEMBERS' ACCOUNT, COULD BE TAXED AS BUSINESS INCOME UNDER SECTION 28 OF THE ACT? IN OUR VIEW, SU CH INTEREST 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 ASSES SING 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 ASSESS EE AS ATTRIBUTED BY THE REVENUE. HOWEVER, IN REGARD TO TH E 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 OF IN VESTMENT CONSTITUTED A BUSINESS ACTIVITY BY A PRUDENT BUSINE SSMAN; THEREFORE, SUCH INTEREST INCOME WAS LIABLE TO BE TA XED UNDER SECTION 28 AND NOT UNDER SECTION 56 OF THE ACT AND, CONSEQUENTLY, THE ASSESSEE(S) WAS ENTITLED TO DEDUC TION UNDER 8 ITA NOS.1405 TO 1407/PN/2016 SECTION 80P(2)(A)(I) OF THE ACT. THE ARGUMENT WAS R EJECTED BY THE ASSESSING OFFICER AS ALSO BY THE TRIBUNAL AND T HE HIGH COURT, HENCE, THESE CIVIL APPEALS HAVE BEEN FILED B Y 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 MEMBERS; (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 AND THER E 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, NAMELY: (1) IN THE CASE OF THE ASSESSEE, THE ENTIRE FUNDS W ERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THAT THERE 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 ONLY 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 NOT 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 FUNDS . THAT WAS WHY, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD I NVESTED IN SHORT-TERM DEPOSITS. FURTHERMORE, THE ASSESSEE HAD MAINTAINED OVERDRAFT FACILITY WITH DENA BANK AND THE BALANCE A S 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 EIT HER THE LD. CIT (A) OR THE REVENUE. IN VIEW OF THE ABOVE FACTS, WE ARE OF 9 ITA NOS.1405 TO 1407/PN/2016 THE FIRM VIEW THAT THE LEARNED CIT (A) WAS NOT JUST IFIED IN COMING TO A CONCLUSION THAT THE SUM OF 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 SOCIETY 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 (S UPRA) AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT I N 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 H AVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THE LOWER AUTHO RITY. NO DOUBT, THE LATEST JUDGMENT IN TOTGAR'S CO-OPERATIVE 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 LTD VS ITO (SUPRA), THE ASSESSEE CO-OPERATIVE SOCIETY WAS TO PROVIDE CR EDIT FACILITY TO ITS MEMBERS AND MARKET THE AGRICULTURAL PRODUCE. THE ASSESSEE IS NOT IN THE BUSINESS OF BANKING. THEREFO RE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDGMENT OF THE APEX COURT IN TOTGAR'S CO-OPERATIVE SALE SOCIETY LTD (SUPRA) IS N OT APPLICABLE IN RESPECT OF THE CO-OPERATIVE SOCIETY WHOSE BUSINE SS IS BANKING. ADMITTEDLY, THE ASSESSEE HAS INVESTED FUND S IN STATE PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT SCHEM E. SINCE GOVERNMENT OF INDIA HAS WITHDRAWN INDIA VIKAS PATRA , AS A SMALL SAVINGS INSTRUMENT, FUNDS INVESTED AT THE DIS CRETION OF THE BANK IS ONE OF THE ACTIVITIES OF THE BANKING AS PER THE BANKING REGULATION ACT. SINCE THE ASSESSEE CO-OPERATIVE SOC IETY IS IN THE BUSINESS OF BANKING THE INVESTMENT IN THE STATE PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT CERTIFICATE SC HEME IS A BANKING ACTIVITY, THEREFORE, THE INTEREST ACCRUED O N SUCH INVESTMENT HAS TO BE TREATED AS BUSINESS INCOME IN THE COURSE OF ITS BANKING ACTIVITY. ONCE IT IS A BUSINESS INCO ME, THE, ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)((A)(I ). THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDGMENT O F THE LARGER BENCH OF THE APEX COURT IN KARNATAKA STATE CO- OPER ATIVE APEX BANK (SUPRA) IS APPLICABLE TO THE FACTS OF THIS CAS E. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE APEX COU RT IN KARNATAKA STATE CO-OPERATIVE BANK (SUPRA), THE ORDE R OF THE COMMISSIONER 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 REGI STRAR OF COOPERATIVE SOCIETIES FOR ACCEPTING DEPOSITS AND LENDING 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 FAC ILITY TO MEMBERS WHO CAN BE ANY PERSON OF THE SOCIETY. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MAHAVIR NAGARI SAHAKARI PAT SANSTHA LTD. REPORTED IN 74 TTJ 793 (PUNE) HAS HELD THAT THE CRE DIT SOCIETY WHICH IS CARRYING ON THE BUSINESS OF BANKING ACTIVITY AND PR OVIDING CREDIT FACILITY TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION U/S.80P(2) (A)(I). IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE DECISIONS OF THE AHMEDABAD BENCH OF THE TRIBUNAL AND COCHIN BENCH OF THE TRIBUNAL WH ICH IN TURN HAVE 10 ITA NOS.1405 TO 1407/PN/2016 CONSIDERED THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, THE SAME I S UPHELD 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 MAINTAINING CONSISTENC Y, WE AFFIRM THE ACTION OF THE CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 80P(2)(A)(I) OF THE ACT IN RELATION TO A SUM OF RS.75 ,36,432/-. ACCORDINGLY, REVENUE FAILS IN ITS APPEAL. 10. I FIND THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI LAXMI NARAYAN NAGARI SAHAKARI PATSANSTHA MARYADIT VIDE ITA NO.604/PN/2014 ORDER DATED 19-08-2015 FOLLOWING THE DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO REPORTED IN 55 TAXMANN.COM 447 (TO WHICH I A M 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 HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY DISPUTE TO BE DECI DED IN THE GROUNDS RAISED BY THE ASSESSEE IS THAT WHETHER THE INTEREST AMOUN TING TO RS.25,01,774/- EARNED BY THE ASSESSEE ON SHORT TERM DEPOSI TS WITH BANKS HAS TO BE TREATED AS INCOME FROM OTHER SOURCES U/S.56 OR THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). WE FIND TH E AO FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) TREATED THE INTEREST EARNE D FROM SUCH SHORT TERM DEPOSITS AS INCOME FROM OTHER SOURCES AND BROUGHT THE SAME TO TAX WHICH HAS BEEN UPHELD BY THE CIT(A). 10. IT IS THE CASE OF THE ASSESSEE THAT IN VIEW OF THE D ECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDS CREDIT COOPERATIVE LTD. (SUPRA) THE INTEREST EARNED FROM SUC H SHORT TERM DEPOSITS WITH BANK IS ENTITLED TO DEDUCTION U/S.80P(2)( A)(I). WE FIND THE HONBLE HIGH COURT OF KARNATAKA AFTER CONSIDERING TH E DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE SAL E SOCIETY LTD. (SUPRA) HELD THAT THE INTEREST EARNED BY SUCH COOPERA TIVE SOCIETIES ON SHORT TERM DEPOSITS WITH SCHEDULED BANKS IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). THE RELEVANT OBSERVATION OF THE HO NBLE 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 T HE INTEREST EARNED FROM SHORT-TERM DEPOSITS AND FROM SAVINGS BANK ACCOUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO I TS MEMBERS. IT IS NOT CARRYING ON ANY OTHER BUSINESS. THE INTEREST INCOME EAR NED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHETHER THIS INTEREST IS ATTRIBUTABLE TO THE BUSINESS OF PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. IN THIS REGARD, IT IS NECE SSARY TO NOTICE THE RELEVANT PROVISION OF LAW I.E., SECTION 80P(2)(A)(I) : 'DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOC IETIES: 11 ITA NOS.1405 TO 1407/PN/2016 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 SUBJE CT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), I N 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 BUSIN ESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 7. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION IS OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSIDER THE MEANIN G OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FROM ITS USE IN VA RIOUS 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 'ATT RIBUTABLE TO' OCCURRING IN THE PHRASE 'PROFITS AND GAINS ATTRIBU TABLE TO THE BUSINESS OF THE SPECIFIED INDUSTRY (HERE GENERATION AND DISTRIBUTION OF ELECTRICITY) ON WHICH THE LEARNED SOLICITOR-GENE RAL RELIED, IT WILL BE PERTINENT TO OBSERVE THAT THE LEGISLATURE, HAS DELI BERATELY USED THE EXPRESSION 'ATTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED THAT THE EXPRESSION 'ATTR IBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVE D FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE 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 RESTRI CTED MEANING IN THE MANNER SUGGESTED BY THE LEARNED SOLICITOR-GENE RAL, IT HAS USED THE EXPRESSION 'DERIVED FROM', AS, FOR INSTANCE, IN SECTION-80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAM ELY, 'ATTRIBUTABLE TO', HAS BEEN USED, THE LEGISLATURE INTE NDED TO COVER RECEIPTS FROM SOURCES OTHER 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 LEGISLATUR E WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EXPRESSION 'DERI VED FROM'. THE EXPRESSION 'ATTRIBUTABLE TO' BEING OF WIDER IMPORT, T HE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GAT HER 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 GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE C APITAL, 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 12 ITA NOS.1405 TO 1407/PN/2016 SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. TH E SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTER EST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS O F BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSI NESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPE RATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UND ER 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., O N WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHE RE THE ASSESSEE- COOPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FA CILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL P RODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETIN G AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SA ID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PROD UCE WAS BOUGHT, WAS INVESTED IN A SHORT-TERM DEPOSIT/SECURITY. S UCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE-SOCIETY WAS A LIABILIT Y AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THE REFORE, TO THAT EXTENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UND ER 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. FURTHE R THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FAC TS OF THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING D OWN 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 ACCOUNT. IN FACT T HIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY R EQUIRED 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 A S TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING O N THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDH RA 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 BENEFI T OF DEDUCTION OF THE 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 DELHI HIGH COURT IN THE CASE OF MANTOLA COOPERATIVE THRIFT & CREDIT SOCIETY LTD. (SUPRA) HAS HELD THAT WHERE THE ASSESSEE COOPERATIVE SOCIETY WAS ENGAGED I N PROVIDING CREDIT FACILITIES TO ITS MEMBERS EARNS INTEREST INCOME O N SURPLUS FUNDS DEPOSITED AS FIXED DEPOSITS, SUCH INTEREST INCOME WOULD B E ASSESSABLE AS INCOME FROM OTHER SOURCES AND THUS NOT ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). HOWEVER, IT IS ALSO THE SETTLED PROP OSITION OF LAW THAT WHEN TWO VIEWS ARE POSSIBLE, THE VIEW WHICH IS IN FAVOU R OF THE ASSESSEE HAS TO BE FOLLOWED. SINCE IN THE INSTANT CASE, TWO DI VERGENT DECISIONS WERE CITED BEFORE US AND NO DECISION OF THE HONBLE JURISDI CTIONAL HIGH COURT IS AVAILABLE, THEREFORE, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS REPORTED IN 88 ITR 192 WE HOLD 13 ITA NOS.1405 TO 1407/PN/2016 THAT THE VIEW IN FAVOUR OF THE ASSESSEE, I.E. THE DECI SION OF THE HONBLE KARNATAKA HIGH COURT HAS TO BE FOLLOWED. ACCORDINGL Y, WE HOLD THAT THE INTEREST INCOME EARNED BY THE ASSESSEE ON SHORT TERM DEP OSITS KEPT WITH BANKS HAS TO BE ALLOWED AS DEDUCTION U/S.80P(2)(A)(I) O F THE I.T. ACT. THE ORDER OF THE CIT(A) IS ACCORDINGLY SET ASIDE AND THE G ROUNDS RAISED BY THE ASSESSEE 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 T RIBUNAL IN THE CASE OF SHRI LAXMI NARAYAN NAGARI SAHAKARI PATSANSTHA MARYADI T CITED (SUPRA), I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ) HOLDING THAT ASSESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) ON THE INTERE ST INCOME. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENU E ARE DISMISSED. 13. SINCE I AM A PARTY TO THE ABOVE DECISION, THEREFORE, FO LLOWING MY OWN DECISION IN THE CASE OF SWA ASHOKRAO BANKAR NAGARI SAHAKARI PATSANSTHA MARYADIT (SUPRA) I HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) ON THE INTEREST INCOME FROM FDRS KEP T WITH BANKS OTHER THAN COOPERATIVE BANKS/COOPERATIVE SOCIETIE S. THEREFORE, THE ORDER OF THE CIT(A) IS SET ASIDE AND THE GROUNDS RAIS ED BY THE ASSESSEE ARE ALLOWED. 14. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN ITA NOS. 1406 AND 1407/PN/2016. FACTS BEING SIMILAR, THEREFORE, FOLLOW ING MY DECISION IN THE PRECEDING PARAGRAPHS I HOLD THAT THE ASS ESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) ON THE INTEREST INCOME O F RS.22,62,211/- FOR A.Y. 2010-11 AND RS.22,14,970/- FOR A.Y. 201 1-12. GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 15. IN THE RESULT, ALL THE 3 APPEALS FILED BY THE ASSESSEE ARE A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29-07-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED : 29 TH JULY, 2016. 14 ITA NOS.1405 TO 1407/PN/2016 '# $# / 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) - 7, PUNE 4. THE CIT-7, PUNE 5. $ %%* , * , SMC BENCH / DR, ITAT, SMC BENCH PUNE; 6. 2 / GUARD FILE.