The Income Tax Officer, Ward-1, Karwar., Karwar V. Akshaya Co-op. Credit Society Ltd., Karwar

ITA 59/PAN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1213 (ITAT-PANAJI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVIRAJ Y V
• Assessee Lawyers: PRADEEP KULKARNI
• Keywords: Business income; Question of law
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER & SHRI RAMIT KOCHAR HONBLE ACCOUNTANT MEMBER ITA NO. 59 /P A N/201 6 (ASST. YEAR: 20 1 2 - 1 3 ) ITO , WARD - 1 KARWAR . VS. AKSHAYA C O - OPERATIVE CREDIT SOCIETY LTD., DR. KAMALAKAR ROAD, KARWAR. PAN NO. AAAAA 3196 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRADEEP KULKARNI - CA DEPARTMENT BY : SHRI RAVIRAJ Y.V - DR DATE OF HEARING : 2 1 / 11 /201 6 . DATE OF PRONOUNCEMENT : 21 / 11 /201 6 . O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE APPELLATE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), MANGALURU (CIT(A) FOR SHORT) , DATED 25/02/2016 , FOR THE A SSESSMENT Y EAR 2012 - 13, THE APPELLATE PROCEEDINGS BEFORE THE LD.CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 20/2/2015 P A SSED BY THE LD. ASSESSING OFFICER (IN SHORT THE AO ) U/S 143 ( 3 ) OF THE INCOME - T AX ACT, 1961 (HEREIN AFTER T HE ACT). 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, PANAJI (HEREINAFTER CALLED THE TRIBUNAL) : - 1. THE ORDER OF THE LD CIT(A) IS AGAINST LAW AND FACTS OF THE CASE. 2 ITA NO. 59 /P A N/201 6 2. THE LD . CIT(A) ERRED IN DELETING THE ADDITIONS MADE TREATING THE INTEREST INCOME EARNED FROM INVESTMENTS MADE IN OTHER BANKS / FROM NON - MEMBERS AS OTHER SOURCES AS PER THE PREVAILING PROVISIONS OF 80P(2) ( D) OF I.T.ACT, 1961. 3. THE LD . CIT(A) ERRED IN ALLOWING THE DEDUCTION CLAIMED U/S. 80P(2)(A)(I) TREATING THE INTEREST INCOME EARNED FROM INVESTMENTS MADE IN NATIONALIZED AND SCHEDULED BANK S, THROUGH THE BASIC NATURE OF INCOME EARNED DOES NOT FALL UNDER SECTION 80P(2)(A)(I). 4. THE LD. CIT(A) ERRED IN HOLDING THE DECISION AGAINST THE SETTLED DECISION OF HONBLE S UPREME C OURT IN THE CASE OF TOTGARS CO - OP. SALE SOCIETY LTD. V/S ITO (188 TAXMA N 282 (2010)) WHICH IS IN FAVOUR OF THE DEPARTMENT. 3 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBER S . THE ASSESSEE EARNED INTEREST INCOME OF RS.1,14,49,638/ - FROM THE BANK S . THE ASSESSEE FILED ITS RETURN OF INCOME ON 27 /09/2012 DECLARING NIL INCOME A FTER CLAIMING DEDUCTION OF R S.75,24,621 / - U/S. 80P(2)(D) OF THE ACT . HOWEVER, THE AO DISALLOWED THE DEDUCTION ON THE GROUND THAT INTEREST INCOME EARNED FROM OTHER THAN COOPE RATIVE SOCIET IES DOES NOT QUALIF Y FOR DEDU CTION U/S. 80P(2)(D) OF THE ACT AND AS SINCE THE ASSESSE E HAD EARNED THE INTEREST INCOME FROM THE BANKS OF RS.1,14,49,638/ - , THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESS EE BY THE AO AS IT DOES NOT QUALIFY FOR DEDUCTION UNDER SECTION 80P(2)( D) OF THE ACT , VIDE ASSESSMENT ORDER DATED 20/02/2015 PASSED BY THE AO U/S.143(3) OF THE ACT. 4 . AGGRIEVED BY THE ASSESSMENT ORDER DATED 20/02/2015 PASSED BY THE AO U/S.143(3) OF THE ACT, THE ASSESS EE FILED FIRST APPEAL WITH THE LD. CIT(A) AND CONTENDED THAT DEDUCTI ON U/S 80P(2)(A)(I) OF THE ACT SHOULD BE ALLOWED AS DEDUCTION FROM THE TOTAL INCOME AS THE INTER E ST 3 ITA NO. 59 /P A N/201 6 EARNED ON INVESTMENTS IS ATTRIBUTABLE TO THE BUSINESS OF THE COOPERATIVE SOCIETY SINCE THE ASSESSE IS A COOPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS . THE APPEAL WAS ALLOWED BY THE LD. CIT(A) AS IN THE OPINION OF THE LD. CIT(A) THE ISSUE WAS COVERED BY THE DECISIONS OF THE JURISDICTIONAL HIGH COURT / T RIBUNAL AS UNDER : - ( A ) GUTTIGEDARARA CREDIT CO - OPERATIVE SOCIETY LTD V . INCOME TAX OFFICER, WARD 2(2), MYSORE (2015) 60 TAXMANN 215 (KAR) (B) TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE SOCIETY LTD V . ITO 230 TAXMAN 309 (28.10.2014) (C) SHREE SIDDESHWAR SOUHARDHANA SAHAKARI NIYAMIT V. ITO, WARD 1, BAGALKOT (KAR). (D) ITO, WARD 1, SIRSI V. S UVARNA C OOPERATIVE SOCIETY LT D (ITAT, A BENCH, BANGALORE) (E) CIT VS ANDHRA PRADESH STATE COOPERATIVE BANK LTD(2011) 200 T AXMAN 220 (AP) THE LD.CIT(A) OBSERVED THAT IN THE CASE OF GUTTIGEDARARA CREDIT CO - OPERATIVE SOCIETY LTD V. INCOME TAX OFFICER, WARD 2(2), MYSORE (2015) 60 TAXMANN 215 (KAR), THE HON'B LE HIGH COURT HEL D AS UNDER: 7. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, THE UNDISPUTED FACTS WHICH EMERGE ARE, CERTAIN SUMS OF INTEREST WERE EARNED FROM SHORT - TERM DEPOSITS AND FROM S AVINGS BANK ACCOUNT. THE ASSESSE E IS A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NO T CARRYING ON ANY OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSESSE E BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHETHER THIS INTEREST IS AT TRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. 8. IN THI S REGARD, IT IS NECESSARY TO NOTICE THE RELEVANT PROVISION OF LAW I.E. SECTION 80P(2)(A)(I) : - ' 8 OP DEDUCTION IN RESPECT OF INCOME OF CO - OPERATIVE SOCIETIES: (1) WHERE, IN THE CASE OF AN ASSESSES BEING A CO - OPERATIVE 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 SP ECIFIED IN SUB - SECTION (2) , IN COMPUTING THE TOTAL INCOME OF THE ASSESSE E. 4 ITA NO. 59 /P A N/201 6 (2) THE SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING, NAMELY: (A) IN THE CASE OF CO - OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR (II) TO (VII) ****** THE WHOLE OF THE AMOUNT OF PROFITS AND G AINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 9. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION IS OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSIDER THE MEANING OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE CASE OF CAMB AY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978 ] 113 ITR 84 (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 INDUSTRY (HERE GENERATION AND DISTRIBUTION OF ELECTRICITY) ON WHICH THE LD. SOLICITOR - GENERAL RE LIED, IT WILL BE PERTINENT TO OBSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION 'ATTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED THAT THE EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRE SSION 'DERIVED FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE OF OLD MACHINERY AND BUILDINGS CANNOT BE REGARDED AS PROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY . IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE LD. SOLICITOR - GENERAL, IT HAS USED TH E EXPRESSION 'DERI VED FROM', AS FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAMELY, 'ATTRIBUTABLE TO', HAS BEEN USED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY.' 10. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING., THEY HAVE USED THE EXPRESSION 'DERIVED FROM' THE EXPRE SSION 'ATTRIBUTABLE TO' BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE 5 ITA NO. 59 /P A N/201 6 BUSINESS . A CO - OPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDIN G CREDIT FACILITIES TO I TS MEMBERS. THE I NTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THE SOCIETY CANNOT KEEP THE SAID AMOUNT IDLE . IF THEY DEPOSIT THIS AMOUNT, I N BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY . THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FAC ILITIES TO ITS MEMBERS BY A CO - OP ERATIVE SOC IETY AND IS LIABLE TO BE DEDUCTED FROM THE G ROSS T OTAL INCOME UNDER SECTION 80P OF THE ACT. THE LD.CIT(A) OBSERVED THAT T HE FACTS OF THE INSTANT APPEAL ARE IDENTICAL TO THE CASES DISCUSSED ABOVE . THE A SSESSEE IS A CO - OPERATIVE SOCIETY PROVIDING C REDIT FACILITIES TO ITS MEMBERS AND DEPOSITS ARE ALSO ACCEPTED FROM MEMBERS. THE ASSESSEE CLAIMED THAT SURPLUS FUNDS WERE INVESTED IN BANKS AND EARNED INTEREST INCOME. IT IS CLAIMED AS NORMAL BUSINESS OF THE SOCIETY. THE CIT(A) OBSERVED THAT AO HAS NOT DIS PUTED ANY OF THE CLAIMS IN THE ASSESSMENT ORDER IN VIEW OF THE BINDING - JURISDICTIONAL HON'BLE HIGH COURT AND HON'BLE ITAT DECISIONS (DISCUSSED ABOVE), THE CIT(A) OBSERVED THAT THE WORD 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DER IVED FROM' HENCE, THE CIT(A) DIRECTED THE AO TO TREAT INTEREST INCOME OF T HE APPELLANT AS BUSINESS INCOME AND ALLOW ED THE DEDUCTION U/S. 80P(2)(A) ( I) OF THE ACT AND DELETE THE ENTIRE ADDITION MADE. T HUS IN NUTSHELL, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESS EE VIDE APPELLATE ORDER DATED 25/02/2016 . 5. AGGRIEVED BY THE APPELLATE ORDER DATED 25/02/2016 PASSED BY THE LD.CIT(A) , THE R EVENUE HAS FILED AN APPEAL BEFORE TH IS TRIBUNAL . T HE LD. DR CONTENDED THAT THE ASSES SEE HAS RECEIVED INTEREST INCOME FROM THE BANKS , WHICH ARE OTHER THAN COOPERATIVE SOCIETIES AND HENCE THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U NDER SECTION 80P OF THE ACT , KEEPING IN VIEW THE PROVISION S OF SECTION 80 P (2)(D) OF THE ACT . THE LD. DR RELIED UPON THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF 6 ITA NO. 59 /P A N/201 6 TOTGARS COOP ERATIVE SALE SOCIETY L T D. V . ITO REPORTED IN 322 ITR 283 (SC) . THE LD. DR RELIED UPON THE ASSESSMENT ORDER OF THE AO . 6. THE LD. AR , ON THE OTHER HAND , RELIED ON THE DECISION OF THE HONBLE HIGH C OURT OF KARNATAKA IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED V . ITO REPORTED IN 2015(2) TMI 995 IN I.T.A.NO.307/2014 VIDE ORDER DATED 28/10/2014 AND CONTENDED THAT THE ISSUE IS DIRECTLY COVERED IN FAV OUR OF THE ASSESSE E AND THE INTEREST EARNED ON DEPOSITS WITH THE NATIONALISED BANKS TO PAY THE ASSESSEE IS TO BE ALLOWED AS DEDUCTION AS PER SECTION 80P(2)(A)(I) OF THE ACT AS THIS IS THE PROFIT AND GAIN BUSINESS , WHICH IS ATTRIBUTABLE TO BUSINESS OF THE ASSESSEE TO PROV IDE THE CREDIT FACILITIES TO IT S MEMBERS. WRITTEN SUBMISSION S ARE SUBMITTED BY THE ASSESSEE WHICH ARE PLACED IN FILE WHEREBY LD.COUNSEL FOR THE ASSESSEE CONTENDED THA T THE INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF P ROVIDING CREDIT FACILITIES TO ITS MEMBERS. HE DISTINGUISHED THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF M/S TOTGARS COOPERATIVE SALE SOCIETY LIMITED (SUPRA), ON WHICH RELIANCE IS PLACED BY THE R EVENUE TO CONTEND THAT IN THE CASE OF THE TOTGARS COOPERATIVE S ALE S OCIETY (SUPRA) THE SAID TAX PAY ER APA R T FROM PROVIDING CREDIT FACILITATES TO ITS MEMBERS WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS WHILE IN THE CASE OF THE ASSESSEE , THE ASSESSE E IS ONLY PROVIDING CREDIT F ACILITIES TO ITS MEMBER. THE LD. COUNSEL FOR THE ASSESSE E RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ITO V . M/S. VYAVASAYA SEVA SAHAKARI BANK LTD . IN ITA NO.124/PAN/2016 DECIDED ON 21 /09/ 2016 WHERE IN THE T RIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER : - 4. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: - I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE AND ALSO THE ASSESSMENT ORDER OF THE AC. THE DECISION QUOTED BY THE ASSESSEE THAT OF HONORABLE HIGH COURT OF KARNATAKA IN 7 ITA NO. 59 /P A N/201 6 THE CASE OF TUMKUR MERCHANTS SOUHARDHA CREDIT COOPERATIVE SOCIETY, THE A P HI GH COURTS DECISION IN THE CASE OF CIT VS. A . P . STATE COOPERATIVE BANK LTD., ARE ALL IN FAVOUR OF THE ASSESSEE, WHEREAS THE AC RELIED MORE ON SUPREME COURTS DECISION IN THE CASE OF TOTGARS C O - OPERATIVE SOCIETY. THIS CANT BE ACCEPTED BECAUSE THE FACTS AR E DIFFERENT IN THIS CASE. THE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDHA CREDIT CO - OPERATIVE SOCIETY HAS NOT ONLY ANALYZED THE FACTS OF TOTGARS CO - OPERATIVE SALE SOCIETY BUT ALSO HAS SAID AS TO HOW THE DECISIONS OF THE ANDHRA PRADESH HI GH COURT REFERRED TO ABOVE AND ALSO THAT OF THE SUPREME COURTS DECISION IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO., ARE APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN THIS CASE THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND MAINLY ENGAGED IN TRADING ACTIVITIES FOR ITS MEMBERS LIKE PURCHASE AND SALE OF RATION GOODS, FERTILIZERS, KIRANA ITEMS, PESTICIDES, AGRICULTURAL IMPLEMENTS, ETC., AND ALSO PROVIDES CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE HAS MADE INVESTMENTS IN OTHE R COOPERATIVE BANKS AND HAS RECEIVED INTEREST AND DIVIDEND INCOME AS DETAILED BELOW: 1. INTEREST ON DEPOSITS FROM KANARA DISTRICT CENTRAL COOPERATIVE BANK LTD RS.2,30,711/ - 2. DIVIDEND AND INTEREST INCOME FROM OTHER COOPERATIVE SOCIETIES RS. 16,596/ - RS.2,47,307/ - THEREFORE WHETHER THIS INTEREST AND DIVIDEND INCOME EARNED IS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS THE QUESTION THAT REQUIRES TO BE DECIDED OR WHETHER THE INTEREST AND DIVIDEND EARNED ON DEPOSITS KEPT WITH OTHER BANKS IS DEDUCTIBLE ULS.80P(2)(D). SECTION 80P(2)(D) STATES THAT: I NTEREST OR DIVIDEND IN RESPECT OF ANY INCOME, BY WAY OF DEPOSIT WITH ANY CO - OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO - OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME IS ELIGIBLE FOR DEDUCTION . AS PER SECTION 2(19) OF THE ACT, A CO - OPERATIVE SOCIETY MEANS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE CO - OPERATIVE SOCIETIES ACT, 1912, OR UNDER ANY LAW FOR THE TIME BEING IN FORCE IN ANY STATE FOR THE REGIS TRATION OF CO - OPERATIVE SOCIETIES. THE PROVISIONS OF THE IT ACT, 1961, EITHER IN SECTION 2(19) OR U/S.80P, DO NOT MAKE ANY DISCRIMINATION BETWEEN CO - OPERATIVE 8 ITA NO. 59 /P A N/201 6 SOCIETIES CARRYING ON BANKING BUSINESS AND OTHER CO - OPERATIVE SOCIETIES. CO - OPERATIVE BANKS ARE P RIMARILY CO - OPERATIVE SOCIETIES BY CONSTITUTION AND BANKS BY THE NATURE OF BUSINESS. IN THE CASE OF MENASI SEEMEYA GROUP GRAMAGALA SEVA SAHAKARI SANGHA NIYAMITA, IN ITA NO.609 AND 601(BNG/2014 DATED 06/02/2015) IT WAS HELD THAT THE RESTRICTIVE INTERPRE TATION GIVEN TO CO - OPERATIVE SOCIETY U/S.80P(2)(D) WAS NOT WARRANTED. THE ITAT, BANGALORE BENCH, IN THIS CASE, THROUGH A DETAILED REASONING, CAME TO THE CONCLUSION THAT THE INTEREST AND DIVIDEND EARNED BY THE ASSESSEE FROM CO - OPERATIVE BANK WAS ELIGIBLE FO R DEDUCTION U/S 80P(2)(D) OF THE ACT. IN CONCLUSION IT IS HELD THAT THE INTEREST INCOME AND DIVIDEND EARNED ON DEPOSITS AND INVESTMENTS MADE WITH OTHER COOPERATIVE BANKS/SOCIETY ARE FULLY DEDUCTIBLE UNDER SECTION 80P(2)(D) FROM THE INCOME LIABLE TO TAX . 5. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ABOVE QUOTED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE CLA IM OF DEDUCTION UNDER SEC. 80P(2)(A)(I) OF THE ACT AFTER FOLLOWING THE PRINCIPLES LAID DOWN IN THE DECISION OF THE HONBLE BOMBAY HIGH COURT AT PANAJI IN THE CASE OF M/S. THE QUEPEM URBAN COOPERATIVE CREDIT SOCIETY LTD. VS. ACIT IN TAX APPEALS NO. 22 - 24/20 15 DATED 17/04/2015, AS ALSO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. IN ITA NO. 307/2014, DATED 28/10/2014. NO CONTRARY DECISION COULD BE CITED BY THE DEPARTMENTAL REPRESENTATIVE. W E, THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WHICH IS HEREBY CONFIRMED AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL FILED BY THE REVENU E STANDS DISMISSED. 7 . THE LD. DR COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH AL LOWED THE APPEAL OF THE ASSESSEE. FURTHER , HE COULD NOT BRING ANY CONTRARY DECISION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE SOCIETY LTD (SUPRA) , WHEREIN THE HONBLE KARNATAKA HIGH COURT HELD AS UNDER: - 9 ITA NO. 59 /P A N/201 6 6. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, THE UNDISPUTED FACTS WHICH EMERGES IS, THE SUM OF RS. 1,77, 305 / - REPRESENTS THE INTEREST EARNED FROM SHORT - TERM DEPOSITS AND FROM SAVINGS BANK ACCOUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT CARRYING ON ANY OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSES SEE BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DE POSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHETHER THIS INTEREST 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 I.E., SECTION 80P(2)(A)(I): 'DEDUCTION IN RESPECT OF INCOME OF CO - OPERATIVE SOCIETIES: 8 OP (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO - OPERATIVE 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 BE THE FOLLOWING, NAMELY: (A) IN THE CASE OF CO - OPERATIVE SOCIETY ENGAGED IN - (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING 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 BUSINESS 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 CONSIDER THE MEANING OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO . LTD. V . COMMISSIONER OF INCOME TAX , GUJARAT - II 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 INDUSTRY (HERE GENERATION AND DISTRIBUTION OF ELECTRICITY) ON WHICH THE LD. SOLICITOR - GENERAL RELIED, IT WILL BE PERTINENT TO OBSERVE THAT 10 ITA NO. 59 /P A N/201 6 THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION 'ATTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED THAT THE EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EX PRESSION 'DERIVED FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE OF O L D MACHINERY AND BUILDINGS CANNOT BE REGARDED AS PROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE LD. SOLICITOR - GENERAL, IT HAS USED THE EXPRESSION 'DE RIVED FROM', AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAMELY, 'ATTRIBUTABLE TO', HAS BEEN USED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY.' 8. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EXPRESSION 'DERIVED FROM'. THE EXP RESSION 'ATTRIBUTABLE TO' BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A COOPERATIVE SOCIETY WHICH 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 CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSIN ESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO - OPERATIVE SOCIETY AND IS LI ABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION BOP OF THE 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 WITH A CASE WHERE THE ASSESSEE - COOPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE 11 ITA NO. 59 /P A N/201 6 CONSIDERATION RECEIVED FROM MARKETING AGRICULTUR AL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT - TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE - SOCIETY WAS A LI ABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A) ( I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF TH E ACT. THEREFORE IN THE FACTS OF THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF T HAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED 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 ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTER EST. THE SAID INTEREST 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 COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX III, HYDERABAD V S . ANDHRA PRADESH STATE COOPERATIVE BANK LTD REPORTED IN (2011) 200 TAXMAN 220/12 IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCT ION OF THE AFORESAID AMOUNT IS UNSUSTA INABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIA L QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER: APPEAL IS ALLOWED. 8 . RESPECTF U LLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL AT PANAJI IN THE CASE OF M/S. VYAVASAYA SEVA SAHAKARI BANK LTD. (SUPRA) AND THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE SOCIETY LTD (SUPRA) , WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS HEREBY CONFIRMED AND THE APPEAL OF THE R EVENUE IS DISMISSED. WE ORDER ACCORDINGLY. 12 ITA NO. 59 /P A N/201 6 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 2 1 ST DAY OF NOVEMBER , 201 6 AT GOA . SD/ - SD/ - (GEORGE MATHAN) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 1 ST NOVEMBER , 201 6 . V.S.S.G BABU / - COPY TO: 1. THE ASSESSEE. AKSHAYA C O - OPERATIVE CREDIT SOCIETY LTD., DR. KAMALAKAR ROAD, KARWAR. 2. THE REVENUE. ITO , WARD - 1 , KARWAR . 3. THE PR. CIT , MANGALORE. 4. THE CIT(A) , MANGALORE. 5. THE D.R . 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 13 ITA NO. 59 /P A N/201 6 DESCRIPTION DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 21 / 11 /2016 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 2 2 /11/2016 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 2 2 /11/2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 2 2 /11/2016 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2 2 /11/2016 SR.PS 6. DATE OF PRONOUNCEMENT 2 2 /11/2016 SR.PS 7. FILE SENT TO THE BENCH CLERK 2 2 /11/2016 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER