M/s Tibetan Rabgayling Primary Agricultural Credit Co-Operative Society Ltd., Hunsur V. ITO, Mysore

ITA 1598/BANG/2014

• Counselvise Citation: 159821114 RSA 2014
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Question of law
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NO.1598(BNG)/2014 (ASSESSMENT YEAR : 2010-11) M/S TIBETAN RABGAYLING PRIMARY AGRICULTURAL CREDIT CO-OPERATIVE SOCIETY LTD., GURUPURA VILLAGE & POST, HUNSUR TALUK PAN NO.AAAAT3617P APPELLANT VS THE INCOME-TAX OFFICER, WARD-1(3), MYSORE RESPONDENT AND ITA NO.1596(BNG)/2014 (ASSESSMENT YEAR : 2010-11) THE INCOME-TAX OFFICER, WARD-1(3), MYSORE APPELLANT VS M/S TIBETAN RABGAYLING CO-OP. SOCIETY LTD., GURUPURA VILLAGE & POST, HUNSUR TALUK. PAN NO.AAAAT3617P ASSESSEE BY : SHRI SURESH MUTHUKRISHNAN, CA REVENUE BY : SHRI PRAVEEN KARANTH, JCIT DATE OF HEARING : 01-09-201 5 DATE OF PRONOUNCEMENT : 04-09-2015 2 ITA NO1598 & 1596(B)/2014 O R D E R PER SMT ASHA VIJAYARAGHAVAN, JM: THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE AGAINST THE ORDER OF THE CIT(A), MYSORE BOTH DATED 02-06-2014 F OR THE ASSESSMENT YEAR 2010-11 RESPECTIVELY, FOR THE ASSESSMENT YEAR 2010- 11. ITA NO.1598/BANG/2014 FOR A. Y. 2010-11 - M/S TIBETAN RABGAYLING PRIMARY AGRICULTURAL CREDIT CO- OPERATIVE SOCIETY LTD : 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND IT IS ENGAGED IN VARIOUS ACTIVITIES LIKE BANKING, SUPPLYING PROVISIONS, SEED S AND FERTILIZERS ETC. THE NET PROFIT EARNED IN ALL ITS ACTIVITIES IS RS.9,02, 472/- AND HAS COMPUTED GROSS TOTAL INCOME OF RS.10,63,120/- ON WHICH IT HAS CLAI MED DEDUCTION UNDER VARIOUS CLAUSES OF 80P AMOUNTING TO RS.10,63,120/- (BUT RESTRICTED TO GROSS TOTAL INCOME) AND COMPUTED \NIL TOTAL INCOME. IN THE ASSESSMENT ORDER, THE AO DISALLOWED THE CLAIM U/S 80P(2) UNDER VARIOUS SU B-SECTION AFTER GIVING DETAILED REASONS. 3 ITA NO1598 & 1596(B)/2014 3. AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE T HE CIT(A) 3.1 THE CIT(A) HELD AMONG OTHER GROUNDS THAT THE IN COME EARNED BY THE ASSESSEE ON FD REQUIRES TO BE ASSESSED UNDER TH E HEAD OTHER SOURCES AND NOT AS PART OF THE BUSINESS OF PROVIDING CREDIT FACILITIES AND THEREBY HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCT ION U/S 80P(2)(A)(I) OF THE ACT, AS CLAIMED BY THE ASSESSEE IN THE RETURN OF IN COME. FURTHER, THE CIT(A) HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S80P(2)(I) OF THE ACT IN RESPECT OF THE INCOME DERIVED FROM THE OPERATION OF THE WATER TREATMENT PLANT. 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE HONBLE ITAT AGAINST THE ORDER OF THE CIT(A). IN ITS APPEAL HAD TAKEN SIX G ROUND, OF WHICH GROUNDS 1 AND 6 ARE GENERAL NEEDING NO SPECIFIC ADJUDICATION. 5. GROUND.5 IS ON CHARGE OF INTEREST U/SS.234A, B A ND C OF THE INCOME- TAX ACT, 1961 (THE ACT FOR SHORT), WHICH ALSO DOE S NOT NEED ANY SPECIFIC ADJUDICATION BEING CONSEQUENTIAL IN NATURE. 4 ITA NO1598 & 1596(B)/2014 6. VIDE ITS GROUND 2, GRIEVANCE RAISED BY ASSESSEE IS THAT CIT (A) UPHELD THE VIEW OF AO THAT INCOME EARNED BY ASSESSE E ON FDS WERE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS PART OF BUSINESS INCOME. 7. THE ASSESSEE, A CO-OPERATIVE SOCIETY HAD FILED I TS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR IN WHICH IT HAD CLAIME D DEDUCTION OF RS.11,25,918/- U/S.80P(2)(A)(I) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT ASSESSEE H AD DURING THE RELEVANT PREVIOUS YEAR RECEIVED INTEREST FROM MEMBERS AT RS. 30,41,654/- AND INTEREST RECEIVED FROM BANK ON FIXED DEPOSITS WAS RS.1,24,1 5,519/-. AS PER THE AO, PRIMARY OBJECT OF THE ASSESSEE SOCIETY WAS TO PROVI DE CREDIT FACILITY TO ITS MEMBERS AND NOT MAKING DEPOSITS IN BANK. AS ON 31- 03-2010, TOTAL LOANS GIVEN TO MEMBERS WAS JUST RS.32,235/- AS AGAINST DE POSITS MADE IN BANKS FOR RS.9,58,73,948/-. IN OTHER WORDS, SUBSTANTIAL PA RT OF THE DEPOSITS FROM ITS MEMBERS WERE PARKED IN FDS WITH BANKS. THIS, AS PE R THE AO SUBSTANTIATED THE VIEW THAT ASSESSEE WAS NOT CARRYING OUT ITS AVO WED OBJECT OF ASSESSEE OF 5 ITA NO1598 & 1596(B)/2014 PROVIDING CREDIT FACILITIES TO ITS MEMBERS. HE HEL D THAT SUCH INTEREST FROM DEPOSITS COULD ONLY BE CONSIDERED AS INCOME FROM OT HER SOURCES. RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF T OTAGARS COOPERATIVE SALE SOCIETY IN 322 ITR 283, THE AO HELD THAT INTEREST E ARNED BY ASSESSEE FROM SURPLUS FUNDS WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCESAND NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S.80P(2)(A)(I ) OF THE ACT. 8. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE C IT (A). ARGUMENT OF ASSESSEE WAS THAT THE AMOUNTS WHICH WERE PLACED IN DEPOSITS WERE HAVING DIRECT NEXUS WITH THE AMOUNTS RECEIVED AS DEPOSITS FROM MEMBERS. WHEN THERE WERE NO IMMEDIATE NEED OF THE FUNDS FOR LOAN DISBURSEMENTS, INSTEAD OF KEEPING THE FUNDS IDLE, ASSESSEE HAD PLACED IT WITH THE BANKS AS DEPOSITS. AS PER ASSESSEE, IT WAS BOUND TO PAY INTEREST TO THE M EMBERS. SUBMISSION OF ASSESSEE WAS THAT ACCEPTANCE OF DEPOSITS FROM ITS M EMBERS, CLOSURE OF SUCH DEPOSITS AND REPAYMENTS WERE REGULAR AND ROUTINE FE ATURE OF ITS BUSINESS. AS PER ASSESSEE, UNLESS THE FUNDS WHICH WERE REMAINING WITH IT WERE PLACED IN 6 ITA NO1598 & 1596(B)/2014 BANKS, IT WOULD NOT HAVE BEEN POSSIBLE FOR IT TO PA Y THE INTEREST DUE TO ITS MEMBERS. 9. AN ALTERNATE CONTENTION WAS ALSO MADE BEFORE THE CIT (A) THAT IF INTEREST INCOME FROM BANK DEPOSITS WAS CONSIDERED U NDER THE HEAD INCOME FROM OTHER SOURCES, THEN INTEREST PAID BY ASSESSEE ON DEPOSITS TO ITS MEMBERS WHICH WAS USED FOR PLACING THE DEPOSITS WITH BANK H AD TO BE ALLOWED AS A DEDUCTION U/S.57(III) OF THE ACT. AS PER ASSESSEE, THERE WAS A DIRECT NEXUS BETWEEN THE DEPOSITS RECEIVED FROM ITS MEMBERS AND THE DEPOSITS PLACED BY IT WITH THE BANKS, AND THIS WAS CLEARLY BROUGHT OUT IN ITS BALANCE-SHEET. 10. CIT (A) WAS HOWEVER NOT IMPRESSED BY THE ABOVE CONTENTIONS RAISED BY ASSESSEE. ACCORDING TO HIM, THE AO WAS J USTIFIED IN RELYING ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF T OTAGARS COOPERATIVE SALE SOCIETY (SUPRA), WHICH UNEQUIVOCALLY HELD THAT INTE REST RECEIVED BY A COOPERATIVE SOCIETY ON SURPLUS FUNDS PLACED WITH BA NKS AS DEPOSITS, WERE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURC ES. HOWEVER, ACCORDING TO THE CIT (A), CLAIM OF THE ASSESSEE THA T DEDUCTION SHOULD BE 7 ITA NO1598 & 1596(B)/2014 ALLOWED U/S.57(III) OF THE ACT, WAS JUSTIFIED IF IT COULD SHOW DIRECT NEXUS BETWEEN THE FUNDS RECEIVED FROM THE MEMBERS WHICH W ERE INTEREST BEARING, WITH THE DEPOSITS MADE BY IT IN THE BANKS. FOR THI S, HE REMITTED THE MATTER BACK TO THE AO FOR WORKING OUT THE INTEREST THAT CO ULD BE ALLOWED. 11. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DER OF CIT (A), SUBMITTED THAT THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD., V. ITO (ITA NO.307 OF 2014, DT 28.10.2014), AFTER CONSIDERING THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD., (SUPRA), HAD HELD THAT THE SAID JUDGMENT OF HONBLE APEX COURT WAS APPLICABLE ONLY TO THE FACTS IN THAT CASE. AS PER THE LD. AR, THE HONBLE APEX COURT HAD NOT LAID DOWN ANY LAW FOR GENERAL APPLICATION. AS PER LD. AR, JURISDICTI ONAL HIGH COURT IN THE AFORESAID CASE HAD UNEQUIVOCALLY HELD THAT FUNDS WH ICH WERE NOT IMMEDIATELY REQUIRED BY A CREDIT COOPERATIVE SOCIETY FOR LENDIN G MONEY TO THE MEMBERS, IF DEPOSITED IN BANK, EARNING INTEREST THEREFROM, SUCH INTEREST WAS ATTRIBUTABLE TO THE BUSINESS OF BANKING AND, THEREFORE, ELIGIBLE FO R CLAIMING DEDUCTION 8 ITA NO1598 & 1596(B)/2014 U/S.80P(2)(A)(I) OF THE ACT. LD. AR POINTED OUT TH AT ASSESSEES CASE DIFFERED FROM THAT OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPE RATIVE LTD (SUPRA), ONLY BY REASON OF MULTIPLE ACTIVITIES CARRIED ON B Y IT. HOWEVER, ACCORDING TO LD. AR, PROVIDING CREDIT FACILITIES TO ITS MEMBERS WAS ONE OF THE AVOWED OBJECTS OF THE SOCIETY. 12. THE LD. DR STRONGLY SUPPORTING THE ORDERS OF AU THORITIES BELOW SUBMITTED THAT SOURCE OF THE INTEREST WAS DEPOSITS IN THE BANK. ACCORDING TO HIM, ONLY THE IMMEDIATE SOURCE WAS REQUIRED TO BE S EEN AND NOT THE REMOTE SOURCE. HONBLE APEX COURT WAS CLEAR IN THIS ASPEC T IN THE DECISION OF TOTGARS COOPERATIVE SALE SOCIETY LTD., (SUPRA). H ERE IN THE CASE OF ASSESSEE, ONLY A VERY SMALL AMOUNT WAS LENT BY IT TO ITS MEMB ERS. IT WAS NOT SIMILAR TO A SOCIETY WHICH WAS CARRYING ON CREDIT BUSINESS. T HEREFORE ACCORDING TO HIM, CLAIM FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT, O N SUCH INTEREST WAS UNJUSTIFIED. 13. THE LD. AR WAS THAT THE GENESIS OF FUNDS WAS TH E BUSINESS OF ASSESSEE. FUNDS WHICH WERE PLACED IN BANKS DID NOT BELONG TO ANYBODY OTHER 9 ITA NO1598 & 1596(B)/2014 THAN MEMBERS OF THE SOCIETY. UNLESS SUCH FUNDS ARE PLACED IN THE BANKS, IT WOULD NOT BE POSSIBLE FOR ASSESSEE TO PAY INTEREST DUE TO THE MEMBERS. HENCE, ACCORDING TO LD. AR, IT WAS A PART OF ASSESS EES BUSINESS ONLY. 14. THE LEARNED AR BROUGHT TO OUR NOTICE THE ORDER OF THE HONBLE ITAT IN ASSESSEES APPEAL IN ITA NO.1056/BANG/2013 & REVENUES APPEAL IN ITA NO.1081/BANG/2013 DATED 30-04-2015 WHEREIN SIM ILAR ISSUE HAS BEEN DISCUSSED ELABORATELY . THE RELEVANT PORTION IS E XTRACTED HEREIN BELOW: WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CO NTENTIONS. THERE IS NO DISPUTE THAT ONE OF THE MAIN OBJECT OF ASSESSEE SOCIETY WAS PROVIDING CREDIT FACILITY TO ITS MEMBERS. AO H IMSELF HAS MENTIONED THAT THIS WAS THE PRIMARY OBJECT FOR WHIC H ASSESSEE WAS INCORPORATED, AT PARA 6 OF THE ASSESSMENT ORDER. N ODOUBT, OUT OF SUBSTANTIAL SUM RECEIVED AS DEPOSITS FROM THE MEMBE RS, ONLY SMALL PORTION WERE GIVEN BY ASSESSEE AS LOANS TO IT S MEMBERS. MAJOR PART OF THE FUNDS WERE PARKED IN FDS. HOWEVE R, IT IS AN ADMITTED POSITION THAT ASSESSEE WAS BOUND TO GIVE I NTEREST TO ITS MEMBERS ON THE DEPOSITS RECEIVED BY IT FROM THEM. THEREFORE, WHEN THERE WERE NO TAKERS FOR THE MONEY, WHICH ASSE SSEE AS A PART OF ITS OBJECTS WANTED TO LEND, THE ONLY AVAILABLE C HOICE FOR 10 ITA NO1598 & 1596(B)/2014 ASSESSEE, IN ORDER NOT TO KEEP THE FUNDS IDLE, WAS TO PLACE IT IN BANKS FOR EARNING INTEREST. THEIR LORDSHIPS IN THE JUDGMENT IN TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (S UPRA), , WHICH WAS ALSO IN RELATION TO A COOPERATIVE SOCIETY HAVING AS ITS OBJECT, BUSINESS OF PROVIDING BUSINESS CREDITS TO I TS MEMBERS, HELD AS UNDER AT PARAS 3 TO 10 OF THE JUDGEMENT DT.28.10 .2014 : '4. THE LEARNED COUNSEL FOR THE ASSESSEE ASSA ILING THE IMPUGNED ORDER CONTENDED, THE INTEREST ACCRUED IN A SUM OF R S.1,77,305/- IS FROM THE DEPOSITS MADE BY THE ASSESSEE IN A NATIONA LIZED BANK OUT OF THE AMOUNTS WHICH WAS USED BY THE ASSESSEE FOR PROV IDING CREDIT FACILITIES TO ITS MEMBERS AND THEREFORE THE SAID IN TEREST AMOUNT IS ATTRIBUTABLE TO THE CREDIT FACILITIES PROVIDED BY T HE ASSESSEEAND FORMS PART OF PROFITS AND GAINS OF BUSINESS AND THEREFORE HE SUBMITS THE APPELLATE AUTHORITIES WERE NOT JUSTIFIED IN DENYING THE SAID BENEFIT IN TERMS OF SUB-SEC.(2) OF SECTION 80P OF THE ACT. IN SUPPORT OF HIS CONTENTIONS, HE RELIED ON SEVERAL JUDGMENTS AND POI NTED OUT THAT THE APEX COURT IN THE AFORESAID JUDGMENT HAS NOT LAID D OWN ANY LAW. 5. PER CONTRA, LEARNED COUNSEL FOR THE REVENUE STRO NGLY RELIED ON THE SAID JUDGMENT OF THE SUPREME COURT AND SUBMITTED, T HE CASE IS COVERED BY THAT JUDGMENT OF THE APEX COURT AND NO C ASE FOR INTERFERENCE IS MADE OUT. 6. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, THE UNDISPUTED FACTS WHICH EMERGES IS, THE SUM OF RS. 1,77,305/- R EPRESENTS THE INTEREST EARNED FROM SHORT-TERM DEPOSITS AND FROM S AVINGS BANK ACCOUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PROV IDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT CARRYING ON AN Y OTHER BUSINESS. THE 11 ITA NO1598 & 1596(B)/2014 INTEREST INCOME EARNED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHOR T DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHETHER THIS INTERE ST IS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELEVANT PROVISION OF LAW IE., 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 C O-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB- SECTION (2) , IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY: (A) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN (I) )CARRYING ON THE BUSINESS OF BANKING OR PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS, OR (II) XXX (III) XXX (IV) XXX (V) XXX (VI) XXX (VII) XXX THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS 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 CONSI DER THE 12 ITA NO1598 & 1596(B)/2014 MEANING OF THE WORD ATTRIBUTABLE AS SUPPOSED TO D ERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE C ASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME-TAX, GUJARAT-LL REPORTED IN ITR VOL. 113 (1978) PAGE 842 AT PAGE 93 AS UNDER: AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION ATTRIBUTABLE TO OCCURRING IN THE PHRASE PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF THE SPECIFIED INDUS TRY 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 EXPRESSIO N ATTRIBUTABLE TO AND NOT THE EXPRESSION DERIVED F ROM. I T CANNOT BE DISPUTED THAT THE EXPRESSION ATTRIBUTABL E TO IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION DERI VED FROM. HAD THE EXPRESSION DERIVED FROM BEEN USED, IT COU LD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHA RGE ARISING FROM THE SALE OF OLD MACHINERY AND BUILDING S CANNOT BE REGARDED AS PROFITS AND GAINS DERIVED FROM THE C ONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELEC TRICITY. I N THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVE R THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE LEARNED SOLICITOR GENERAL, IT HAS USED THE EXPRESSION DERIVED FROM, AS, FOR INSTANCE, IN SEC TION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAMELY, ATTRIBUTABLE TO, HAS BEEN USED, THE LEGISLATURE INTENDED TO COV ER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINE SS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. 13 ITA NO1598 & 1596(B)/2014 8. THEREFORE, THE WORD ATTRIBUTABLE TO IS CERTAIN LY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. WHENEVER THE LE GISLATURE WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EXPRESSION DERIVED FROM. THE EXPRESSION ATTRIBUTABLE TO BE ING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLAT URE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A COOPERATIVE SOCIETY WHIC H 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 CAPI TAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THE Y CANNOT KEEP THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BA NK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIE S TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE B USINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO TH E ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CR EDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF TH E ACT. 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S. TOTGARS CO-OPERATIVE SALE SOCIETY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING W ITH A CASE WHERE THE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTUR AL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FRO M MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBE RS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT-TERM DE POSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY 14 ITA NO1598 & 1596(B)/2014 SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCO ME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY M ENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80 P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF THE SAID CASE, THE A PEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MAD E IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS O F THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVES TED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR A CCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MO NEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HA D DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID IN TEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH CO URT IN THE CASE OF COMMISSIONER OF INCOME-TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPORTE D IN (2011) 200 TAXMAN 220/12 IN THAT VIEW OF THE MAT TER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BEN EFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. A CCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HE NCE, WE PASS THE FOLLOWING ORDER. APPEAL IS ALLOWED.' 15 ITA NO1598 & 1596(B)/2014 15. HENCE, IN VIEW OF THE JUDGEMENT OF HONBLE JURI SDICTIONAL HIGH COURT REPRODUCED ABOVE, WHERE IN AT PARA 10, IT HAS BEEN CLEARLY MENTIONED THAT THE MONEY MEANT FOR LENDING, REMAINING SURPLUS , THERE BEING NO TAKERS, IF DEPOSITED IN BANKS FOR EARNING INTEREST, SUCH INTER EST INCOME WOULD BE ATTRIBUTABLE TO THE BUSINESS OF BANKING CARRIED OUT BY THE ASSESSEE, WE ARE OF THE OPINION THAT THE FACTS OF THE CASE HERE FIT PER FECTLY WELL WITH THE FACTS IN THE JUDGMENT MENTIONED ABOVE. 16. WE ALSO FIND THAT THE CO-ORDINATE BENCH HAS DE CIDED THE ISSUE IN ASSESSEES APPEAL IN ITA NO.1056/BANG/2013 AND REVE NUES APPEAL IN ITA NO.1081/BANG/2013 AND OTHERS DATED 30-04-2015. W E, THEREFORE, HOLD THAT ASSESSEE WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S.80 P(2)(A)(I) OF THE ACT, ON THE INTEREST EARNED ON THE FDS PLACED BY IT WITH BA NKS, THIS BEING A PART OF ITS BUSINESS INCOME. GROUND 2 OF THE ASSESSEE THEREFOR E STANDS ALLOWED. 16 ITA NO1598 & 1596(B)/2014 17. WHEN GROUNDS 3 AND 3.1 WERE TAKEN UP, LEARNED C OUNSEL FOR ASSESSEE SUBMITTED THAT HE WAS NOT PRESSING THESE G ROUNDS. THESE GROUNDS ARE THEREFORE DISMISSED AS NOT PRESSED. 18. VIDE ITS GROUND 4, GRIEVANCE RAISED BY ASSESSEE IS THAT IT WAS DENIED DEDUCTION U/S.80P(2)(A)(IV) OF THE ACT, ON I NCOME FROM OPERATION OF WATER TREATMENT PLANT. 19. THE ASSESSEE HAD SUPPLIED TREATED WATER TO ITS MEMBERS FROM ITS WATER TREATMENT PLANT AND ON THE AMOUNT RECEIVED FO R SUPPLY OF THE WATER, IT HAD CLAIMED DEDUCTION U/S.80P(2)(A)IV) OF THE ACT. AO WAS OF THE VIEW THAT SUPPLY OF WATER WAS BOTH FOR AGRICULTURAL OPERATION AS WELL AS TO TENANTS OF A COMMERCIAL COMPLEX WHICH WAS LEASED OUT BY ASSESSEE . THUS, ACCORDING TO AO, THE WATER WAS NOT INTENDED FOR AGRICULTURAL PUR POSE ALONE. FURTHER, AS PER THE AO, THERE WAS NO COST FOR PURCHASE OF WATER AND DEDUCTION OF INCOME COULD NOT BE ALLOWED. RELIANCE ON THE DECISION OF MUMBAI HIGH COURT IN THE CASE OF CIT VS. SHETKARI SAHAKARI SAKHAR KARKHANA L TD., (1999) 238 ITR 983, WHEREIN IT WAS HELD THAT ONLY WATER FOR IRRIG ATION FACILITIES COULD BE 17 ITA NO1598 & 1596(B)/2014 CONSIDERED AS AGRICULTURAL USE. IN THIS VIEW OF TH E MATTER, HE DISALLOWED THE DEDUCTION CLAIMED U/S.80P(2)(A)(IV) OF THE ACT. 20. IN ITS APPEAL BEFORE THE CIT (A), ARGUMENT OF A SSESSEE WAS THAT WATER WAS BASICALLY SUPPLIED FOR DRINKING PURPOSE T O THE COMMERCIAL COMPLEX AND PARTLY FOR AGRICULTURAL PURPOSE. ACCORDING TO ASSESSEE, EVEN IF IT WAS USED PARTLY FOR AGRICULTURAL PURPOSE, IT COULD CLAI M DEDUCTION U/S.80P(2)(A)(IV) OF THE ACT. HOWEVER, CIT (A) WAS NOT IMPRESSED. HE CONFIRMED THE DISALLOWANCE. 21. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DERS OF AUTHORITIES BELOW SUBMITTED THAT SIMILAR CLAIM OF T RACTOR HIRE CHARGES WAS ALLOWED BY CIT (A) RELYING ON THE JUDGMENT IN ADDL. CIT VS. RYOTS AGRICULTURAL PRODUCE CO-OPERATIVE MARKETING SOCIETY LTD., (1978) 115 ITR 709 (KAR). ACCORDING TO HIM, THERE WAS NO REASON A S TO WHY INCOME EARNED ON SUPPLY OF WATER, IF USED FOR AGRICULTURAL OPERAT IONS SHOULD BE DENIED SUCH DEDUCTION. 22. THE LEARNED DR SUPPORTED THE ORDERS OF AUTHORIT IES BELOW. 18 ITA NO1598 & 1596(B)/2014 23. WE FIND THAT A SIMILAR ISSUE HAS BEEN DECIDED I N ITA NO.1081/BANG/2013 FOR THE ASSESSMENT YEAR 2009-10. THE RELEVANT PORTION IS REPRODUCED HEREUNDER; WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CO NTENTIONS. IT IS NOT DISPUTED THAT THE WATER WHICH WAS PURIFIED USIN G WATER TREATMENT PLANT WAS NOT THE ONE ESSENTIALLY MEANT FOR DRINKI NG PURPOSE AND SUPPLIED TO A COMMERCIAL COMPLEX. AS PER ASSESSEE S ADMISSION, ONLY A PART OF THE WATER WAS USED FOR AGRICULTURAL PURPOSE. SECTION 80P(2)(A)(IV) IS REPRODUCED HEREUNDER : SECTION 80P - DEDUCTION IN RESPECT OF INCOME OF CO- OPERATIVE SOCIETIES. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OP ERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB- SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE A SSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY: (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED I N (IV) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS , LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS, 19 ITA NO1598 & 1596(B)/2014 WHAT IS EXEMPTED BY VIRTUE OF THE ABOVE IS INCOME A RISING ON ACCOUNT OF PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LIV ESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYI NG THEM TO THE MEMBERS. HERE ADMITTEDLY THERE WAS NO PURCHASE. FURTHER, TH E WATER WAS NOT EXCLUSIVELY INTENDED FOR AGRICULTURAL USE. WE ARE, THEREFORE, OF THE OPINION THAT CLAIM OF THE ASSESSEE WAS RIGHTLY DENIED BY TH E LOWER AUTHORITIES. WE DO NOT FIND ANY GROUND TO INTERFERE WITH THE ORDERS OF AUTHORITIES BELOW. GROUND 4 OF THE ASSESSEE STANDS DISMISSED. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1596(B)/2014 FOR AY: 2010-11 M/S TIBETAN RAB GAYLING CO-OP. SOCIETY LTD. 24. NOW WE TAKE UP APPEAL OF THE REVENUE. THE REVE NUE HAS RAISED ALTOGETHER FIVE GROUNDS. BUT THE SOLE GRIEVANCE RA ISED BY IT THROUGH THESE GROUNDS IS THAT CIT (A) DIRECTED THE AO TO ALLOW DE DUCTION U/S.57(III) OF THE ACT, ON ITS INTEREST EARNINGS FROM FDS KEPT WITH TH E BANKS. CIT (A) HAD GIVEN THIS RELIEF BASED ON THE CONTENTION OF ASSESS EE THAT FUNDS PLACED BY IT IN 20 ITA NO1598 & 1596(B)/2014 THE BANKS WERE DEPOSITS FROM ITS MEMBERS AND THEREF ORE, INTEREST PAID ON SUCH DEPOSITS HAD A DIRECT NEXUS WITH INTEREST EARNED ON THE FDS. 25. WE HAVE AT PARAS 5 ABOVE, IN RELATION TO GROUND NO.2 OF THE ASSESSEE HELD THAT INTEREST EARNED BY ASSESSEE OUT OF FDS CAN BE CONSIDERED ONLY UNDER THE HEAD INCOME FROM OTHER BUSINESS, I N VIEW OF THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD., (SUPRA) AND ASSE SSEE WAS ENTITLED FOR DEDUCTION THEREON U/S.80P(2)(A)(I) OF THE ACT. IN VIEW OF THIS, GROUNDS RAISED BY THE REVENUE HAVE BECOME IRRELEVANT AND INFRUCTUO US. 26. TO SUM UP THE RESULT, THE ASSESSEES APPEAL I S PARTLY ALLOWED AND THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 4 TH SEPTEMBER, 2015. SD/ - (ABRAHAM P GEORGE) SD/ - (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE: D A T E D : 04-09-2015 AM* 21 ITA NO1598 & 1596(B)/2014 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR,ITAT, BANGALORE