The Kabilpore People's Co.Op.Credit Society Ltd., Navsari V. The Income tax Officer,Ward-2, Navsari

ITA 160/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94534 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; Question of law
• Section: 143(3); 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.160/AHD/2012 ASST. YEAR:2007-08 THE KABILPORE PEOPLES CO-OP. CREDIT SOCIETY LTD., AT & PO-KABILPORE, DIST. NAVSARI. VS INCOME-TAX OFFICER, WARD-2, NAVSARI. (APPELLANT) (RESPONDENT) PA NO.AAATT3976G APPELLANT BY SHRI RASESH SHAH, AR RESPONDENT BY SHRI NARENDRA SINGH, SR.DR DATE OF HEARING: 22/9/2015 DATE OF PRONOUNCEMENT: 14/10/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CI T(A), VALSAD, DATED 26.9.2011. ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR AY 2007-08 WAS FRA MED BY ITO, WARD- 2, NAVSARI ON 29/08/2009. THE ASSESSEE HAS RAISED F OLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT CONSIDERING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT FOR THE INTER EST EARNED ON PROVIDING CREDIT FACILITIES TO ITS MEMBERS FROM GRO SS TOTAL INCOME. ITA NO._160/AHD/2012 ASST. YEAR 2007-08 2 2. WITHOUT PREJUDICE TO THE GROUND NO.1 THE LD. CIT (A)-VALSAD HAS ERRED IN CONFIRMING THE ORDER OF THE AO IN MAKING A DDITION OF ENTIRE AMOUNT OF INTEREST FROM NATIONALIZED BANKS, INTEREST FROM GUJARAT ELECTRICITY COMPANY AND INTEREST ON I.T. RE FUND FOR RS.3,65,508/- IN AGGREGATE WITHOUT GRANTING PRORATE DEDUCTION OF INTEREST EXPENSES AND ADMINISTRATIVE OVERHEAD CL AIMED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-VALSAD HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO ADOPTING THE ELECTRICITY COLLECTION INCOME OF RS .68,932/- INSTEAD OF RS.57,350/- ACTUALLY EARNED BY THE APPEL LANT. 4. THE LD.CIT(A)-VALSAD HAS ERRED IN OVERLOOKING AN D IN SUMMARILY REJECTING THE DETAILED STATEMENTS OF FACTS SUBMITTE D ALONG WITH MEMORANDUM OF APPEAL, VARIOUS DOCUMENTS AND EVIDENC ES PLACED IN THE WRITTEN SUBMISSIONS FILED, WHILE ACCE PTING THE LOP- SIDED AND FACTUALLY INCORRECT VERSION OF THE AO AND HENCE, THE ACTION OF THE AO TAXING THE ENTIRE AMOUNT OF INTERE ST FROM NATIONALIZED BANKS, DENYING THE CLAIM OF PRORATE DE DUCTION OF INTEREST EXPENSES AND ADMINISTRATIVE OVERHEADS IS L IABLE TO BE STRUCK DOWN. 5. YOUR APPELLANT FURTHER RESERVES ITS RIGHTS TO AD D, ALTER, AMEND OR MODIFY ANY OF THE AFORESAID GROUNDS BEFORE OR AT TH E TIME OF HEARING OF AN APPEAL. 2. GROUND NO.1 IS NOT PRESSED BY THE ASSESSEE BEING MISCONCEIVED GROUND. HENCE THE SAME IS REJECTED AS NOT PRESSED AND EFFECTIVE GROUND NOS.2 & 3 ARE TO BE DEALT WITH AND OTHER TWO GROUNDS ARE CONSEQUENTIAL IN NATURE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2007-08 ON 26.10.2007 DECLA RING THEREIN TOTAL INCOME OF RS.2,740/-, AFTER CLAIMING DEDUCTION OF R S.3,57,005/- U/S 80P OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER ITA NO._160/AHD/2012 ASST. YEAR 2007-08 3 SECTION 143(2) WAS ISSUED. THE AO WHILE FRAMING THE ASSESSMENT ORDER DID NOT ALLOW DEDUCTION UNDER SECTION 80P(2)( A)(I) OF THE ACT FOR THE INTEREST EARNED OTHER THAN FROM ITS MEMBERS AT RS.365508/- AS WELL AS ELECTRICITY COLLECTION CHARGES RECEIVED BY SOCIETY AT RS.57,350/- BEING AN ACTIVITY NOT RELATED TO THE MA IN OBJECT OF THE SOCIETY. HOWEVER, THE AO GAVE THE BASIC DEDUCTION O F RS.50,000/- UNDER SECTION 80P(2)(C)(II). 4. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(A) WHO CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF INTEREST INCOME (OTHER THAN INTEREST FROM MEMBERS) AT RS.365508/- B UT DELETED THE ADDITION OF ELECTRICITY COLLECTION CHARGES INCOME O F RS.57350/- ACCEPTING IT AS AN INCOME FROM SERVICE PROVIDED TO ITS MEMBERS. THE CIT(A) GAVE FOLLOWING DECISION IN SUPPORT OF HIS CO NFIRMING THE ADDITION OF INTEREST INCOME REFERRED TO ABOVE OF RS .365508/- :- 5.10 DECISION: I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF TH E AO AND THE SUBMISSIONS MADE BY THE LD. AR. THE SHOR T ISSUE HERE IS WHETHER THE INTEREST INCOME EARNED BY THE APPELLANT FROM THE NATIONALIZED BANK IS ELIGIBLE FOR DEDUCTION U/S 80P (2)(D) OF THE ACT AND WHETHER FROM SUCH INCOME A PRO-RATA EXPENSES BE ALL OWED? THE FACT IS THAT THE MAIN ACTIVITIES OF THE APPELLANT IS FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THEREBY EARNED INTERE ST INCOME FROM THE MEMBERS. THE APPELLANT CONTENDED THAT BY VIRTUE OF THE DECISION IN THE CASE OF SABARKANTHA DIST. CO-OP. SOCIETY, THE I NTEREST INCOME EARNED FROM NATIONALIZED BANKS ARE EXEMPTED. THE AP PELLANT ALSO RELIED ON OTHER DECISIONS AND I HAVE GONE THROUGH T HOSE DECISIONS. THE UNDISPUTED FACT IS THAT THE APPELLANT HAD INTER EST INCOME FROM NATIONALIZED BANKS OUT OF THE FUND PLACED ON SHORT TERM DEPOSITS. THUS THIS INCOME IS NOT THE BUSINESS INCOME OF THE APPELLANT BUT THE INCOME FROM OTHER SOURCE. THE LAW IS VERY CLEAR T HAT INCOME FROM OTHER SOURCE IS NOT EXEMPTED U/S 80P(2)(A). THE C ONTROVERSY HAS ITA NO._160/AHD/2012 ASST. YEAR 2007-08 4 BEEN SET TO REST BY THE SC IN THE TOTGARS CO-OP. SA LE SOCIETY LTD. VS. ITO (2010)229 CTR (SC) 209 WHEREIN IT HELD THAT (AS SESSEE, A CO-OP. SOCIETY, BEING ENGAGED IN PROVIDING CREDIT FACILITY TO ITS MEMBERS AND MARKETING THE AGRICULTURAL PRODUCE OF ITS MEMBERS, INTEREST EARNED BY INVESTING SURPLUS FUNDS IN SHORT TERM DEPOSITS AND GOVT. SECURITIES FELL UNDER THE HEAD INCOME FROM THE OTHER SOURCES TAXAB LE U/S 56 AND IT CANNOT BE SAID TO BE ATTRIBUTABLE TO ONE OF THE ACT IVITIES OF THE SOCIETY AND THEREFORE, THE INTEREST INCOME DID NOT QUALIFY FOR DEDUCTION U/S 80P(2)(A)(I). ACCORDING TO THE SC, THE WORDS THE W HOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS EMPHASISE THAT TH E INCOME IN RESPECT OF WHICH DEDUCTION IS SOUGHT MUST CONSTITUT E THE OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO TH E SOCIETY). IN THIS CASE, IT WAS ADMITTED THAT THE APPELLANT EARNE D INTEREST ON FUND WHICH ARE NOT REQUIRED FOR THE BUSINESS PURPOSES AT THE GIVEN POINT OF TIME. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SC, MY HUMBLE OPINION IS THAT INTEREST EARN ED FROM THE SHORT TERM DEPOSITS DOES NOT QUALIFY FOR THE EXEMPTION IN THIS CASE. WITH REGARDS TO THE SETTING OFF OF EXPENSES ON PRO-RATA BASIS, IT IS DIFFICULT TO ASCERTAIN WHAT WAS THE AMOUNT SPENT TO EARN THAT IN TEREST INCOME. BUT IT IS A FACT THAT WHATEVER THE EXPENSES INCURRE D HAS ALREADY SUFFERED ALLOWANCE IN THE MAIN BUSINESS ACTIVITIES, FURTHER ALLOWING ANY EXPENDITURE WILL AMOUNT TO DOUBLE DEDUCTION AND I AM NOT INCLINED TO GIVE ANY RELIEF IN THIS ACCOUNT. THUS, THE ADDITION MADE BY THE AO IN THIS GROUND IS CONFIRMED. THIS GROUND OF APPEAL IS HENCE, DISMISSED. 5. BEING AGGRIEVED, THE ASSESSEE IS IN FURTHER APPE AL BEFORE THE TRIBUNAL. THE LD. AR OF THE ASSESSEE SUBMITTED THAT ALL THE ACTIVITIES CARRIED OUT BY THE SOCIETY WERE RELATED TO THE MAIN OBJECT OF THE SOCIETY AND FOR EARNING INCOME FROM DIFFERENT ACTIV ITIES, IT WAS QUITE OBVIOUS THAT THE SOCIETY HAD TO INCUR VARIOUS EXPEN DITURES. THE INTEREST INCOME EARNED BY THE SOCIETY FROM DEPOSITS IN NATIONALIZED BANKS WAS AT PAR WITH INTEREST INCOME EARNED BY THE SOCIETY FROM ITS MEMBERS AS WELL AS DEPOSITS IN CO-OPERATIVE BANKS. THIS IS BECAUSE THE SOCIETY HAS COLLECTED A COMMON FUND BY WAY OF D EPOSITS FROM ITS ITA NO._160/AHD/2012 ASST. YEAR 2007-08 5 MEMBERS AND SUCH COMMON FUND IS DEPLOYED IN FORM OF GRANTING LOANS TO THE MEMBERS OF THE SOCIETY AND PLACING THE SURPLUS FUND BY WAY OF FIXED DEPOSITS WITH THE CON-OPERATIVE BANKS AS WELL AS THE NATIONALIZED BANKS. CERTAIN PART OF THE FUNDS COLLE CTED FROM THE MEMBERS WAS DEPLOYED BY WAY OF DEPOSITS WITH NATION ALIZED BANKS ALSO AND THEREFORE, CERTAIN PORTION OF INTEREST EXP ENDITURE WAS ATTRIBUTABLE TO INCOME FROM DEPOSITS WITH NATIONALI ZED BANKS ALSO. UNDER SUCH CIRCUMSTANCES, YOU WILL APPRECIATE THAT THE APPELLANT HAD RIGHTLY ALLOCATED AND CLAIMED DEDUCTION OF INTEREST EXPENSES AGAINST INCOME FROM DEPOSITS WITH NATIONALIZED BANKS. FURTHER TO STRENGTHEN HIS SUBMISSIONS LD. AR HAS P LACED STRONG RELIANCE ON THE FOLLOWING CASE LAWS :- 1. TUMKUR MERCHANTS SOUHARDA CREDIT CO-OP. LTD. VS. ITO -55 TAXMANN.COM447 (KAR.) 2. CIT VS. RATNAGIRI DIST. CENTRAL CO-OP. BANK LTD. 120 TAXMANN 77 (BOM) 3. ELECTRO URBAN CO-OPRATIVE CREDIT SOCIETY LTD. VS . ITO 76 ITD 43 (CAL) 4. IT) VS. JAFARI MOMIN VIKAS CO-OP. CREDIT SOCIETY LTD. 1491/A/2012 5. SABARKANTHA ZILLA KHARID V. SANGH LTD. VS. CIT 6 9 TAXMANN 619 (SC) 6. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO 58 T AXMANN.COM 35 (KARNATAKA ) ITA NO._160/AHD/2012 ASST. YEAR 2007-08 6 6. ON THE OTHER HAND, LD. DR APART FROM RELYING ON THE ORDERS OF LOWER AUTHORITIES ALSO DREW OUR ATTENTION TO ONE AS PECT SO AS TO COVER THE FACTS OF THE CASE SIMILAR TO THE FACTS DISCUSSE D BY HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP. SALE SO CIETY LTD. (SUPRA). THE LD. DR SUBMITTED THAT IN THE CASE REFE RRED ABOVE, THE APEX COURT HELD THAT ASSESSEE SOCIETY WHICH WAS INV OLVED IN PROVIDING CREDIT FACILITIES AS WELL AS SELLING AGRI CULTURAL PRODUCE OT ITS MEMBERS, MAY HAVE ON VARIOUS OCCASIONS HAD ACCUMULA TED FUND IN THE SOCIETY ON ACCOUNT OF ADVANCE MONEY RECEIVED FR OM SALE OF AGRICULTURAL PRODUCE ON BEHALF OF MEMBERS AND THE L AND WAS PART OF THE LIABILITY SIDE IN THE BALANCE SHEET OF THE ASSE SSEE SOCIETY. THE LD. DR SUBMITTED THAT SIMILARLY IN THE CASE OF ASSESSEE WHICH APART FROM BEING A CREDIT SOCIETY FOR CREDIT FACILITIES TO ITS MEMBERS WAS ALSO INDULGING PROVIDING SERVICES TO ITS MEMBERS BY WAY OF DEPOSITING ELECTRICITY BILLS TO THE ELECTRICITY DEPARTMENT. TH E LD. DR FURTHER ELABORATED THAT ASSESSEE SOCIETY USED TO COLLECT TH E ELECTRICITY BILLS AS WELL AS THE BILL AMOUNT FROM ITS MEMBERS AND USED T O DEPOSIT THE SAME WITH THE ELECTRICITY DEPARTMENT ON SCHEDULED B ANKS AND IN VIEW THEREOF USED TO CHARGE ELECTRICITY COLLECTION CHARG ES AND DURING THE YEAR UNDER APPEAL ASSESSEE SOCIETY HAS EARNED RS.57 ,350/- FROM ELECTRICITY COLLECTION CHARGES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE CONTENTION OF LD . DR IS NOT SUBSTANTIATED BY ANY SUPPORTING OR WORKING WHICH CA N PROVE THAT SOME PART OF THE CIRCULATING FUNDS WERE FROM THE AD VANCE ELECTRICITY BILLS CHARGES AND FURTHER MORE THERE IS A VERY SMAL L SPAN OF TIME AVAILABLE WITH THE SOCIETY IN BETWEEN THE AMOUNT RE CEIVED FROM ITS ITA NO._160/AHD/2012 ASST. YEAR 2007-08 7 MEMBERS ON ACCOUNT OF ELECTRICITY EXPENSES AND THE DUE DATE OF DEPOSITING OF ELECTRICITY BILLS ON BEHALF OF THE ME MBERS. THEREFORE, WE DO NOT FIND ANY BASIS IN THE SUBMISSIONS OF LD. DR THAT THE FACTS OF THE CASE ARE SIMILAR TO THE FACTS DEALT BY HONBLE SUPR EME COURT IN THE CASE OF TOTGARS CO-OP. SALE SOCIETY LTD. (SUPRA). WHEREAS AFTER GOING THROUGH THE CASE LAWS REFERRED BY THE LD. AR ALONG WITH HIS SUBMISSIONS, BEFORE GIVING OUR FINDING WE WOULD LIK E TO ANALYZE A FEW OF THEM. IN THE CASE OF ITO VS. JAFARI MOMIN VIKAS CO-OP. CREDIT SOCIETY LTD. (SUPRA) THE CO-ORDINATE BENCH HAS GIVE N FOLLOWING DECISION:- 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 APPLICABLY I N THE CIRCUMSTANCES OF THE ASSESSEES CASE. 18. IT WAS THE STAND OF THE LEARNED CIT (A) THAT T HE ENTIRE INCOME WAS NOT EXEMPT AND THAT IT WAS TO BE EXAMINED AS TO WHETHER THERE WAS ANY INTEREST INCOME ON THE SHORT TERM BANK DEPO SITS AND SECURITIES INCLUDED IN THE TOTAL INCOME OF THIS SOC IETY WHICH HAS BEEN CLAIMED AS EXEMPT. ACCORDING TO THE CIT (A), A SIMI LAR ISSUE TO THAT OF THE PRESENT ONE WAS DEALT WITH BY THE HONBLE SU PREME COURT IN THE CASE OF TOTGARS CO-OP. SALE SOCIETY LTD V. ITO (SUPRA). THE ISSUE BEFORE THE HONBLE COURT FOR DETERMINATION WAS WHET HER INTEREST INCOME ON SHORT TERM BANK DEPOSITS AND SECURITIES W OULD BE QUALIFIED AS BUSINESS INCOME U/S 80P (2)(A)(I) OF THE ACT. 19. THE ISSUE DEALT WITH BY THE HONBLE SUPREME CO URT IN THE CASE OF TOTGARS (SUPRA) IS EXTRACTED, FOR APPRECIATION O F 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 PRODUCE OF IT S MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT. I N THIS CASE, WE ARE ITA NO._160/AHD/2012 ASST. YEAR 2007-08 8 CONCERNED WITH THE TAX TREATMENT OF SUCH AMOUNT. SI NCE THE FUND CREATED BY SUCH BY SUCH RETENTION WAS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SEC URITIES. THE QUESTION, BEFORE US, IS-WHETHER INTEREST ON SUCH DE POSITS/SECURITIES, WHICH STRICTLY SPEAKING ACCRUES TO THE MEMBERS ACC OUNT, COULD BE TAXED AS BUSINESS INCOME UNDER SECTION 28 OF THE AC T? IN OUR VIEW, SUCH INTEREST INCOME WOULD COME IN THE CATEGORY OF INCOME FROM OTHER SOURCES, HENCE, SUCH INTEREST INCOME WOULD B E TAXABLE 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 WAS OBSER VED THAT THE FIXED DEPOSITS MADE WERE TO MAINTAIN LIQUIDITY AND THAT T HERE WAS NO SURPLUS FUNDS WITH THE ASSESSEE AS ATTRIBUTED BY TH E REVENUE. HOWEVER, IN REGARD TO THE CASE BEFORE THE HONBLE S UPREME COURT (ON PAGE 286) 7BEFORE THE ASSESSING OFFICER, I T WAS ARGUED BY THE ASSESSEE(S) THAT IT HAD INVESTED THE FUNDS O N SHORT TERM BASIS AS THE FUNDS WERE NOT REQUIRED IMMEDIATELY FOR BUSI NESS PURPOSES AND, CONSEQUENTLY, SUCH ACT OF INVESTMENT CONSTITUT ED A BUSINESS ACTIVITY BY A PRUDENT BUSINESSMAN; THEREFORE, SUCH INTEREST INCOME WAS LIABLE TO BE TAXED UNDER SECTION 28 AND NOT UND ER SECTION 56 OF THE ACT AND, CONSEQUENTLY, THE ASSESSEE(S) WAS ENTI TLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ARGUMENT WAS REJECTED BY THE ASSESSING OFFICER AS ALSO BY THE TRIBUNAL AND T HE HIGH COURT, HENCE, THESE CIVIL APPEALS HAVE BEEN FILED BY THE A SSESSEE(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 ITA NO._160/AHD/2012 ASST. YEAR 2007-08 9 AGRICULTURAL PRODUCES. 19.3 IN THE PRESENT CASE UNDER CONSIDERATION, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THERE WER E NO SURPLUS FUNDS. 19.4 WHILE COMPARING THE STATE OF AFFAIRS OF THE PR ESENT ASSESSEE WITH THAT ASSESSEE (BEFORE THE SUPREME COURT), 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 HONBLE 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 COUPLED WITH BANKING WITH ITS MEMBERS, AS IT ACCEPTS DEPOSITS FROM AND LENDS THE SAME TO I TS MEMBERS. TO MEET ANY EVENTUALITY, THE ASSESSEE WAS REQUIRED TO MAINTAIN SOME LIQUID FUNDS. THAT WAS WHY, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD INVESTED IN SHORT-TERM DEPOSITS. FURTHERMORE, T HE ASSESSEE HAD MAINTAINED OVERDRAFT FACILITY WITH DENA BANK AND TH E 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, WE ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP SALE SOCIETY LTD (SUPRA) CANNOT ITA NO._160/AHD/2012 ASST. YEAR 2007-08 10 IN ANY WAY COME TO THE RESCUE OF EITHER THE LD. CIT (A) OR THE REVENUE. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE FIRM VIEW THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN COMING TO A CO NCLUSION THAT THE SUM OF RS.9,40,639/- WAS TO BE TAXED U/S 56 OF THE ACT. IT IS ORDERED ACCORDINGLY. 8. IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OP. LTD. VS. ITO (SUPRA) HONBLE KARNATAKA HIGH COURT HAS DE CIDED THE ISSUE BY OBSERVING AS UNDER :- 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVE STED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABI LITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFI TS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LE NDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE, THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTERES T. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED I N TERMS OF SECTION 80P (1) OF THE ACT. I FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V/S. A NDHRA PRADESH STATE CO-OPERATIVE BANK LTD., [2011] 200 TA XMAN 220/12 TAXMANN.COM 66. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BEN EFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE. FROM PERUSAL OF THE ABOVE REFERRED JUDICIAL PRONOUN CEMENTS WE ARE OF THE CONFIRM VIEW THAT ASSESSEE SOCIETY IN THE IN TEREST OF ITS MEMBERS AS WELL AS IN THE INTEREST OF THE OBJECT OF THE SOCIETY AS WELL AS A SAFETY MEASURE MINIMUM LIQUID FUNDS AND CONVEN IENCE OF FUND MOVEMENTS, THE APPELLANT SOCIETY HAS KEPT ITS SURPL US LIQUID FUNDS WITH DIFFERENT NATIONALIZED BANKS AND RELYING ON TH E JUDGMENT OF ITA NO._160/AHD/2012 ASST. YEAR 2007-08 11 HONBLE KARNATAKA HIGH COURT WE HEREBY HOLD THAT TH E INTEREST INCOME OF RS.365508 IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HENCE THIS GROUND OF ASSES SEE IS ALLOWED. 9. GROUND NO.3 HAS BEEN RAISED BY THE ASSESSEE AGAI NST THE ORDER OF CIT(A) FOR CONFIRMING THE ADDITION MADE BY AO ADOPTING ELECTRICITY COLLECTION CHARGES OF RS.68,932/- INSTE AD OF RS.57,350/- ACTUALLY EARNED BY THE ASSESSEE. FROM THE PERUSAL O F CIT(A)S ORDER IT CAN BE SEEN THAT CIT(A) HAS ALREADY GRANTED RELI EF TO THE ASSESSEE BY DIRECTING THE AO TO DELETE THE ADDITION OF RS.68 ,932/- BY GIVING FOLLOWING DECISION:- 6.5 DECISION: I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS MADE BY THE LD. AR. THE AO H ELD THAT THE ELECTRICITY COLLECTION CHARGE IS NOT EXEMPTED B ECAUSE IT WAS NOT THE MAIN INCOME OF THE APPELLANT. ON THE OTHER HAND THE APPELLANT SUBMITTED THAT THE COLLECTION OF ELECTRIC ITY BILLS WAS KIND OF SUCH FACILITY PROVIDED MAINLY TO THE MEMBER S OF THE SOCIETY AND FOR THAT ACTIVITY A COMMISSION WAS GIVE N BY THE GUJARAT ELECTRICITY BOARD VARIOUS OVERHEADS INCLUDI NG STAFF SALARY, ELECTRICITY BILLS AND OTHER MAINTENANCE CHA RGES AND ADMINISTRATION EXPENSES FOR RUNNING SUCH ACTIVITY A ND THEREFORE, THE GROSS INCOME FROM SUCH ACTIVITY COULD NOT BE CH ARGED TO TAX IN FULL. I HAVE CONSIDERED THE FACTS AND CIRCUMSTAN CES OF THE CASE CAREFULLY. THE APPELLANT HAS BEEN PROVIDING TH E COLLECTION AND PAYMENT OF ELECTRICITY BILL SERVICE TO ITS MEMB ERS FOR WHICH A COMMISSION IS EARNED TO MEET EXPENSES. BECAUSE THE SERVICE IS PROVIDED TO ALL ITS MEMBERS, SUCH ACTIVITIES FOR MED PART OF THE BUSINESS OF THE APPELLANT AND THE INCOME IF ANY OUT OF SUCH SERVICE WILL BE EXEMPTED. THUS, AO IS DIRECTED TO D ELETE THE ADDITION MADE IN THIS GROUND. THE APPELLANT GETS RE LIEF IN THIS GROUND OF APPEAL. ITA NO._160/AHD/2012 ASST. YEAR 2007-08 12 WE UPHOLD THE ORDER OF CIT(A). HENCE, THIS GROUND I S ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14/10/2015 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 14/10/2015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 23/9/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ________OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 14/10/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: