M/s. Jalaram Mercantile Co. Op. Credit Society Ltd., Ahmedabad V. The Income Tax Officer, Ward-1, Anand

ITA 428/AHD/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 2613 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 20-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH PATHAK
• Keywords: Business income; Opportunity of being heard; Proportionate interest
• Section: 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.428/AHD/2017 (ASSESSMENT YEAR : 2013-14) M/S.JALARAM MERCANTILE CO- OP.CREDIT SOCIETY LTD. C/O. SHAH TEELANI & ASSOCIATES E-315, SUMERL BUSINESS PARK-3 OPP.NEW CLOTH MARKET SARANGPUR, AHMEDABAD VS. THE INCOME TAX OFFICER WARD-1, ANAND [PAN NO. AADFJ 4783 A] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY : SHRI OMPRAKASH PATHAK, SR.DR DATE OF HEARING 10/07/2018 DATE OF PRONOUNCEMENT 03/ 10 /2018 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE US AGAINST THE ORDER DATED 30.09.2016 PASSED BY THE COMMISSIONER OF INCO ME TAX(APPEALS)-4, VADODARA [LD.CIT(A) IN SHORT] ARISING OUT OF THE ORDER DATE D 30.11.2015 PASSED BY THE ITO, WARD-1, ANAND FOR ASSESSMENT YEAR (AY) 2013-14. 2. THE ASSESSEE HAS COME UP BEFORE US WITH THE F OLLOWING GROUNDS: 1. THAT, THE LEARNED CIT(A) HAS WRONGLY CONFIRMED THE ADDITION OF RS.14,62,750 AS INTEREST INCOME INSTEAD OF RS.9,64,984. [RS.10,1 6,984 LESS RS.50,000 DEDUCTION U/S.80P(2)(C)(II)]. 2. THAT, THE LEARNED CIT(A) HAS WRONGLY CONFIRMED THE ADDITION U/S.80P(2)(A)(I) ON ACCOUNT OF INTEREST FROM NATIONALIZED BANK. - 2 - ITA NO. 428/AHD/2017 JALARAM MERCANTILE CO-OP.CREDIT SOCIETY LTD. VS. I TO ASST.YEAR 2013-14 3. THE ASSESSEE IS A REGISTERED CO-OPERATIVE SOCIE TY ENGAGED IN A BUSINESS OF EXTENDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE CLA IMED DEDUCTION U/S.80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') OF RS.15,12,750/- WHICH WAS PROCESSED U/S.143(1) OF THE ACT. SUBSEQUENTLY, UPO N SCRUTINY, NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 094.09.2014 WHICH WAS SERVED UPON THE ASSESSEE FOLLOWED BY ANOTHER NOTICE U/S.142(1) DATED 29.05.2015 AND 09.10.2015. 3.1. THE LD. ASSESSING OFFICER DISALLOWED THE CLA IM OF THE ASSESSEE. HOWEVER, DEDUCTION AT RS.50,000/- U/S.80P(2)(C)(II) OF THE ACT WAS ALL OWED. APPEAL PREFERRED BY THE ASSESSEE AGAINST THE SAID ORDER WAS DISMISSED. HENCE, THE INSTANT APPEAL. 3.2. AT THE TIME OF HEARING OF THE INSTANT APPEAL, NO ONE APPEARS ON BEHALF OF THE ASSESSEE. THE LD.DR ALSO AGREES TO GET THE MATTER DISPOSED OF BY US SINCE THE MATTER IS DULY COVERED AGAINST THE ASSESSEE I.E. IN FAVOUR OF THE REVENUE. 3.3. DURING THE ASSESSMENT PROCEEDING, THE LD. ASSE SSING OFFICER WORKED OUT THE INCOME OF THE ASSESSEE AS FOLLOWS: INTEREST FROM OTHER BANKS - RS.18,36,400/- DRAFT/CHEQUE CHARGE INCOME - RS. 28,085/- TOTAL = RS.18,64,485/- =========== 3.4. THE LD. ASSESSING OFFICER PROPOSED TO DISALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80P(2)(A)(I) OF THE ACT SINCE THE INCO ME IS NOT DERIVED ON CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND ASKED FOR REPLY FROM - 3 - ITA NO. 428/AHD/2017 JALARAM MERCANTILE CO-OP.CREDIT SOCIETY LTD. VS. I TO ASST.YEAR 2013-14 THE ASSESSEE IN RESPONSE WHEREOF, THE ASSESSEE MAD E A SUBMISSION DATED 23.11.2015 WHICH IS AS FOLLOWS: WITH REFERENCE TO YOUR SHOW CAUSE NOTICE FOR NOT A LLOWING DEDUCTION U/S.80P OF THE ACT TO THE EXTENT OF INTEREST ON FIXED DEPOSITS OF NATIONALIZED BANK, WE HEREWITH SUBMIT FOLLOWING DETAILS AND EXPLANATION. JALARAM MERCANTILE CO-OPERATIVE CREDIT SOCIETY IS A REGISTERED CO-OPERATIVE CREDIT SOCIETY ENGAGED IN THE BUSINESS OF EXTENDING CREDIT FACILITIES TO MEMBERS. WE ARE NOT CARRYING ON ANY SEPARATE BUSINESS OF EAR NING INTEREST ON FIXED DEPOSITS OF NATIONALIZED BANK. THE FUND OR CAPITAL WHICH IS NOT REQUIRED IMMEDIATE LY TO BE LENT TO THE MEMBERS ARE DEPOSITED TO NATIONALIZED BANK AS FIXED DEPOSIT AND INTEREST INCOME IS RECEIVED ON THOSE FIXED DEPOSITS. THE SOCIETY CANNOT KEEP THE FUNDS IDLE EVERY TIME A ND THEREFORE MAKING FIXED DEPOSITS AT NATIONALIZED BANK IS INEVITABLE. THE INTEREST INCOME ON FIXED DEPOSITS AT NATIONALIZ ED BANKS IS THE INCOME ATTRIBUTABLE TO BUSINESS OF EXTENDING CREDIT FACILI TIES TO MEMBERS AND CANNOT BE TREATED AS SEPARATE BUSINESS OF CO-OPERATIVE CREDIT SOCIETY. KARNATAKA HIGH COURT IN CASE OF GUTTIGEDARARA CREDI T CO-OPERATIVE SOCIETY LTD. V/S. INCOME TAX OFFICER (2015 377 ITR KARNATAKA) HA S ALSO UPHELD THAT INTEREST ON DEPOSITS OF BANKS IS AN INCOME ATTRIBUTABLE TO THE EXTENSION OF CREDIT FACILITIES TO MEMBERS AND THEREFORE ENTITLED TO DEDUCTION U/S.80 P OF THE ACT. COPY OF THE SAID JUDGMENT IS ATTACHED HEREWITH FOR YOUR READY REFERENCE. IN ADDITION TO THAT, IN CASE OF CHIEF CIT V/S. SABA RKANTHA KHARID VECHAN MANDALI LTD. (1977 107 ITR 447 GUJ), GUJARAT HIGH COURT HAS UPHELD THAT AL INTEREST INCOME ON FIXED DEPOSITS CANNOT BE DISALLOWED FOR 8 0P DEDUCTION AND PROPORTIONATE INTEREST ON FIXED DEPOSITS IS TO BE C ALCULATED. 3.5. THE LD. ASSESSING OFFICER ULTIMATELY WHILE DIS ALLOWING THE CLAIM OF THE ASSESSEE OBSERVED AS FOLLOWS: - 4 - ITA NO. 428/AHD/2017 JALARAM MERCANTILE CO-OP.CREDIT SOCIETY LTD. VS. I TO ASST.YEAR 2013-14 I HAVE CONSIDERED THE LEGAL SUBMISSION OF THE ASSE SSEE, THE SAME IS NOT TENABLE. THE INTEREST EARNED FROM ITS MEMBERS BY THE CO-OPERATIV E SOCIETY IS EXEMPT U/S.80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961. IN THE PRESENT CASE, THE ASS ESSEE HAS RECEIVED INTEREST ON FIXED DEPOSITS WITH OTHER BANKS. APART FROM THE ABOVE, THE ASSESS EE HAS ALSO RECEIVED DRAFT CHEQUE CHARGES INCOME. THESE INCOMES ARE NOT ELIGIBLE FOR DEDUCTI ON U/S.80P(2)(A)(I). THE INTEREST EARNED FROM FIX DEPOSIT ETC WHICH IS IN QUESTION IS NOT ELIGIBL E FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IS NOT THE MEMBERS FOR PROVING CREDIT FACILITY TO THEM, WHAT IS 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 REQUIRED FOR BUSINESS PURPOSES, SIN CE THE FUND CREATED BY SUCH RETENTION WAS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSE, THE ASSE SSEE IN SPECIFIED SECURITIES. INTEREST ON SUCH DEPOSITS/SECURITIES, WHICH STRICTLY SPEAKING ACCRUE S TO THE MEMBERS ACCOUNT, COULD NOT BE TAXED AS BUSINESS INCOME UNDER SECTION 28 OF THE ACT. SUC H INTEREST INCOME WOULD BE. TAXABLE UNDER SECTION 56 OF THE ACT. FURTHER, THESE INCOMES, THE ASSESSEE HAS DEBITED AL L THE EXPENDITURES AND NET PROFIT WAS SHOWN AT RS,9,43,641. AS SUCH NO FURTHER EXPENDITUR E REQUIRED TO BE GIVEN FOR EARNING THESE INCOMES. 3.4 THE ASSESSEE HAS RELIED UPON VARIOUS DECISIONS . THE SAME IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 3.5. FURTHER, THE DECISION OF THE HON, SUPREME COUR T IN THE CASE OF THE TOTGARS' COOPERATIVE SALE SOCIETY LTD, [SUPRA] IS SQUARELY APPLICABLE TO THE PRESENT CASE. IN THE INSTANT CASE, THE INTEREST RECEIVED FROM OTHER BANKS IS NOT THE INTER EST RECEIVED FROM THE MEMBERS FOR PROVIDING CREDIT FACILITIES TO THEM. WHAT IS SOUGHT TO BE TAX ED U/S.56 OF THE ACT IS THE INTEREST INCOME ARISING ON THE SURPLUS INVESTED IN DEPOSITS WITH BANKS OR I N OTHER SECURITIES WHICH SURPLUS WAS NOT REQUIRED FOR BUSINESS PURPOSES. THEREFORE, SUCH INC OME COMES IN THE CATEGORY OF 'INCOME FROM OTHER SOURCES', HENCE, SUCH INTEREST INCOME WOULD B E TAXABLE U/S.56 OF THE INCOME-TAX ACT, 1961, SECTION 80P(1), INTER ALIA, STATES THAT WHERE THE G ROSS TOTAL INCOME OF A CO-OPERATIVE SOCIETY INCLUDES ANY INCOME FROM ONE OR MORE SPECIFIED ACTI VITIES, THEN SUCH INCOME SHALL BE DEDUCTED FROM THE GROSS TOTAL INCOME, IN COMPUTING THE TOTAL TAXABLE INCOME OF THE ASSESSEE SOCIETY. AN INCOME, WHICH IS ATTRIBUTABLE TO ANY OF THE SPECIFI ED ACTIVITIES IN SECTION 80P(2) OF THE ACT, WOULD BE ELIGIBLE FOR DEDUCTION, THE WORD 'INCOME' HAS BE EN DEFINED U/S.2(24)(I) OF THE ACT TO INCLUDE PROFITS AND GAINS. THIS SUB-SECTION IS AN INCLUSIV E PROVISION. THE PARLIAMENT HAS INCLUDED SPECIFICALLY BUSINESS PROFITS' INTO THE DEFINITI ON OF THE WORD 'INCOME'. THE ASSESSEE SOCIETY REGULARLY INVESTS FUNDS NOT IMMEDIATELY REQUIRED FO R BUSINESS PURPOSES. INTEREST ON SUCH INVESTMENTS, THEREFORE, 'PROFITS AND GAINS OF BUSIN ESS'. SUCH INTEREST INCOME CANNOT BE SAID ALSO TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY , VIZ., CARRYING ON THE BUSINESS OF PROVIDING CREDI T FACILITIES TO ITS MEMBERS, THEREFORE, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) O F THE INCOME-TAX ACT,, 1961 OR IN SECTION 80P(2)(III) OF THE ACT AND HENCE, THE INTEREST INCO ME EARNED ON DEPOSITS WITH BANKS IS TAXABLE U/S,56 OF THE INCOME-TAX ACT, 1961. 3.6 IN VIEW OF ABOVE, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80P(20(A)(I) OF THE INCOME- TAX ACT, 1961 IS DISALLOWED, HOWEVER, THE ASSESSEE IS ALLOWED DEDUCTION AT RS,50,000 - 5 - ITA NO. 428/AHD/2017 JALARAM MERCANTILE CO-OP.CREDIT SOCIETY LTD. VS. I TO ASST.YEAR 2013-14 U/S,80P(2)(C)(II) OF THE INCOME-TAX ACT, 1961, PENA LTY PROCEEDINGS U/S.27L(1)(C) OF THE INCOME- TAX ACT, 1961 ARE SEPARATELY INITIATED. 3.6. IN APPEAL, THE LD. CIT(A) OBSERVED AS FOLLOWS: THUS, IN VIEW OF THIS DECISION OF GUJARAT HIGH COU RT, THE INTEREST EARNED BY THE APPELLANT ON INVESTMENT OF SURPLUS AMOUNTS WITH BANKS AND BONDS IS NOT ELIGIBLE FOR DEDUCTION U/S.80P OF THE ACT, IN CASE WHERE THE CO-OPERATIVE SOCIETY IS A BA NK, ONE OF ITS OBJECTS WOULD BE TO CARRY ON THE GENERAL BUSINESS OF BANKING. LIKE OTHER BANKS, MON EY WOULD BE ITS STOCK-IN-TRADE OR CIRCULATING CAPITAL AND ITS NORMAL BUSINESS IS TO DEAL IN MONEY AND CREDIT. THE BUSINESS OF SUCH A BANK DOES NOT CONSIST ONLY OF RECEIVING DEPOSITS AND LENDING MONEY TO ITS MEMBERS OR SUCH OTHER SOCIETIES AS ARE MENTIONED IN THE OBJECTS. WHEN SUCH A SOCIET Y LENDS OUT ITS MONIES SO THAT THEY MAY BE READILY AVAILABLE TO MEET THE DEMANDS OF ITS DEPOSI TORS IF AND WHEN THEY ARISE, IT IS A LEGITIMATE MODE OF CARRYING ON ITS BANKING BUSINESS. IN CASE O F A CREDIT SOCIETY LIKE THE PRESENT ONE, THE BUSINESS OF THE SOCIETY IS LIMITED TO PROVIDING CRE DIT TO ITS MEMBERS AND THE INCOME THAT IS EARNED FROM PROVIDING SUCH CREDIT FACILITIES TO ITS MEMBER S IS DEDUCTIBLE UNDER SECTION 80P(2)(A)(I), HOWEVER, INVESTING ITS SURPLUS FUNDS WITH THE NATIO NALIZED BANKS IS NO PART OF THE BUSINESS OF THE APPELLANT OF PROVIDING CREDIT TO ITS MEMBERS AND HE NCE, IT CANNOT BE SAID THAT THE INTEREST INCOME DERIVED FROM DEPOSITING SURPLUS FUNDS WITH THE NATI ONALIZED BANKS IS PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITIES OF THE APPE LLANT SOCIETY. THE CHARACTER OF THE INTEREST IS DIFFERENT FROM THE INCOME ATTRIBUTABLE TO THE BUSIN ESS OF THE SOCIETY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME DERIVED FROM IN VESTING SURPLUS FUNDS WITH THE NATIONALIZED BANKS MUST BE CLOSELY LINKED WITH THE BUSINESS OF P ROVIDING CREDIT FACILITIES FOR IT TO BE HELD THAT I T IS ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE. T HEREFORE, THE PROFITS AND GAINS CAN BE SAID TO BE DIRECTLY ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS IF THERE IS A DIRECT AND PROXIMATE CONNECTION BETWEEN THE PROFITS GAINS AND THE BUSINESS OF THE APPELLANT. IN THE PRESENT CASE THERE IS NO OBLIGATION UPON THE AP PELLANT TO INVEST ITS SURPLUS FUNDS WITH THE NATIONALIZED BANKS. INVESTING SURPLUS FUNDS IN A BA NK IS NO PART OF THE BUSINESS OF THE ASSESSEE OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, IT IS ONLY THE INTEREST DERIVED FROM TH E CREDIT PROVIDED TO ITS MEMBERS WHICH IS DEDUCTIB LE UNDER SECTION 80P(2)(A)(I) AND THE INTEREST DERIVED BY DEPOSITING SURPLUS FUNDS WIT H THE NATIONALIZED BANKS NOT BEING ATTRIBUTABLE TO THE BUSINESS CARRIED ON BY THE APPELLANT , CANNOT BE DEDUCTED UNDER SECTION 80P(2)(A)(I). IF THE APPELLANT WANTS TO AVAIL OF THE BENEFIT OF DEDUCTION OF SUCH INTEREST INCOME,, IT IS ALWAYS OPEN FOR IT TO DEPOSIT THE SURPLUS FUN DS WITH A COOPERATIVE BANK/OTHER CO-OP SOCIETIES AND AVAIL OF DEDUCTION UNDER SECTION 80P(2)(D). ACCORDINGLY, THE ACTION OF THE ASSESSING OFFICER OF NOT ALLOWING DEDUCTION ON SUCH INCOME IS UPHELD AND THE SOLE GROUND OF APPEAL IS DISMISSED. 3.7. FURTHER, THE ASSESSEE CHALLENGED THE CONFIRMAT ION OF ADDITION U/S.80P(2)(A)(I) OF THE ACT ON ACCOUNT OF INTEREST INCOME FROM NATIONALIZED BANK. - 6 - ITA NO. 428/AHD/2017 JALARAM MERCANTILE CO-OP.CREDIT SOCIETY LTD. VS. I TO ASST.YEAR 2013-14 4. WE HAVE HEARD THE LD.DR. WE HAVE PERUSED THE RE LEVANT MATERIALS AVAILABLE ON RECORD. IT IS A SETTLED PRINCIPLE OF LAW THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION OF THE INTEREST INCOME ACCRUED FROM THE FIXED DEPOSIT LYIN G WITH THE NATIONALIZED BANK OUT OF HIS SURPLUS FUND. SUCH WAS NOT REQUIRED FOR BUSINESS P URPOSES. THE SAID RATIO HAS BEEN UPHELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF STA TE BANK OF INDIA VS. CIT (2016) 389 ITR 578 (GUJ.) WITH THE FOLLOWING OBSERVATION: 13. IN THE OPINION OF THIS COURT, IN CASE OF A SOC IETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, INCOME FROM INVESTMENTS MADE IN BANKS DOES NOT FALL IN ANY OF THE CATEGORIES MENTIONED UNDER SECTION 80P(2)(A) OF THE ACT. IN TH E CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA), AS RIGHTLY SUBMITTED BY THE LEARNED COUNSE L FOR THE RESPONDENT, THE COURT WAS DEALING WITH TWO KINDS OF ACTIVITIES: INTEREST INCOME EARNE D FROM THE AMOUNT RETAINED FROM THE AMOUNT PAYABLE TO THE MEMBERS FROM WHOM PRODUCE WAS BOUGHT AND WHICH WAS INVESTED IN SHORT-TERM DEPOSITS/SECURITIES; AND THE INTEREST DERIVED FROM THE SURPLUS FUNDS THAT THE ASSESSEE THEREIN INVESTED IN SHORT-TERM DEPOSITS WITH THE GOVERNMENT SECURITIES. THIS IS FURTHER CLEAR WHEN ONE PERUSES THE DECISION OF THE KARNATAKA HIGH COURT FR OM WHICH THE MATTER TRAVELLED TO THE SUPREME COURT WHEREIN IT WAS THE CASE OF THE ASSESS EE THAT IT WAS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THER EFORE, THE APPELLANT-SOCIETY BEING AN ASSESSEE ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBE RS, THE INTEREST RECEIVED ON DEPOSITS IN BUSINESS AND SECURITIES IS ATTRIBUTABLE TO THE BUSINESS OF T HE ASSESSEE AS ITS JOB IS TO PROVIDE CREDIT FACILITIES TO ITS MEMBERS AND MARKETING THE AGRICUL TURAL PRODUCTS OF ITS MEMBERS. THIS COURT IS, THEREFORE, OF THE VIEW THAT THE ABOVE DECISION IS N OT RESTRICTED ONLY TO THE INVESTMENTS MADE BY THE ASSESSEE THEREIN FROM THE RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS BUT ALSO IN RESPECT OF FUNDS NOT IMMEDIATELY REQUIRED FOR BUSIN ESS PURPOSES. THE SUPREME COURT HAS HELD THAT INTEREST ON SUCH INVESTMENTS, CANNOT FALL WITH IN THE MEANING OF THE EXPRESSION 'PROFITS AND GAINS OF BUSINESS' AND THAT SUCH INTEREST INCOME CA NNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY, NAMELY, CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. T HE COURT HAS HELD THAT WHEN THE ASSESSEE SOCIETY PROVIDES CREDIT FACILITIES TO ITS MEMBERS, IT EARNS INTEREST INCOME. THE INTEREST WHICH ACCRUES ON FUNDS NOT IMMEDIATELY REQUIRED BY THE AS SESSEE FOR ITS BUSINESS PURPOSES AND WHICH HAS BEEN INVESTED IN SPECIFIED SECURITIES AS 'INVES TMENT' ARE INELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. FOR THE ABOVE REAS ONS, THIS COURT RESPECTFULLY DOES NOT AGREE WITH THE VIEW TAKEN BY THE KARNATAKA HIGH COURT IN TUMKU R MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. (SUPRA) THAT THE DECISION OF THE SUPREME COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA) IS RESTRICTED TO THE SALE CONSIDERATION RECEIVED FR OM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WHICH WAS RETAINED IN MANY CASES AND INVEST ED IN SHORT TERM DEPOSIT/SECURITY AND THAT THE SAID DECISION WAS CONFINED TO THE FACTS OF THE SAID CASE AND DID NOT LAY DOWN ANY LAW. 14. THUS, IN THE LIGHT OF THE PRINCIPLES ENUNCIATED BY THE SUPREME COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA), IN CASE OF A SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, INCOME FROM INVESTMENTS MADE IN BANKS DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN - 7 - ITA NO. 428/AHD/2017 JALARAM MERCANTILE CO-OP.CREDIT SOCIETY LTD. VS. I TO ASST.YEAR 2013-14 SECTION 80P(2)(A) OF THE ACT. HOWEVER, SECTION 80P( 2)(D) OF THE ACT SPECIFICALLY EXEMPTS INTEREST EARNED FROM FUNDS INVESTED IN CO-OPERATIVE SOCIETIE S. THEREFORE, TO THE EXTENT OF THE INTEREST EARNED FROM INVESTMENTS MADE BY IT WITH ANY CO-OPER ATIVE SOCIETY, A CO-OPERATIVE SOCIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INCOME U NDER SECTION 80P(2)(D) OF THE ACT. HOWEVER, INTEREST EARNED FROM INVESTMENTS MADE IN ANY BANK, NOT BEING A CO-OPERATIVE SOCIETY, IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(D) OF THE ACT. 4.1 THE RATIO HAD BEEN SQUARELY FOLLOWED BY TH E CIT(A) WHICH WE DO NOT WANT TO INTERFERE WITH. HOWEVER, THE ASSESSEE DISPUTED THE QUANTUM OF ADDITION OF RS.14,62,750/- AS INTEREST INCOME INSTEAD OF RS.9,64,984/-. 5. SINCE THE ASSESSEE IN APPEAL BEFORE US DISPUTED THE QUANTUM OF ADDITION, WE FIND IT FIT TO SEND THE MATTER BACK TO THE FILE OF LD. ASSE SSING OFFICER TO RE-COMPUTE THE DISALLOWANCE OF THE INTEREST INCOME ON THE FIXED DE POSIT OF THE ASSESSEE LYING WITH THE NATIONALIZED BANK. HOWEVER, WE FURTHER DIRECT THE LD. ASSESSING OFFICER TO EXCLUDE AND/OR DEDUCT THE AMOUNT OF INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON SUCH DEPOSITS WITH THE NATIONALIZED BANK. WHILE DOING SO, WE MAKE IT CLEAR THAT THE ASSESSEE BE GIVEN AN OPPORTUNITY OF BEING HEARD BY THE LD. ASSESSING OF FICER AND ALSO TO BE ALLOWED TO RELY UPON THE EVIDENCES IN SUPPORT OF HIS CASE TO BE CON SIDERED BY THE LD. ASSESSING OFFICER. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 03 / 10 /2018 SD/- SD/- ( WASEEM AHMED ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 03/ 10 /2018 .., . ../ T.C. NAIR, SR. PS - 8 - ITA NO. 428/AHD/2017 JALARAM MERCANTILE CO-OP.CREDIT SOCIETY LTD. VS. I TO ASST.YEAR 2013-14 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-4, VADOARA 5. !'# , $ , / DR, ITAT, AHMEDABAD 6. #() *+ / GUARD FILE. / BY ORDER, ! //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 3.10.2018 (DICTATION-PAD 1 0- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3.10.2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.9.10.2018 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER