THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED, JALANDHAR V. DEPUTY COMMISSIONER OF INCOME TAX , HOSHIARPUR CIRCLE, HOSHIARPUR

ITA 317/ASR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0399 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 22-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Application of stay
• Section: 56; 143(3); 113; 13; 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 317 & S. A. NO. 07/(ASR)/2018 ASSES SMENT YEAR: 2015-16 THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED, JALANDHAR [PAN: AACAT 4848G] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, HOSHIARPUR CIRCLE, HOSHIARPUR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SAMEER BHATIA ( ADV.) RESPONDENT BY: SH. GAUTAM DEB (D.R.) DATE OF HEARING: 12.09.2018 DATE OF PRONOUNCEMENT: 27.11.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, JALANDHAR ( CIT (A) FOR SHORT) DATED 24.04.2018, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ('THE AC T' HEREINAFTER) DATED 29.11.2017 FOR THE ASSESSMENT YEAR (AY) 2015-16. 2. THOUGH THE APPEAL RAISES AS MANY AS SIX GROUNDS , IT IMPUGNS THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80-P(1), CL AIMED AT RS. 36,86,014, EFFECTED FOR RS. 1,40,778, BEING INTEREST EARNED BY THE ASSESSEE-SOCIETY ON TERM DEPOSIT/S WITH ITS BANK (ORIENTAL BANK OF COMMERCE ). ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 2 THE BACKGROUND FACTS 3. THE ASSESSEE, AS NOTED BY THE ASSESSING OFFICER (AO) AT PARA 2 OF HIS ORDER, IS A COOPERATIVE SOCIETY FORMED BY THE RESIDENTS OF THE SURROUNDING AREAS, ENGAGED IN AGRICULTURAL ACTIVITIES, AN ACTIVITY SPECIFIED U /S. 80-P(2)(A)(I) OF THE ACT. IT ALSO ACCEPTS DEPOSITS FROM ITS MEMBERS AND MAKES ADVANC ES (ONLY) TO THEM, I.E., PROVIDES CREDIT FACILITIES TO ITS MEMBERS. THE AO OBSERVED THE INCOME PROFILE DURING THE ASSESSMENT PROCEEDINGS, AND EXCLUDED THE INTEREST EARNED ON DEPOSITS MAINTAINED WITH A SCHEDULED BANK, I.E., IN ALLOWING DEDUCTION U/S. 80-P (1) R/W S. 80-P(2)(A). THE SAME FOUND CONFIRMATION IN FIRST AP PEAL ON THE GROUND THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF BANKING, DISTINGUISHING THUS THE DECISION IN CIT V. NAWANSAHAR CENTRAL COOPERATIVE BANK LTD . [2012] 349 ITR 689 (SC). AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. THE RESPECTIVE CASES 4. THE APPEAL WAS HEARD IN THE FIRST INSTANCE BY RE LYING ON THE DECISION IN NAWANSHAHAR CENTRAL COOPERATIVE BANK LTD. (SUPRA), WHICH STANDS DISTINGUISHED BY THE CIT(A) BY STATING THAT THE ASSESSEE-SOCIETY IS NOT IN THE BUSINESS OF BANKING. THE SAME DID NOT SEEM A VALID GROUND IN-AS-MUCH AS THE ASSESSEE IS ENGAGED, EQUIVALENTLY, IN THE PROVISION OF CREDIT FACILITIES TO ITS MEMBERS, AN ACTIVITY COVERED U/S. 80P(2)(A)(I), AS, IN FACT, IS THAT OF BANKING. ACCORDINGLY, THE FUNDS SURPLUS WITH IT FOR THE TIME BEING, INVESTED IN TER M DEPOSIT/S WITH BANK/S, SHOULD BE CONSIDERED LIKEWISE, I.E., WHETHER THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING OR PROVISION OF CREDIT FACILITIES TO ITS M EMBERS. THE HONBLE COURT HAD OPINED THAT THE INTEREST INCOME ON THE SAID SHORT-T ERM DEPOSIT/S IS ONLY INCIDENTAL TO THE ASSESSEES PRINCIPAL ACTIVITY/S AND, THUS, ATTR IBUTABLE THERETO, AND WOULD ACCORDINGLY QUALIFY FOR DEDUCTION U/S. 80P(1) R/W S . 80P(2)(A)(I). ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 3 AT THE TIME OF DICTATION, HOWEVER, IT WAS FOUND TH AT THE LD. CIT(A) HAD, IN FACT, SUSTAINED THE DISALLOWANCE U/S. 80P(1) FOLLOW ING THE DECISION BY THE HONBLE APEX COURT IN TOTGARS COOPERATIVE SALE SOCIETY LTD. V. ITO [2010] 322 ITR 283 (SC), A DECISION, SURPRISINGLY, NOT REFERRED TO AT ALL BY THE PARTIES DURING HEARING. THE APPEAL WAS, ACCORDINGLY, POSTED FOR HEARING THE PARTIES THEREON, EVEN AS THE SAID CONDUCT CANNOT BUT BE DISAPPROVED. THE LD. AR, SH. BHATIA, WAS, ACCORDINGLY, REQUIRED TO MEET THE REVENUES RELIANCE ON THE SAID DECISION. HE WOULD, PLACING RELIANCE ON TUMKUR MERCHANTS SOUDHARDA CREDIT COOPERATIVE LTD . [2015] 230 TAXMAN 309 (KAR), STATE THAT WHILE IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA), IT WAS A CASE OF INVESTMENT OF SURPLUS FUNDS, IN THE INSTANT CASE IT WAS THE ASSESSEES OPERATIONAL FUNDS THAT WERE INVOLVED . FOR THIS, HE WOULD DRAW SUPPORT FROM THE AOS OBSERVATION OF HAVING VERIFIED THE AS SESSEES ACCOUNTS TO FIND IT TO HAVE PARKED SOME OF ITS FUNDS IN ITS ACCOUNT WITH ORIENTAL BANK OF COMMERCE (OBC), A SCHEDULED BANK (AND NOT A COOPERATIVE BANK ), EARNING THE IMPUGNED INTEREST OF RS.1,40,778 (PARA 2 OF THE ASSESSMENT O RDER). THE INVESTMENT, HE WOULD ARGUE, WOULD ONLY STAND TO BE MADE DURING A PRECEDI NG YEAR IN-AS-MUCH AS THE SURPLUS WOULD ONLY STAND TO BE DETERMINED AS AT THE YEAR-END. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD REBUT BY DRAWING OUR ATTE NTION TO THE AOS CLEAR STATEMENT (AGAIN, AT PARA 2 OF HIS ORDER) OF THE AS SESSEE HAVING INVESTED ITS SURPLUS FUNDS IN TERM DEPOSIT/S. TRUE, THE SURPLUS FUNDS (A S GENERATED DURING THE YEAR) ARE QUANTIFIED AT THE YEAR-END, BUT THAT DOES NOT MEAN THAT THE SAME ARE AVAILABLE WITH IT ONLY AT THE YEAR-END. THE WHOLE CONCEPT OF ADVAN CE-TAX, HE WOULD ADD, IS BASED ON THE CONCEPT OF PAY AS YOU EARN. THE LD. AR WOU LD, IN REJOINDER, STATE OF THE INAPPLICABILITY OF THE EXAMPLE OF ADVANCE-TAX IN- AS-MUCH AS THE ASSESSEE IS NOT LIABLE TO TAX AND, THUS, TO ADVANCE-TAX, ON ITS INC OME, BEING EXEMPT IN FULL U/S. 80P(1) R/W S. 80P(2)(A)(I). ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 4 HE, HOWEVER, HAVING, NOT PLACED THE DECISIONS RELIE D UPON ON RECORD, HE WAS ASKED TO FURNISH COPIES THEREOF AND, AT THE SAME TI ME, THE LD. DR, WHERE SO DESIRED, SUBMIT THE REVENUES REPLY THERETO, AND THE HEARING WAS ACCORDINGLY CLOSED. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. DISCUSSION 5.1 THE RELEVANT PART OF SECTION 80P, UNDER WHICH P ROVISION THE DEDUCTION IS BEING CLAIMED ON THE INTEREST INCOME OF RS.1.41 LAC S, READS AS UNDER: 80-P. DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIV E 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 ACCORDANCE 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 A CO-OPERATIVE SOCIETY ENGAGED I N (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS, OR (II) A COTTAGE INDUSTRY, OR (III) THE MARKETING OF AGRICULTURAL PRODUCE GROWN B Y ITS MEMBERS, OR (IV) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS , LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING THEM TO IT S MEMBERS, OR (V) THE PROCESSING, WITHOUT THE AID OF POWER, OF TH E AGRICULTURAL PRODUCE OF ITS MEMBERS, OR (VI) THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS M EMBERS, OR (VII) FISHING OR ALLIED ACTIVITIES, THAT IS TO SAY, THE CATCHING, CURING, PROCESSING, PRESERVING, STORING OR MARKETING OF FISH OR THE PURCHASE OF MAT ERIALS AND EQUIPMENT IN CONNECTION THEREWITH FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS, THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES: ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 5 PROVIDED THAT IN THE CASE OF A CO-OPERATIVE SOCIETY FALLING UNDER SUB-CLAUSE (VI) OR SUB-CLAUSE (VII), EXPLANATION. FOR THE PURPOSES OF THIS SECTION, AN URBAN CONSUME RS CO-OPERATIVE SOCIETY MEANS A SOCIETY FOR THE BENEFIT OF THE CONSUMERS WI THIN THE LIMITS OF A MUNICIPAL CORPORATION, MUNICIPALITY, MUNICIPAL COMMITTEE, NOTIFIED AREA CO MMITTEE, TOWN AREA OR CANTONMENT. (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRI MARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. EXPLANATION. FOR THE PURPOSES OF THIS SUB-SECTION, (A) 'CO-OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL C REDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANK ING REGULATION ACT, 1949 (10 OF 1949); (B) 'PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DE VELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE P RINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOP MENT ACTIVITIES. 5.2 WE MAY, TO BEGIN WITH, REPRODUCE AS UNDER THE O PERATING PART OF THE ASSESSMENT ORDER, ADVERTED TO BY BOTH THE PARTIES, AND WHICH STANDS UPHELD BY THE FIRST APPELLATE AUTHORITY: 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY CONSISTI NG OF MEMBERS WHO ARE RESIDENTS OF SURROUNDING AREAS, ENGAGED GENERALLY IN AGRICULTURA L ACTIVITIES. IT ACCEPTS DEPOSITS FROM MEMBERS AND ALSO MAKE ADVANCES ONLY TO THEM. SURPLUS FUNDS HAVE BEEN DEPOSITED INTO BANKS . IT HAS ALSO ENGAGED IN TRADING ACTIVITIES ON A LI MITED LEVEL BY SELLING FERTILIZERS, PESTICIDES AND OTHER ESSENTIAL COMMODITIES TO ITS M EMBERS. DURING VERIFICATION, IT WAS NOTICED THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PARKED SOME OF ITS FUNDS IN IT'S ACCOUNT WITH ORIENTAL BANK OF COMMERCE, VIL L. JALLOWAL, WHICH WAS A SCHEDULED BANK AND NOT A COOPERATIVE BANK, AND EARNED INTEREST OF RS.L,40,778/- FROM THE SAME. WHEN CONFRONTED THAT THIS AMOUNT WAS NOT EXEMPT FROM TAX U/S. 80P(2)(D) OF THE ACT, THE LD. AR ADMITTED THE LEGAL POSITION. ACCORDINGLY, DEDUCTION U/S. 80P(2) OF THE ACT IS DENIED UPON RS.L,40,778/- AND THE SAME IS HELD AS TAXABLE INCOM E OF THE ASSESSEE. BY CLAIMING DEDUCTION ON THIS INCOME ... [EMPHASIS, OURS] THE APEX COURT IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) EXPLAINED THAT THE PLACEMENT OF ITS SURPLUS FUNDS IN TERM DE POSIT/S WITH BANK/S BY A SOCIETY ENGAGED IN THE PROVISION OF CREDIT FACILITIES TO IT S MEMBERS AND MARKETING THEIR ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 6 AGRICULTURE PRODUCE, IS NOT AN ACTIVITY WHICH COULD BE REGARDED AS ATTRIBUTABLE TO ITS SAID TWO ACTIVITIES, BOTH STIPULATED U/S. 80P( 2)(A)(I). THE BANK INTEREST, UNDER SUCH A SITUATION, IT EXPLAINED, IS ASSESSABLE U/S. 56, AND CANNOT BE REGARDED AS INCOME OF/FROM A BUSINESS ATTRIBUTABLE TO ANY OF TH E SAID TWO PRINCIPAL ACTIVITIES, INCOME FROM WHICH IS ELIGIBLE FOR DEDUCTION U/S. 80 P(1) IN FULL. THE ASSESSEES ARGUMENT THAT IT, A CREDIT SOCIETY, IS OBLIGED UNDE R KARNATAKA COOPERATIVE SOCIETIES ACT, 1959 TO INVEST ITS SURPLUS FUNDS IN SPECIFIED SECURITIES, AND IN VIEW OF THIS STATUTORY OBLIGATION THE INTEREST INCOME ON ITS SHO RT TERM DEPOSITS BE CONSIDERED AS INCOME FROM BUSINESS ACTIVITY/S, ALSO DID NOT FIND FAVOUR WITH THE APEX COURT. THE REASON FOR THE SAME, AS A READING OF ITS DECISION, ALSO READ OUT DURING HEARING AND, IN FACT, REPRODUCED TO AN EXTENT IN THE IMPUGNED OR DER, SHOWS, IS THAT THE INCOME SPECIFICALLY PROVIDED FOR DEDUCTION U/S. 80P(1) IS THE PROFITS AND GAINS OF THE BUSINESS ATTRIBUTABLE TO THE ACTIVITIES SPECIFIED I N SECTION 80P(2)(A) . THE DEPOSIT OF ITS SURPLUS FUNDS COULD NOT BE REGARDED AS EITHER INCIDENTAL OR ATTRIBUTABLE TO THE ACTIVITY OF PROVISION OF CREDIT FACILITIES TO ITS M EMBERS OR MARKETING THEIR AGRICULTURAL PRODUCE BY THE ASSESSEE-SOCIETY, BOTH OF WHICH FIND MENTION IN SECTION 80P(2)(A) AND, ACCORDINGLY, THE PROFITS AND GAINS F ROM WHICH, AND UNDISPUTEDLY SO, ARE DEDUCTIBLE U/S. 80P(1). THE INTEREST ON BANK DE POSITS, ON THE OTHER HAND, WAS ASSESSABLE U/S. 56, I.E., AS INCOME FROM OTHER SOUR CES. THE DEPOSITS WERE IN FACT OUT OF THE FUNDS OF ITS MEMBERS RETAINED BY THE SOCIET Y, I.E., SURPLUS WITH IT FOR THE TIME BEING AND NOT REQUIRED FOR ITS PRINCIPAL ACTI VITY/S, I.E., PROVISION OF CREDIT TO ITS MEMBERS OR MARKETING THEIR AGRICULTURAL PRODUCE . WE MAY ALSO, FOR BETTER CLARITY, REPRODUCE THE CACHE NOTES OF THE SAID DECI SION, CAPSULING ITS RATIO: THE WORDS 'THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS IN SECTION 80P(2) OF THE INCOME-TAX ACT, 1961, EMPHASISE THAT THE INCOME IN RESPECT OF WHICH DEDUCTION IS SOUGHT BY A CO-OPERATIVE SOCIETY MUST CONSTITUTE THE OPERA TIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY . THE INTEREST INCOME ARISING TO A CO-OPERATIVE SOCIE TY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR MARKE TING OF AGRICULTURAL PRODUCE OF ITS ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 7 MEMBERS, ON THE SURPLUS, WHICH IS NOT REQUIRED IMME DIATELY FOR BUSINESS PURPOSES, FROM INVESTMENT IN SHORT-TERM DEPOSITS AND SECURITIES, H AS TO BE TAXED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE INCOME TAX ACT, 196 1. SUCH INTEREST CANNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY, VIZ. , CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR MARKETING OF AGRICULTU RAL PRODUCE OF ITS MEMBERS. INTEREST INCOME OF SUCH SOCIETY FROM AMOUNTS RETAINED BY IT CANNOT BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OR SECTION 80P(2)(A)(III) OF THE ACT. SECTION 80P(2)(A)(I) CANNOT BE PLACED ON A PAR WITH EXPLANATION (BAA) TO SECTION 80HHC, SECTION 80HHD(3) AND SECTION 80HHE(5). [EMPHASIS, OURS] 5.3 WE MAY NEXT EXAMINE THE FACTS OF THE CASE. THE RELEVANT FACTS STAND OBSERVED AT PARA 2 OF THE ASSESSMENT ORDER, REPRODU CED SUPRA. THE AO IS CATEGORICAL IN HIS OBSERVATION/FINDING. IT IS IMPER MISSIBLE TO READ ONE PART OF HIS ORDER DE HORS AND INCONSISTENT WITH THE OTHER, PARTICULARLY WHER E THE LANGUAGE DOES NOT SUGGEST SO, AND IS UNAMBIGUOUS. NO DISPUTE QUA THE SAME STANDS IN FACT RAISED BEFORE THE FIRST APPELLATE AUTHORITY. IN ANY CASE, NO MATERIAL CONTRARY TO THE CLEAR FINDING STANDS PLACED EITHER BEFORE THE FIRST APPEL LATE AUTHORITY OR BEFORE US. IN FACT, THE INFERENCE OF THE BANK DEPOSIT/S BEING OUT OF SU RPLUS FUNDS ARISES AS A COROLLARY FROM THE FACT THAT THE ASSESSE IS ENGAGED IN THE PR INCIPAL ACTIVITY/S AND, THUS, THE BUSINESS OF PROVISION OF CREDIT FACILITIES TO ITS M EMBERS AND SELLING, ON A LIMITED LEVEL THOUGH, FERTILIZERS, PESTICIDES AND OTHER ESS ENTIAL COMMODITIES TO ITS MEMBERS. THE INCOME FROM BOTH THESE STAND CLAIMED DEDUCTIBLE AND ALLOWED U/S. 80P(1), I.E., AT RS.35.45 LACS. IT IS THE BUSINESS ATTRIBUTABLE TO THESE ACTIVITIES, INCOME FROM WHICH IS ENTITLED TO DEDUCTION U/S. 80P(1) R/W S. 8 0-P(2)(A). THE ACTIVITY OF INVESTMENT IN BANK DEPOSIT/S IS, ON THE CONTRARY, U NDERTAKEN ONLY AS THE FUNDS ARE NOT, FOR THE TIME BEING, REQUIRED FOR THESE ACTIVIT IES. THE SAME STOOD REGARDED (IN NAWANSHAHAR CENTRAL COOPERATIVE BANK LTD. (SUPRA)) AS OF A BUSINESS INCIDENTAL TO THE BUSINESS OF THE BANKING, AN ACTIVITY SPECIFIED U/S. 80P(2)(A)(I), ONLY AS THE BANK WAS STATUTORILY REQUIRED TO INVEST A PART OF ITS FU NDS IN SPECIFIED SECURITIES, SO THAT ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 8 THE SAID ACTIVITY BECAME INTEGRAL TO THE BANKING AC TIVITY, AND THE INCOME THEREFROM A PART OF THE BANKING BUSINESS INCOME. THE MATTER MAY, FURTHER, BE LOOKED AT FROM ANOTHER ANGLE. ANY BUSINESS ACTIVITY REQUIRES FUNDS THE FUNDS NOT REQUIRED THER EFOR FOR THE TIME BEING, MAY BE INVESTED IN SHORT-TERM DEPOSITS, AS BANK DEPOSITS, FOR SAFE KEEPING, WHILE EARNING SOME INCOME IN THE INTERIM. THE SAID ACTIVITY, IF T HAT CONSIDERATION WERE TO BE THE BASIS TO HOLD IT AS INCIDENTAL AND, THUS, ATTRIBUTA BLE TO THE PRINCIPAL ACTIVITY (OR THE BUSINESS IN RELATION THERETO) WOULD STAND TO BE ATT RIBUTABLE TO ANY BUSINESS FOR THAT MATTER. IN OTHER WORDS, THE SAID ARGUMENT DOES NOT ASSIST THE ASSESSEES CASE, WHICH IS EVEN OTHERWISE NOT SUPPORTED BY PROVEN FACTS OR MATERIAL ON RECORD. THAT INTEREST EARNED ON PARKING OF FUNDS, SURPLUS FOR THE TIME BE ING, IN BANK DEPOSIT/S, IS ASSESSABLE AS INCOME FROM OTHER SOURCES U/S. 56, RE PRESENTS TRITE LAW, FOR WHICH REFERENCE MAY BE MADE TO THE DECISION IN TUTICORIN ALKALI FERTILIZERS CHEMICALS & FERILIZERS LTD. V. CIT [1997] 227 ITR 172 (SC). 5.4 WE MAY NEXT ADVERT TO THE CASE LAW RELIED UPON, BEGINNING WITH THE DECISION IN NAWANSHAHAR CENTRAL COOPERATIVE BANK LTD. (SUPRA). THE SAME IS RENDERED, AS ITS READING SHOWS, FOLLOWING ITS EARLIER DECISION IN CIT V. NAWANSHAHAR CENTRAL CO-OPERATIVE BANK LTD . [2007] 289 ITR 6 (SC). IT STANDS, REFERRING TO SE VERAL PRECEDENTS, CLARIFIED THAT INCOME ARISING FROM STAT UTORY INVESTMENT BY A COOPERATIVE BANK IS ATTRIBUTABLE TO THE BUSINESS OF BANKING AND, THUS, ELIGIBLE FOR DEDUCTION U/S. 80P(1). THE SAID DECISION DOES NOT D ETRACT FROM, AND IS, RATHER, CONSISTENT WITH THE DECISION IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA); THE APEX COURT CLEARLY HOLDING THAT THE INCOME FROM STA TUTORY INVESTMENTS, REQUIRED TO BE STATUTORILY MADE BY A COOPERATIVE BANK, IS INCOM E FROM BUSINESS ATTRIBUTABLE TO THE BUSINESS OF BANKING, I.E., A PART OF THE BANKIN G BUSINESS INCOME. PUT DIFFERENTLY, THE OPERATIONAL INCOME OF BANKING BUSINESS . THIS IS VERY DIFFERENT FROM THE INCOME ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 9 ON BANK DEPOSITS MADE BY INVESTING THE SURPLUS WITH IT FOR THE TIME BEING, INCOME FROM WHICH IS THEREFORE ASSESSABLE U/S. 56. THE DEC ISION IN NAWANSHAHAR CENTRAL CO-OPERATIVE BANK LTD . (SUPRA), THUS, STANDS RIGHTLY DISTINGUISHED BY TH E LD. CIT(A). THE DECISION IN LALITAMBA PATTINA SOUHARDA SAHAKANI NIYAMITA V. ITO [2018] 166 DTR 400 (KAR) IS RENDERED BY THE HONBLE COURT FOLLOWING ITS EARLIER DECISION IN TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. (SUPRA). THE DECISION IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) STANDS DISTINGUISHED ON THE GROUND THAT IN THAT CASE THE DEDUCTION UNDER RE FERENCE WAS U/S. 80P(2)(D) (PARA 14), AND THAT THE TRIBUNAL HAD PROCEEDED TO CONSIDE R THE DEDUCTION U/S. 80P(2)(D) AS A DEDUCTION U/S. 80P(2)(A)(I) (PARA 13). THAT IS, T HE AUTHORITIES HAD MIXED UP THE ISSUE OF SECTION 80P(2)(A)(I) AND SEC.80P(2)(D) (PA RA 14). THE HONBLE COURT THEREFORE CLARIFIED THAT DEDUCTION U/S. 80P(2)(D) W OULD NOT DISENTITLE THE CLAIM FOR DEDUCTION U/S. 80P(2)(A)(I), WHICH TWO PROVISIONS A RE DIFFERENT AND DISTINCT (PARA 13). THE SAME, HOWEVER, AS A READING OF THE DECISIO N IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) SHOWS, IS NOT FACTUALLY CORRECT. IN THAT CA SE TOO, THE ASSESSEE CLAIMED DEDUCTION, APART FROM ON INCOME FROM MARKET ING OF AGRICULTURAL PRODUCE OF ITS MEMBERS, COVERED U/S. 80P(2)(A)(III), ON IN COME FROM THE PROVISION OF CREDIT FACILITIES TO ITS MEMBERS, COVERED U/S. 80P(2)(A)(I ). THERE IS, IN FACT, ABUNDANT REFERENCE TO THE LATTER PROVISION IN THE JUDGMENT R EPRODUCED IN THE IMPUGNED ORDER AS WELL AS IN ITS GIST (SUPRA), TO ENTERTAIN ANY DO UBT IN THE MATTER. IT IS PERHAPS COGNIZANT OF THIS FACT THAT THE LD. COUNSEL FOR THE APPELLANT IN LALITAMBA PATTINA SOUHARDA SAHAKANI NIYAMITA (SUPRA) ADVANCED AN ARGUMENT STATING THAT EVEN ASSUMING THE DECISION IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) TO BE APPLICABLE.. . AN ARGUMENT WHICH STANDS DULY CONSIDERED BY THE H ONBLE COURT AT PARA 13 OF ITS DECISION, REMANDING THE MATTER TO THE AO FOR FRESH CONSIDERATION ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 10 (REFER PARA 16 OF THE DECISION). THE DECISION IN TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. (SUPRA), AS WELL AS IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA), HAVING BEEN CONSIDERED BY ITS SUBSEQUENT DECISION BY THE HONBLE KARNATAKA HIGH COURT IN LALITAMBA PATTINA SOUHARDA SAHAKANI NIYAMITA (SUPRA), WHICH WE HAVE ALREADY CONSIDERED, THE RELIANCE ON T HE DECISION IN TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. (SUPRA) MAY NOT OBTAIN. HOWEVER, WE MAY YET CONSIDER THE SAME FOR THE SAKE OF COMPREHEN SIVENESS OF THIS ORDER. THE DECISION BY THE APEX COURT IN TOTGARS (SUPRA) STANDS DISTINGUISHED BY THE HONBLE COURT ON THE BASIS THAT THE SOURCE OF SURPLUS FUNDS WITH THE APPELLANT-SOCIETY WAS THE AMOUNTS RETAINED BY THE SOCIETY FROM THAT DUE T O ITS MEMBERS, I.E., A LIABILITY DUE TO THEM. THEREFORE, ON FACTS, THE APEX COURT HE LD THAT THE AO WAS RIGHT IN TAXING THE BANK INTEREST INCOME U/S. 56. THE BANK D EPOSIT/S, IN THE INSTANT CASE, THE HONBLE COURT HELD, WERE SOURCED NOT FROM A LIABILI TY BUT FROM AMOUNTS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING TO ITS MEMBERS (REFER PARA 9 AND 10 OF THE DECISION), I.E., FUNDS SURPLUS WITH IT FOR THE TIME BEING IN-AS-MUCH AS THERE WERE NO TAKERS FOR THE SAME. IN OTHER WORDS, THE HONBLE COURT DISTINGUISHED TH E DECISION IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) ON THE BASIS OF THE SOURCE OF THE SURPLUS FUNDS WITH THE ASSESSEE-SOCIETY. THE QUESTION THAT WOULD , WITH RESPECT, ARISE, IS AS TO THE RELEVANCE OF THIS SOURCE, GIVEN THE DECISION BY THE APEX COURT IN TOTGARS (SUPRA) WHEREIN, AGAIN, THE INVESTMENT WAS OF THE SURPLUS FUNDS NOT REQUIRED IMMEDIATELY FOR ITS BUSINESS PUR POSES BY THE ASSESSEE-SOCIETY, AS FACT ABUNDANTLY CLARIFIED BY THE APEX COURT. FUN DS ARE, IN FACT, FUNGIBLE, EVEN AS ARGUED BY THE LD. DR BEFORE US. IN A CONTINUING BUS INESS, IT IS DIFFICULT TO SAY WHETHER THE SURPLUS FUNDS ARISE OUT OF A LIABILITY OR PROFITS OR ANY OTHER FOR THAT MATTER. THE SURPLUS FUNDS ONLY MEAN THAT NO REQUIRE D FOR THE TIME BEING FOR ITS PRINCIPAL ACTIVITY/S AND, THUS, DEEMED SURPLUS, AS ALSO APPARENT FROM A BARE READING ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 11 OF THE CACHE NOTES OF THE SAID DECISION, REPRODUCED SUPRA. NOTHING MORE, AND NOTHING LESS. FURTHER, THE SAME HAS, AN ASPECT ALSO ARGUED BEFORE US, NOTHING TO DO WITH THE DETERMINATION PER SE OF PROFIT FOR THE YEAR AFTER THE CLOSE OF THE YEAR . DETERMINATION OF PROFITS ARISING DURING OR FOR THE YEAR, AN EXERCISE DONE AND, IN FACT, POSSIBLE ONLY AFTER THE YEAR-END, DOES NOT IM PLY THAT THE FUNDS ATTRIBUTABLE TO OR ARISING OUT OF PROFITS ARE AVAILABLE ONLY AFTER THE CLOSE OF THE YEAR OR, GOING BY THE LD. COUNSELS ARGUMENT, AFTER DRAWING AND CLOSI NG THE ACCOUNTS FOR THE YEAR. THE INCOME, IMPLYING A NET ACCRETION TO ITS ASSETS, CAN IN FACT BE DETERMINED BY COMPARING THE NET ASSET POSITION (I.E., ASSETS MINU S LIABILITIES), BETWEEN ANY TWO DATES. DEPLOYMENT OF SUCH SURPLUS FUNDS, ARISING IN THE REGULAR COURSE OF BUSINESS/S, WHATEVER THAT (BUSINESS) MAY BE, NOT RE QUIRED FOR THE TIME FOR BEING EMPLOYED THEREIN, IS WHAT THE APEX COURT, PER ITS D ECISION IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA), HAS REGARDED AS AN ACTIVITY WHICH WOULD NO T QUALIFY AS A BUSINESS ACTIVITY, MUCH LESS THAT ATTRIBUTABLE TO T HE PRINCIPAL ACTIVITY/S, FOR THE INCOME THEREFROM TO BE CONSIDERED AS ELIGIBLE FOR D EDUCTION U/S. 80P(1) R/W S. 80P(2)(A), WHERE THE PRINCIPAL ACTIVITY/S IS COVERE D THEREBY. WHY, WE HAVE ALREADY STATED THAT FUNDS BEING THE PRIME REQUIREMENT OF AN Y BUSINESS, FUNDS NOT REQUIRED THEREIN FOR THE TIME BEING AND, AS SUCH, PLACED IN SHORT-TERM DEPOSITS, WOULD, GOING BY THAT REASON, QUALIFY THE SAID ACTIVITY OF DEPO SIT OR PLACEMENT OF THE SURPLUS FUNDS IN BANK DEPOSITS, AS INCIDENTAL TO ANY BUSINE SS, AND INCOME THEREFROM AS ATTRIBUTABLE TO THE SAID BUSINESS, DEFEATING THE VE RY PURPOSE OF SUCH A STIPULATION. THIS, I.E., REGARDING THE SAID ACTIVITY, FOR THAT R EASON, AS INCIDENTAL OR ATTRIBUTABLE TO THE PRINCIPAL ACTIVITY/S, IN FACT I S PRECISELY WHAT STANDS DISCOUNTENANCED BY THE HONBLE COURT IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA). RATHER, IN-AS-MUCH AS THE FUNDS IN THAT CA SE WERE THAT RETAINED BY THE ASSESSEE-SOCIETY OUT OF THAT DUE TO ITS MEMBERS (F ROM THE SALE PROCEEDS OF THEIR ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 12 AGRICULTURE PRODUCE), THE FUNDS COULD ALSO BE SAFEL Y SAID TO BE OF ITS SAID BUSINESS, I.E., THE OPERATIONAL FUNDS, ALSO REFERRED TO BY THE LD. COUNSEL, SH. BHATIA, BEFORE US. THE HONBLE COURT, YET, DID NOT CONSIDER THE AC TIVITY OF DEPOSIT OF SUCH FUNDS WITH THE BANK AS INTEGRAL TO THE SAID PRINCIPAL AC TIVITY, I.E., THE MARKETING OF THE AGRICULTURAL PRODUCE OF ITS MEMBERS BY THE SOCIETY AND, THUS, AS INCIDENTAL THERETO, SO AS TO REGARD IT AS FROM A BUSINESS ATTRIBUTABL E THERETO. AND WHICH, THEREFORE, AGAIN, GIVES CREDENCE TO THE ARGUMENT THAT IT IS NO T SO MUCH THE SOURCE OF THE FUNDS REGARDED AS SURPLUS (WITH THE ASSESSEE-SOCIETY), BUT THE ACTIVITY OF THEIR DEPOSIT WITH THE BANK, BEING NOT REQUIRED FOR THE PRINCIPAL ACTIVITY/S FOR THE TIME BEING, THAT HAS BEEN REGARDED BY THE HONBLE COURT AS A SEPARAT E AND DISTINCT ACTIVITY AND, FURTHER, NOT AS A BUSINESS ATTRIBUTABLE TO THE PR INCIPAL ACTIVITY/S. IT HAS, IN FACT, NOT BEEN REGARDED AS A BUSINESS, BUT AS A RESIDUARY A CTIVITY YIELDING INCOME FROM OTHER SOURCES. THIS, IN FACT, ALSO REFURBISHES OUR EARLIER STATEMENT THAT THE SURPLUS FUNDS ARE TO BE RECKONED NOT WITH REFERENCE TO THE SOURCE, I.E., PROFITS OR LIABILITY OR ANY OTHER, WHICH IS EVEN OTHERWISE DIFFICULT TO DET ERMINE IN A RUNNING BUSINESS, BUT OF THEIR BEING NOT REQUIRED FOR THE PRINCIPAL ACTIV ITY/S FOR THE TIME BEING AND, THUS, SURPLUS FOR BEING PARKED IN SHORT-TERM INSTRUMENT S, AS THE BANK DEPOSITS, I.E., IS CIRCUMSTANTIAL . THE ASCRIBING OF THE SOURCE OF THE TERM DEPOSITS UNDER REFERENCE TO OPERATIONAL FUNDS BY SH. BHATIA, THEREFORE, MAY NOT BE OF MUCH RELEVANCE. THIS IS APART FROM THE FACT THAT WE HAVE IN ANY CASE CLARIF IED THAT THE FUNDS DEPOSITED IN THE INSTANT CASE TO BE SURPLUS FUNDS, WHICH IS EVEN OTH ERWISE BORNE OUT BY THE FACT OF THEIR BEING NOT REQUIRED FOR THE PRINCIPAL ACTIVITY /S, AS ALSO CERTIFIED BY THE BANK (OBC) WITH WHICH THE SAME STAND PLACED (ANNEXURE B TO THE ASSESSEES COMPILATION). WE MAY FINALLY REFER TO THE DECISION IN TIARA COOPERATIVE AGRICULTURAL SERVICE SOCIETY LTD. V. ITO [2018] 194 TTJ 119 (CHD.)(UO). IN THE FACTS OF THA T ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 13 CASE, THE ASSESSEES CASE THROUGHOUT WAS THAT THE F UNDS ARE PARKED IN BANK FDRS SO AS TO MAINTAIN LIQUID FUNDS TO ENABLE REFUND OF DEP OSITS OF ITS MEMBERS, I.E., AS AND WHEN DEMANDED. IN OTHER WORDS, THE BANK DEPOSIT/S W ERE MADE IN THE COURSE OF CARRYING ON ITS PRINCIPAL/S ACTIVITY OF PROVISION O F CREDIT FACILITIES TO ITS MEMBERS, AN ACTIVITY COVERED U/S. 80P(2)(A)(I), AND NOT AS A SEPARATE ACTIVITY. SURELY, WHERE SO PROVED, THE INTEREST INCOME BECOMES A PART OF TH E BUSINESS INCOME FROM THE SAID ACTIVITY. THE RELEVANT FACTS HAVING NOT BEING ESTAB LISHED, THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE AO FOR DETERMINATION. IN THE INSTANT CASE, THERE IS NOTHING TO REBUT THE CLEAR FINDING OF THE FUNDS INVESTED IN BANK DEPOSIT/S BEING SURPLUS FUNDS, CLARIFIED BY US TO MEAN THAT NOT REQUIRED BY THE DEPOSITOR FOR HIS PRINCIPAL BUSINESS. THE SAID DECISION, DISTINGUISHABLE ON FAC TS, WOULD, THUS, BE OF NO ASSISTANCE TO THE ASSESSEE. IN SUM 6. THERE IS, WE MAY CLARIFY, NO QUARREL WITH THE SC OPE OF THE TERM ATTRIBUTABLE, FOR WHICH THE HONBLE KARNATAKA HIGH COURT RELIES I N ITS CITED DECISION ON THE DECISION IN CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (SC). THE SAID WORD, AS USED IN SECTION 80P(2)(A), HOWEVER, QUALIFIES, NOT THE INCOME, BUT THE BUSINESS, THE PROFITS AND GAINS OF WHICH, WITH REFERENCE TO THE SPECIFIED ACTIVITY/S, IS DEDUCTIBLE U/S. 80P(1). IT IS, AS SUCH, ONLY THE PROFITS AND GAINS OF SUCH BUSINESS THAT WOULD STAND DEDUCTIBLE U/S. 80P(1). ON FACTS, IT IS THE FUNDS NOT REQUIRED FOR THE SAID BUSINESS THAT, BEING SURPLUS FOR THE TIME BEING, ARE PARKED IN BANK DEPOSIT/S, FETCHING INCOME. HOW COULD SUCH AN ACTIVITY, INDEPENDENT AS IT IS OF THE SAID BUSINESS, BE REGAR DED AS ARISING FROM THE SAID BUSINESS, OR AS ATTRIBUTABLE THERETO ? RATHER, AS EXPLAINED BY THE HONBLE APEX COURT, THE SAID ACTIVITY IS NOT BUSINESS, AND INCOM E THERE-FROM IS ASSESSABLE U/S. 56. THIS IS IN FACT IN CONSONANCE WITH THE SETTLED LAW IN THE MATTER. THAT THE ASSESSEE- ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 14 SOCIETY IS, IN TERMS OF ITS CHARTER, AUTHORIZED TO SO INVEST/DEPOSIT, ASSUMING SO, AND WHICH INDEED WOULD BE IN ALL OTHER CITED CASES, IS ANOTHER MATTER, AND LARGELY IRRELEVANT. IT IS IN FACT FOR THIS REASON THAT THE LD. COUNSEL WOULD BEFORE US PLEAD OF THE FUNDS INVESTED AS BEING NOT SURPLUS FUNDS, CONTRARY TO WHAT STANDS, UPON VERIFICATION, HELD BY THE AO - WHOSE FINDING HAS NO T BEEN REBUTTED IN ANY MANNER; BY THE ASSESSEES BANK; AND IN FACT BORNE OUT BY TH E FACT OF THE FUNDS BEING NOT REQUIRED FOR THE ASSESSEES PRINCIPAL ACTIVITY, I.E ., THE PROVISION OF CREDIT FACILITIES TO ITS MEMBERS, AND TO SOME EXTENT, SELLING OF FERT ILIZERS, ETC., INCOME FROM BOTH OF WHICH STANDS CLAIMED AND ALLOWED AS DEDUCTION U/S. 80P(1). THE ISSUE, AS IT TRANSPIRES, IS ALSO NOT, STRICTLY SPEAKING, OF THE DEPLOYMENT OF SURPLUS FUNDS VIS-- VIS OPERATIONAL FUNDS, AS WE DISCERN FROM THE DECIS ION IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA), BUT AS TO WHETHER THE SAME CONSTITUTES THE ASSESSEES OPERATIONAL INCOME . AND WHICH CLEARLY DOES NOT IN THE PRESENT CASE. I T IS THIS IN FACT THAT HAS FOUND FAVOUR WITH THE TRIBUNAL IN TIARA COOPERATIVE AGRICULTURAL SERVICE SOCIETY LTD. (SUPRA). IN VIEW OF THE FORE-GOING, THE IMPUGNED INTEREST IN COME OF RS.1.41 LACS, HAS RIGHTLY BEEN DENIED DEDUCTION U/S. 80P(1) R/W S. 80 P(2)(A)(I) OF THE ACT. THE DECISION IN TOTGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA), IN OUR VIEW, AS DID THE LD. CIT(A), SQUARELY COVERS THE ISSUE AT HANDS. BEFORE PARTING, WE MAY ADDRESS AN ARGUMENT ALSO MAD E DURING HEARING, THAT IS, WITH REGARD TO THE AO HAVING TRAVELLED OUTSIDE THE SCOPE OF THE RELEVANT BOARD INSTRUCTION INASMUCH AS THE ASSESSEES CASE/RETURN WAS SELECTED FOR SCRUTINY AS A LIMITED SCRUTINY CASE. THE ONLY ADJUSTMENT TO THE R ETURNED INCOME BEING THE REDUCTION IN THE DEDUCTION U/S. 80-P, FORMING PART OF CHAPTER VI-A, TO EXAMINE CLAIMS UNDER WHICH THE ASSESSEES RETURN WAS SELECT ED FOR SCRUTINY, WE FIND NO INFIRMITY OR AN EXCESS OF JURISDICTION ON THE PART OF THE AO. ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 15 THE ASSESSEES APPEAL BEING DISPOSED OF, ITS STAY APPLICATION BECOMES IN- FRUCTUOUS. WE DECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D, AND ITS STAY APPLICATION DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 27, 2018 S D/- (SANJAY AR ORA) ACCOUNTANT MEM BER 1. I HAVE GONE THROUGH THE ORDER PASSED BY THE HON'BLE ACCO UNTANT MEMBER, WHEREBY THE APPEAL OF THE ASSESSEE IS DISMISSED. I AM IN AGREEMENT WITH DISMISSAL OF THE APPEAL ON LEGAL GROUN DS AS WELL AS ON MERIT. HOWEVER, ON MERIT, I AM WRITING MY SEPARATE ASSENT ORDE R. 2. THE ISSUE INVOLVED IN THE APPEAL UNDER CONSIDERATION RELATES TO THE DISALLOWANCE OF DEDUCTION OF INTEREST INCOME OF RS. 1,40, 778/- AS CLAIMED UNDER SECTION 80-P (I) OF THE INCOME TAX ACT, HEREINAFT ER CALLED AS 'THE ACT'. 3. IN THE INSTANT CASE, AS IT REFLECTS FORM THE ASSESSMENT OR DER THAT THE ASSESSE IS A CO-OPERATIVE SOCIETY CONSISTING OF MEMBERS WHO AR E RESIDENTS OF SURROUNDING AREAS, ENGAGED GENERALLY IN AGRICULTURAL A CTIVITIES AND ACCEPTS DEPOSITS AND PROVIDE CREDIT FACILITIES TO THE MEMBERS ONL Y AND ALSO ENGAGED IN TRADING ACTIVITIES ON A LIMITED LEVEL BY SELLING F ERTILIZERS, PESTICIDES AND OTHER ESSENTIAL COMMODITIES TO ITS MEMBERS. SURPLUS FUNDS HAVE BEEN DEPOSITED INTO BANKS. DURING VERIFICATION, IT WAS NOTICE D THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PARK ED SOME OF ITS FUNDS IN IT'S ACCOUNT WITH ORIENTAL BANK OF COMMERCE, VIL L JALLOWAL, WHICH WAS A SCHEDULED BANK AND NOT A CO-OPERATIVE BANK AND EARNED INTEREST OF RS. ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 16 140,7878/- FROM THE SAME. ACCORDINGLY THE DEDUCTION UN DER SECTION 82P(2)(D) WAS DENIED AND THE SAME WAS HELD AS TAXABLE I NCOME OF THE ASSESSEE. 4. THE ADDITION WAS SUSTAINED BY THE LD CIT(A) WHILE RELYING UPON THE APEX COURT JUDGMENT RENDERED IN THE CASE OF TOTGARS CO-OP. SALE SOCIETY LTD. VS. ITO REPORTED AS 322 ITR 283 (SC). THE LD. CIT(A) ALSO DISM ISSED THE LEGAL GROUND QUA APPLICABILITY OF THE CBDT INSTRU CTION NO. 20/2015 (F. NO. 225/268/2015-ITA-II) DATED 29 TH DECEMBER 2015. 5. DURING THE COURSE OF ARGUMENTS ON APPEAL, THE ASSESSE N OT ONLY ARGUED ON MERITS BUT ALSO ON LEGAL ISSUE RAISED IN APPEA L AND WITH REGARD TO MERITS OF THE CASE THE ASSESSEE SPECIFICALLY EMPHASIZED THAT T HE CASE OF THE ASSEEEE IS SQUARELY COVERED BY THE JUDGMENT PASSED BY THE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. -VS- ITO [2015] 55 TAXMANN.COM 447, WHICH HAS DISTINGUISHED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOT GARS' CO-OPERATIVE SALE SOCIETY LIMITED (SUPRA). THE ASSEEEE FURTHER RE LIED UPON JUDGMENT PASSED BY THE APEX COURT IN THE CASE OF COMMISSIONER OF I NCOME TAX VS. NAWANSHAR CENTRAL COOPERATIVE BANK LTD. (2012) 348 I TR 0869 AND CO- ORDINATE BENCHES OF ITAT INTER-ALIA THE CHANDIGARH BE NCH IN THE CASE OF TIARA CO-OPERATIVE AGRICULTURAL SERVICE SOCIETY LTD. VS INCOME TAX OFFICER (ITA NO. 905 TO 908/CHD/2017, DECIDED ON 1 ST MAY 2018) {2018 [194] TTJ 9CHD)(UO) 1} 6. ON THE CONTRARY, THE LD. D R SUPPORTED THE ORDERS P ASSED BY THE AUTHORITIES BELOW AND SUBMITTED THAT ISSUE UNDER CONSIDER ATION IS SQUARELY COVERED BY THE JUDGMENT OF APEX COURT IN TOTGARS' CO-O P. SALE SOCIETY LTD. (SUPRA). ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 17 7. HAVING HEARD THE ARGUMENTS OF THE PARTIES AND PERUSE D THE MATERIAL PLACED ON RECORD. IN MY CONSIDERED, THE CASE OF THE ASSEEEE ON MERIT, SQUARELY COVERED BY THE TOTGAR'S CASE BECAUSE THE FACTS OF T HE ASSESSEE'S CASE AND OF TOTGAR'S CASE ARE EXACTLY SIMILAR AS IT CLEARLY REFLECTS FROM THE ASSESSMENT ORDER AS WELL AS FROM ANNEXURE 'A' {WHICH IS AN CERTIFICATE ISSUED BY THE OFFICE OF THE DEPUTY REGISTRAR CO-OPERATI VE SOCIETIES, HOSHIARPUR, PUNJAB} THAT THAT THE ASSESSE HAD PARKED SOME OF ITS SURPLUS FUNDS, IN ITS ACCOUNT IN ORIENTAL BANK OF COMMERCE, VILL . JALLOWAL, AND INCIDENTALLY EARNED INTEREST. AS PER THE VERDICT OF SUP REME COURT, THE SAID INTEREST HAS TO BE CONSIDERED AS INCOME FROM OTHER SOURCES U/S56 OF THE ACT AND CAN NOT BE ALLOWED AS DEDUCTION UNDER SECTION 80P(2) OF THE ACT. CASES INTER-ALIA TIARA COOPERATIVE AGRICULTURAL SERVICE SO CIETY LTD CASE, RELIED UPON BY THE ASSEEEE ARE DISSIMILAR TO THE FACTS OF THE ASSESSEE'S CASE AND HENCE NOT APPLICABLE BECAUSE, THE ASSESSE HAD FAILED TO ESTABLISH THAT FUNDS PARKED IN ITS BANK WERE FROM OPERATIONAL FUNDS. HENCE IN VIEW OF THE JUDGMENTS OF APEX COURT NO OPTION IS LEFT EXCEPT TO RESPECTFULLY FOL LOW THE RATIO LAID DOWN IN ITS TRUE SPIRIT, THEREFORE, IT IS NOT APPROPRIATE T O TRAVEL TO OTHER ASPECTS CONSIDERED BY THE KARNATAKA HIGH COURT, BUT TO FOLLOW THE PROPOSITION SETTLED BY THE APEX COURT. HENCE, THE APPEAL OF THE ASSESSEE IS LI ABLE TO BE DISMISSED IN VIEW OF THE AFORESAID ANALYZATION AND OBSER VATION MADE ABOVE. 8. IN THE RESULT, THE ASSESSEE'S APPEAL STANDS DISMISSED AND S TAY APPLICATION BECOME INFRUCTUOUS HENCE NEEDS NO ADJUDICAT ION, RESULTANTLY DISMISSED. SD/- N. K. CHOUDHRY (JUDICIAL MEMBER) DATE: 27.11.2018 /GP/SR. PS. ITA NO.317&SA NO.07/ASR/2018 (AY 2015-16) THE JALLOWAL AGRICULTURE SERVICE SOCIETY LIMITED V. DY. CIT 18 COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: THE JALLOWAL AGRICULTURE SER VICE SOCIETY LIMITED, JALANDHAR (2) THE RESPONDENT: THE DEPUTY COMMISSIONER OF INCOME TAX, HOSHIARPUR CIRCLE, HOSHIARPUR (3) THE CIT(APPEALS)-1, JALANDHAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER