Ambad Taluka Prathamik Shikshak Sah. Pat. San. Maryadit, Jalna V. Income-tax Officer,

ITA 1459/PUN/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2838 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Business income
• Section: 143(3); 56

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KU MAR KEDIA , AM . / ITA NO. 1459 /PN/201 5 / ASSESSMENT YEAR : 20 1 0 - 11 AMBAD TALUKA PRATHAMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT, NUTAN VASAHAT, JALNA - BEED ROAD, AMBAD, DIST. JALNA 431204 . / APPELLANT PAN: A A AAA80 83E VS. THE INCOME TAX OFFICER , WARD 1(3), JALNA . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 0 3 . 0 2 .201 6 / DATE OF PRONOUNCEMENT: 10 . 0 2 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - I , AURANGABAD , DATED 3 1 . 08 .20 1 5 RELATING TO ASSESSMENT YEAR 20 1 0 - 11 AGAINST ORDER PASSED UN DER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 1459 /PN/20 1 5 AMBAD TALUKA PRATHAMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT 2 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U / S 80P IN RESPECT OF THE INTEREST INCOME OF RS.6,31 ,391 / - RECEIVED BY THE ASSESSEE CO - OPERATIVE SOCIETY ON INVESTMENTS MADE IN DEPOSITS IN JALNA DIST. CENTRAL CO - OPERATIVE BANK LTD. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM THE DEDUCTION U / S 80P(2)(A)(IA) / 80P(2)(D ) IN RESPECT OF THE INCOME EARNED BY WAY OF INTEREST ON DEPOSITS MADE IN JALNA DIST. CENTRAL COOPERATIVE BANK LTD. 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE WAS A CREDIT COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FA CILITY TO ITS MEMBERS AND HENCE, THE INVESTMENTS MADE IN FIXED DEPOSITS OF JALNA DIST.CENTRAL CO - OPERATIVE BANK LTD. WERE MADE IN THE COURSE OF THE ASSESSEE'S BUSINESS AND THUS, THERE WAS NO REASON TO DENY THE DEDUCTION U / S 80P(2)(A)(I) IN RESPECT OF THE I NCOME DERIVED FROM THE ABOVE INVESTMENTS. 4] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSEE SUBMITS THAT JALNA DIST CENTRAL CO - OP. BANK LTD. WAS REGISTERED UNDER THE MAHARASHTRA COOP. SOCIETIES ACT, 1960 AND HENCE, THE ASSESSEE WAS ELIGIBLE TO CLAI M THE DEDUCTION U / S 80P(2)(D) IN RESPECT OF THE INCOME DERIVED BY WAY OF INTEREST AND DIVIDEND ON INVESTMENTS MADE IN THE SAID CO - OP. SOCIETY. 5] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INTEREST INCOME EARNED OF RS.6,31,391 / - WAS TAXABLE AS INCOME F ROM OTHER SOURCES WITHOUT APPRECIATING THAT THE SAID INTEREST INCOME WAS EARNED IN THE COURSE OF THE BUSINESS OF THE ASSESSEE SOCIETY AND THEREFORE, THE SAME WAS TAXABLE AS BUSINESS INCOME OF THE ASSESSEE. TAXABLE AS BUSINESS INCOME OF THE ASSESSEE. 6] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE A SSESSEE SUBMITS THAT ASSUMING WITHOUT ADMITTING THAT THE INTEREST INCOME OF RS.6,31,391/ - IS TAXABLE AS INCOME FROM OTHER SOURCES, STILL THE DEDUCTION U / S 80P WAS ALLOWABLE TO THE ASSESSEE SOCIETY IN RESPECT OF THE SAID INTEREST INCOME. 7] WITHOUT PREJUD ICE TO THE ABOVE GROUNDS, ASSUMING WITHOUT ADMITTING THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM THE DEDUCTION U / S 80P(2)(A)(I) OR SECTION 80P(2)(D), THE ASSESSEE SUBMITS THAT THE DISALLOWANCE MAY BE RESTRICTED TO THE NET INCOME EARNED AFTER DEDUCTING PR PR OPORTIONATE EXPENSES INCURRED IN RESPECT OF THE ABOVE INCOME AND THE SAID DISALLOWANCE MAY NOT BE MADE IN RESPECT OF THE GROSS INCOME EARNED BY THE ASSESSEE. 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISS UE ARISING IN THE PRESENT APPEAL IS COVERED BY THE ORDER OF TRIBUNAL IN ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT IN ITA NO.900/PN/2014, RELATING TO ASSESSMENT YEAR 2010 - 11 AND CO NO. 34/PN/2015 & ORS. ORDER DATED 29.01.2016 . ITA NO. 1459 /PN/20 1 5 AMBAD TALUKA PRATHAMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT 3 4. THE IS SUE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST INCOME RECEIVED BY THE ASSESSEE CO - OPERATIVE SOCIETY ON INVESTMENTS MADE IN DEPOSITS IN JALNA DISTRICT CENTRAL CO - OPERAT IVE BANK LTD. THE ASSESSEE HAD MADE THE AFORESAID INVESTMENTS OUT OF ITS SURPLUS FUNDS AND HAS CLAIMED THAT IT WAS ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT . THE AUTHORITIES BELOW DENIED THE SAID CLAIM OF THE ASSESSEE AND HELD THAT THE SAID INCOME WAS ASSESSABLE AS INCOME FROM OTHER SOURCES AND NOT ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT . AN ALTERNATE PLEA RAISED BEFORE THE AUTHORITIES BELOW WAS THAT THE ASSESSEE WAS ELIGIBLE FOR CLAIM O F DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. 5. SIMILAR ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST RECEIVED ON FIXED DEPOSITS, AROSE BEFORE THE TRIBUNAL IN ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT (SUPRA) , WHEREIN THE TRIBUNAL HAS HELD AS UNDER: - 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE US IS A CREDIT CO - OPERATIVE SOCIETY, WHICH IS ACCEPTING DEPOSITS FROM ITS MEMBERS AND USING THE SAME FOR GIVING LOANS TO ITS MEMBERS. IN ADDITION, THE ASSESSEE IS ALSO MAKING INVESTMENTS WITH OTHER CO - OPERATIVE SOCIETIES, WHICH IT CLAIMS TO HAVE MADE AS PER THE MANDATE OF MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960. THE ISSUE ARISING BEFORE US IS WHETHER THE INT EREST INCOME EARNED BY THE ASSESSEE ON SUCH INVESTMENTS IS LIABLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER RELYING ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN TOTGAR CO - OPERATIVE SALE SOC IETY LTD. VS. ITO (SUPRA) WAS OF THE VIEW THAT THE SAID INTEREST EARNED BY THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE FOR CLAIMING THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT WAS RAISED BEFORE THE CIT(A), WHO DID NOT ADJUDICATE THE SAME AS HE WAS OF THE VIEW THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. BEFORE US, THE THIRD CONTENTION HAS BEEN RAISED THAT IN CASE, NO DEDUCTION IS AVA ILABLE TO THE ASSESSEE, THEN AT BEST ONLY THE NET INCOME ON SUCH RECEIPTS IS TO BE ADDED IN THE HANDS OF THE ASSESSEE, FOR WHICH THE ASSESSEE HAS PLACED THE CALCULATION SHEET ON RECORD. THE CASE OF THE REVENUE ON THE OTHER HAND, IS THAT THE DECISION OF TH E HONBLE APEX COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) IS CLEARLY APPLICABLE. IN THE ALTERNATE, RELIANCE WAS PLACED ON NEWLY INSERTED SECTION 80P(4) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ITA NO. 1459 /PN/20 1 5 AMBAD TALUKA PRATHAMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT 4 ACT, 2006 W.E.F. 01.04.2007 AND IT WA S POINTED OUT THAT THE SAID SECTION HAD OVERRIDING PROVISIONS AND HENCE, THE SAME WAS APPLICABLE. 17. IN ORDER TO ADJUDICATE THE ISSUE, FIRST REFERENCE IS MADE TO THE DECISION OF HONBLE SUPREME COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SU PRA). IN THE FACTS OF THE SAID CASE, THE ASSESSEE BEFORE THE HONBLE APEX COURT WAS A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO THE MEMBERS OR MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS. THE ASSESSEE HAD PARKED ITS FUNDS IN SHORT TERM BANK D EPOSITS AND SECURITIES AND THE INTEREST EARNED ON THE SAME WAS CLAIMED AS DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE REVENUE AUTHORITIES HELD THAT THE SAME WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CLAIM OF THE ASSESSEE WAS T HAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THESE WERE NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES AND CONSEQUENTLY, INTEREST RECEIVED BY THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. FURTHER, THE CONTENTION OF THE ASSESSEE BEFORE THE COURT WAS THAT UNDER REGULATIONS 23 AND 28 R.W.S. 57 AND 58 OF THE KARNATAKA CO - OPERATIVE SOCIETIES ACT, 1959, A STATUTORY OBLIGATION WAS IMPOSED ON CO - OPERATIVE CREDIT SOCIETIES TO INVEST ITS SURPLUS FUNDS IN SPECIFIED SECURITIES AND IN VIEW OF THE AFORESAID STATUTORY OBLIGATIONS, THE ABOVE MENTIONED INVESTMENT WAS MADE BY THE ASSESSEE AND THE SAME WAS IN THE NATURE OF ITS BUSINESS ACTIVITY. THE SAID INTEREST INCOME WAS CLAIMED TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)( I) OF THE ACT, IRRESPECTIVE OF THE SOURCE OR HEAD UNDER WHICH SUCH INCOME WOULD FALL. THE HONBLE APEX COURT NOTED THAT THE INTEREST INCOME ARISING ON SURPLUS INVESTMENT IN SHORT TERM DEPOSITS AND SECURITIES, WHICH SURPLUS WAS NOT REQUIRED FOR BUSINESS PU RPOSE, WAS TO BE TAXED UNDER SECTION 56 OF THE ACT. THE HONBLE APEX COURT FURTHER NOTED THAT THE ASSESSEE MARKETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT AND THE TAX TREATMENT OF SUCH AMOUNT WAS THE ISSUE BEFORE THEM. THE HONBLE APEX COURT HELD THAT WHERE THE INTEREST ON DEPOSITS / SECURITIES, WHERE THE FUNDS WERE NOT IMMEDIATELY REQUIRED INTEREST ON DEPOSITS / SECURITIES, WHERE THE FUNDS WERE NOT IMMEDIATELY REQUIRED FOR BUSINESS PURPOSES, WAS INVESTED IN SPECIFIED SECURITIES, WOULD BE TAXABLE AS INCOME UNDER SECTION 56 OF THE ACT. IT FURTHER HE LD THAT WHERE THE ASSESSEE SOCIETY REGULARLY INVESTS ITS FUNDS NOT IMMEDIATELY REQUIRED FOR BUSINESS PURPOSES, INTEREST ON SUCH INVESTMENT COULD NOT FALL WITHIN THE EXPRESSION OF PROFITS AND GAINS OF BUSINESS AND THE SAME COULD NOT BE HELD TO BE ATTRIBUTAB LE TO THE ACTIVITIES OF THE SOCIETY I.E. CARRYING ON OF BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR MARKETING THE AGRICULTURAL PRODUCE OF ITS MEMBERS. THE HONBLE APEX COURT FURTHER REITERATED THAT WHERE THE ASSESSEE MARKETS THE AGRICULTURAL PRODUCE OF ITS MEMBERS AND IT RETAINS THE SALE PROCEEDS IN MANY CASES AND WHERE THE RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS, FROM WHOM THE PRODUCE WAS BOUGHT, WAS INVESTED IN SHORT TERM DEPOSITS / SECURITIES, THE SAID AMOUNT WAS LIABILITY OF THE ASSESSEE AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITIES SIDE, THEREFORE, TO THAT EXTENT, THE HONBLE SUPREME COURT HELD THAT SUCH INTEREST INCOME COULD NOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN 80P(2)(A)(I) OR 80P(3) OF T HE ACT. IN VIEW THEREOF, THE HONBLE SUPREME COURT UPHELD THE ORDER OF ASSESSING OFFICER IN TAXING THE SAID AMOUNT UNDER SECTION 56 OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE THAT EVEN IF THE SAID INTEREST INCOME WAS HELD TO BE COVERED UNDER SECTION 56 OF THE ACT, WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT, WAS REJECTED. 18. IN THE FACTS OF THE CASE BEFORE HONBLE HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA), THE ASSESSEE CO - OPE RATIVE SOCIETY WAS ENGAGED IN THE ACTIVITY OF CARRYING ON OF BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND IT HAD EARNED INTEREST INCOME ON ITS DEPOSITS. ANOTHER FACT NOTED BY THE HONBLE HIGH COURT OF KARNATAKA WAS THAT THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT THE AMOUNT DUE TO ANY MEMBERS AND IT WAS NOT THE LIABILITY OF THE ITA NO. 1459 /PN/20 1 5 AMBAD TALUKA PRATHAMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT 5 ASSESSEE. IN FACT, THE SAID AMOUNT WAS IN THE NATURE OF PROFITS AND GAINS, WHICH WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKERS AND THE ASSESSEE IN SUCH CIRCUMSTANCES, DEPOSITED THE MONEY IN BANK SO AS TO EARN INTEREST. THE HONBLE HIGH COURT OF KARNATAKA IN SUCH CIRCUMSTANCES HELD THAT THE INTEREST INCOME WAS ATTRIBUTABLE TO CARRYING ON OF BUS INESS OF BANKING AND THEREFORE, IT WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT, THEY TOOK NOTE OF INSERTION OF SECTION 80P(4) OF THE ACT, WHICH WAS APPLIED BY THE ASSESSING OFFICER TO DENY THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE HONBLE HIGH COURT OF KARNATAKA REFERRED TO THE JUDGMENT OF HONBLE APEX COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) AND POINTED OUT THAT IN THE FACTS OF THE SAID CASE, THE AMOUNT WHICH WAS RETAINED BY THE ASSESSEE WAS A LIABI LITY AND IT WAS SHOWN IN THE BALANCE SHEET ON LIABILITIES SIDE. WHERE THE INTEREST INCOME WAS EARNED ON SUCH FUNDS, THEN THE SAME WAS HELD BY THE HONBLE APEX COURT TO BE TREATED UNDER SECTION 56 OF THE ACT. HOWEVER, THE DISTINCTION WAS DRAWN BY THE HON BLE HIGH COURT OF KARNATAKA IN PARA 10 AND IT WAS POINTED OUT THAT IN THE CASE BEFORE THEM, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN THE INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBER, IT WAS NOT THE LIABILITY AND IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNTS. IN FACT, THE AMOUNT WAS IN THE NATURE OF PROFITS AND GAINS WHICH WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKERS AND HENCE, WAS DEPOSITED IN THE BANKS SO AS TO EARN INTEREST, SUCH INTEREST I NCOME EARNED BY THE ASSESSEE WAS HELD TO BE ATTRIBUTABLE TO CARRYING ON THE BUSINESS AND THEREFORE, SAME WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. 19. ANOTHER DECISION REFERRED TO BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE IS GUTTIGEDARARA CREDIT CO - OPERATIVE SOCIETY LTD. VS. ITO (SUPRA), WHEREIN THE ASSESSEE WAS A CO - OPERATIVE SOCIETY ENGAGED IN THE ACTIVITY OF CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. ACTIVITY OF CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER IN VIEW OF INSERTION OF SECTION 80P(4) OF THE ACT, HAD DECLINED TO EXTEND THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE INTEREST INCOME EARNED ON SHORT TERM DEPOSITS AND FROM SAVING BANKS ACCOUNT WAS HELD LIABLE TO INCOME TAX. THE HONBLE HIGH COURT HELD THAT WHERE THE ASSESSEE SOCIETY WAS PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND WAS NOT CARRYING ON ANY OTHER BUSINESS, THEN THE SURPLUS FUNDS WHICH IT HAD EARNED AS PROFITS OF ITS BUSINESS WHEN TEMPORARILY NOT REQUIRED WERE INVESTED IN BANK S TO EARN INTEREST WAS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE, LIABLE TO BE DEDUCTED UNDER SECTION 80P(1) OF THE ACT. 20. FURTHER, THE PUNE BENCH OF TRIBUNAL IN ITO VS. NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. (SUPRA) HAD LAID D OWN THE SIMILAR PROPOSITION AS BY THE HONBLE HIGH COURT OF KARNATAKA. 21. THE ISSUE ARISING BEFORE US IS WHETHER THE INTEREST EARNED BY THE ASSESSEE ON ITS INVESTMENTS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT. THE LEARNED AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE HAS MADE SEVERAL PROPOSITIONS BEFORE US. THE FIRST AND FOREMOST PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THAT THE INTEREST INCOME IS ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER, WITHOUT PREJUDICE TO THE SAME, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE MADE AN ALTERNATE PROPOSITION THAT IN CASE THE INTEREST EARNED BY THE ASSESSEE IS HELD TO BE ASSESSABLE AS INCOME FROM OTHER SOURCES, THEN THE PROPO RTIONATE EXPENDITURE RELATABLE TO SUCH INVESTMENTS IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE AND THEN ONLY BALANCE INTEREST INCOME IS TO BE TAXED AS INCOME FROM OTHER SOURCES. ANOTHER PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT WHERE THE INVESTMENTS WERE MADE WITH OTHER CO - OPERATIVE SOCIETIES, THEN THE ASSESSEE WAS ENTITLED TO ITA NO. 1459 /PN/20 1 5 AMBAD TALUKA PRATHAMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT 6 THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT AND NO AMOUNT WAS ASSESSED IN THE HANDS OF THE ASSESSEE EXCEPT THE DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND SUNDARAM FINANCE OF RS.87,087/ - AND RS.88,519/ - . THE ASSESSEE HAS PLACED ON RECORD ITS BALANCE SHEET ALONG WITH PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION AT PAGES 22 TO 31 OF THE PAPER BOOK WITH ITS ENGLISH TRANSACTION. THE PERUSAL OF THE BALANCE SHEET AS ON 31.03.2010 REFLECTS THE ASSETS IN THE FORM OF BANK BALANCE, CASH, INVESTMENTS AND OTHER DEPOSITS ALONG WITH THE LOAN ADVANCED TO MEMBERS, PROPERTY HELD BY THE ASSESSEE AND INTEREST RECEIVABLE ON INVESTME NTS AND OUTSTANDING LOAN. ON THE LIABILITIES SIDE, THE ASSESSEE HAS DECLARED SHARE CAPITAL, SHARE CAPITAL FUND OF THE ASSESSEE SOCIETY, THE DEPOSITS RECEIVED FROM ITS MEMBERS AND OTHER DEPOSITS AND THEREAFTER, PROVISION OF RS.41,62,699/ - . THE BREAK - UP OF THE INVESTMENT OF RS.5.55 CRORES IS PROVIDED BY THE ASSESSEE AT PAGE 56 OF THE PAPER BOOK. THE BREAK - UP OF THE INVESTMENT IS IN DIFFERENT FDS WITH CO - OPERATIVE SOCIETIES TOTALLING TO RS.5.47 CRORES AND THE OTHER INVESTMENT IN UTI MUTUAL FUNDS, SUNDARAM F INANCE, GRATUITY FUND AND SHARES TOTALLING RS.7,48,216/ - , TOTALLING RS.5.55 CRORES. THE ASSESSEE HAS FURTHER FURNISHED THE BREAK - UP OF FDS WITH DIFFERENT CO - OPERATIVE BANKS AT PAGES 57 TO 68 OF THE PAPER BOOK WITH SAMPLE COPIES OF FDS AT PAGES 69 TO 75 OF THE PAPER BOOK. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT IT WAS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OUT OF LOAN RECEIVED FROM ITS MEMBERS ITSELF. THE SURPLUS AMOUNT WHICH WAS ON ACCOUNT OF AMOUNT RECEIVED FROM ITS M EMBERS ONLY, WHICH HAD NOT BEEN ADVANCED TO ANY OF THE MEMBERS WAS INVESTED IN THE BANKS, AGAINST WHICH THE SAID INVESTMENT WAS MADE OUT OF SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE, WHICH IN TURN, WERE AMOUNTS ADVANCED BY THE MEMBERS ITSELF. THE SAID PAR KING OF FUNDS WITH THE CO - OPERATIVE BANKS WAS CLAIMED BY THE ASSESSEE TO BE IN THE NATURE OF ITS BUSINESS ACTIVITY AS IT WAS THE REQUIREMENT OF MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960, THAT 20 TO 30% OF TOTAL DEPOSITS ARE TO BE PARKED IN THE INVESTMEN TS WITH CO - OPERATIVE BANKS. IT IS NOT THE CASE OF THE DEPARTMENT THAT INVESTMEN TS WITH CO - OPERATIVE BANKS. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE AMOUNT INVESTED BY THE ASSESSEE WAS OUT OF ANY LIABILITIES DUE BY THE ASSESSEE. IN THE ABSENCE OF THE SAME AND FOLLOWING THE SAME PARITY OF REASONING LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA) AND THE FACTS OF THE PRESENT CASE BEING AT VARIANCE TO THE FACTS BEFORE THE HONBLE SUPREME COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA), WE HOLD T HAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN THE ALTERNATE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT AT BEST THE INCOME WHICH CAN BE ASSESSED IN THE HANDS OF ASSESSEE IS THE NET INCOME AND NOT THE GROSS INCOME AS PROPORTIONATE EXPENDITURE INCURRED IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. HOWEVER, WE ARE NOT ADJUDICATING THIS ISSUE SINCE WE HAVE ALREADY HELD THE ASSESSEE TO BE ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE A CT. IN VIEW THEREOF, WE ALSO DO NOT ADJUDICATE THE SECOND ALTERNATE PLEA RAISED BY THE ASSESSEE THAT IT IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. HOWEVER, THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80P(2)( A)(I) OF THE ACT RELATING TO DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND SUNDARAM FINANCE OF RS.87,087/ - AND RS.88,519/ - , WHICH ARE TO BE INCLUDED AS INCOME FROM OTHER SOURCES, ON WHICH THE ASSESSEE IS ENTITLED TO PROPORTIONATE EXPENDITURE. SIMILARLY, THE PROFIT OF RS.25,786/ - FROM OTHER ACTIVITIES AND SERVICES IS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, WE PARTLY UPHOLD THE ORDER OF CIT(A). IN VIEW THEREOF, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. ITA NO. 1459 /PN/20 1 5 AMBAD TALUKA PRATHAMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT 7 6. THE ISSUE ARISING BEFORE US IS SIMILAR TO THE ISSUE BEFORE THE TRIBUNAL IN ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR THE CL AIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST RECEIVED ON DEPOSITS MADE IN JALNA DISTRICT CENTRAL CO - OPERATIVE BANK LTD. THE ALTERNATE PLEA OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT IS THUS, NOT ADDRESSED. THE GROUND S OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 10 TH DAY OF FEBRU ARY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 10 TH FEBR UARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE AP PELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - I, AURANGABAD ; 4. / THE PR. CIT - I, AURANGABAD ; 5. , , , - / DR SMC , ITAT, PUNE; / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE