Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit, Kolhapur V. Income-tax Officer,

ITA 604/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1215 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 28-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: AJINKYA A JAG OJE
• Keywords: Business income; Question of law
• Section: 6; 56

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL PUNE BENCH B, PUNE . . , , BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS A WASTHY, JM . / ITA NO.604/PN/2 014 / ASSESSMENT YEAR : 2010-11 SHRI LAXMI NARAYAN NAGARI SAHAKARI PAT SANSTH A MARYADIT, AT & POST : MURGUD, TALUKA : KALAL, DISTRICT : KOLHAPUR 416219 PAN NO.AAAAS1174 N . / APPELLANT V/S ITO, WARD-1(3), KOL HAPUR . / RESPONDENT / ASSESSEE BY : SHRI AJINKYA A. JAG OJE / DEPARTMENT BY : SHRI . B.C. MALAKAR / ORDER PER R.K. PANDA, A M : THIS APPEAL FILED BY THE ASSESSEE IS DIRE CTED AGAINST THE ORD ER DATED 19-12-2013 OF THE CIT(A), KOLHAPU R RELATING TO ASSESSM ENT YEAR 2010-11. 2. FACTS OF THE C ASE, IN BRIEF, ARE TH AT THE ASSESSEE IS A CREDIT COOPERATIVE SOCIETY REGISTERED UNDER TH E MAHARASHTRA COO PERATIVE SOCIETIES ACT, 1960 . IT FILED ITS RETUR N OF INCOME ON 09 -10-2010 / DATE OF HEARING :13. 08.2015 / DATE OF PRONOUNCEM ENT:19.08.2015 2 ITA NO.604/PN/2014 DECLARING NIL INCOM E. DURING THE COURS E OF ASSESSMENT PRO CEEDINGS THE AO OBSERVED THA T THE SOCIETY ACCEPTS DEPOSITS FROM ITS M EMBERS AND PROVIDES CREDIT F ACILITIES TO ITS MEMBE RS AND EARNS INTEREST THEREON WHICH IS WHOLLY EXEM PT U/S.80P(2)(A) OF TH E I.T. ACT. FROM THE SCRUTINY OF THE DETAILS FURNISH ED, HE NOTED THAT THE ASSESSEE ALSO EARNS INTEREST INCOME ON ITS DEPO SITS WITH VARIOUS CO OPERATIVE SOCIETIES A ND FROM NON-COOPERATIVE SOC IETIES AT RS.44,28,0 65/- WHICH INCLUDES INTEREST INCOME OF RS.19,14, 971/- EARNED BY TH E ASSESSEE SOCIETY F ROM THE COOPERATIVE SOCIETIES . ACCORDING TO THE AO, AS PER THE PROV ISIONS OF SECTION 80P(2)(A)(I), THE INCOME EARNED BY THE CREDIT COO PERATIVE SOCIETIES FROM THE AC TIVITY OF GIVING CREDI T FACILITIES TO ITS MEM BERS IS FULLY EXEMPT. HOWE VER, THE INTEREST EAR NED FROM DEPOSITS K EPT WITH BANKS OTHER THAN CO OPERATIVE CREDIT SOCIE TY HAS TO BE TAXED AS INCOME FROM OTHER SOURCES U/S.56 OF THE I.T. AC T. RELYING ON THE DE CISION OF THE HONBLE SUPREM E COURT IN THE CASE OF THE TOTGARS CO OPERATIVE SALE SOCIETY LTD. REP ORTED IN 322 ITR 283 THE AO HELD THAT THE INTEREST EARNED FROM THE DEP OSIT OF SURPLUS FUNDS WITH BANKS, EVEN W HERE THE COOPERATIVE SOCIETY IS ENGAGED IN THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS, IS INELIGIBLE FOR T HE DEDUCTION U/S.80 P(2)(A)(I). HE ACCORDINGLY ASSE SSED THE INCOME FRO M INTEREST AS INCOM E FROM OTHER SOURCES U/S.5 6 OF THE I.T. ACT. 3. IN APPEAL THE L D.CIT(A) UPHELD THE A CTION OF THE AO BY OB SERVING AS UNDER : 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE ASSESSEE. I FIND THAT THE INTEREST INCOME EARNED FROM BANKS CANNOT BE S AID TO BE ATTRIBUTABLE TO TH E ACTIVITIES OF THE APPE LLANT. THE ACTIVITY OF TH E APPELLANT IS PROVIDING O F CREDIT FACILITIES TO ITS M EMBERS. HAD THE INTERES T BEEN EARNED FROM PROV IDING CREDIT FACILITIES TO MEMBERS, THE SAME WO ULD BE ATTRIBUTABLE TO ITS AC TIVITIES. BUT THE INTEREST RECEIVED FROM BANK IS NOT IN THE COURSE OF ITS ACTI VITIES. AS PER THE TOTGARS COOPERATIVE SA LE SOCIETY LTD. (SUPRA), INTEREST INCOME FROM SURPLUS FUND / SHORT D EPOSITS WITH BANKS IS INCOME FROM O THER SOURCES TAXABLE UN DER SECTION 56 AND IS N OT 3 ITA NO.604/PN/2014 ELIGIBLE FOR DEDUCTION U NDER SECTION 80P(2)(A)( I). IN THAT CASE, THE SOCI ETY CARRIED ON ADDITIONAL AC TIVITY OF MARKETING THE AGRICULTURAL PRODUCE OF ITS MEMBERS BESIDES PROV IDING OF CREDIT FACILITY TO THEM. ALTHOUGH T HE TOTGARS' BUSINESS WAS P ROVIDING OF CREDIT FACILIT IES TO MEMBERS AS WELL AS ACTING AS MARKETING COO PERATIVE SOCIETY, THE DE CISION OF HONBLE SUPRE ME COURT IS IN RESPECT OF ITS BUSINESS AS CREDIT COOPERATIVE SOCIETY AS IS EVIDENT FROM THE FOLLOW ING PARA WHICH IS THE EX CERPT OF THE DECISIONS 'ASSESSEE(S) IS A COOPE RATIVE CREDIT SOCIETY. D URING THE RELEVANT ASSESSMENT YEARS IN Q UESTION, IT HAD SURPLU S FUNDS WHICH THE ASSESSEE(S) INVESTED IN SHORTTERM DEPOSITS WIT H THE BANKS AND IN GOVERNMENT SECURITIES. ON SUCH INVESTMENTS, I NTEREST ACCRUED TO THE ASSESSEE(S). ASSE SSEE(S) PROVIDES CRED IT FACILITIES TO ITS MEMBERS AND ALSO M ARKETS THE AGRICULTURA L PRODUCE OF ITS MEMBERS. THE SUBSTANTI AL QUESTION OF LAW WHICH ARISES IN THIS BATCH OF CIVIL APPEALS IS WHET HER SUCH INTEREST INCOM E WOULD QUALIFY FOR DEDUCTION AS BUSINESS INCOME UNDER S. 80P(2 )(A)(I) OF THE IT ACT 1961' THUS AS PER THIS DECISIO N NOT ONLY THE INTEREST E ARNED FROM THE INVESTM ENT OF SALE PROCEEDS OF M ARKETING PRODUCE OF M EMBERS IS INELIGIBLE FO R DEDUCTION U/S 80P(2)(A )(I) BUT ALSO THAT THE IN TEREST EARNED FROM BAN KS FROM SURPLUS FUNDS, EVE N WHERE THE COOPERATIV E SOCIETY IS ENGAGED IN THE ACTIVITY OF PROVIDING CR EDIT FACILITIES TO ITS MEM BERS, IS ALSO INELIGIBLE F OR THIS DEDUCTION. THEREFO RE THE INCOME FROM INTE REST IS INCOME FROM OTH ER SOURCES CHARGEABLE TO TAX UNDER SECTION 56 OF THE ACT AND ASSESSI NG OFFICER'S ACTION WAS JUSTI FIED. GROUNDS 1 AND 2 AR E REJECTED. 4. AGGRIEVED WITH SUCH ORDER OF THE CI T(A) THE ASSESSEE IS I N APPEAL BEFORE US WITH THE FO LLOWING GROUNDS : 1. THE LD.CIT (APP EALS) KOLHAPUR BY HIS O RDER PASSED U/S.250 DA TED 19122013 RECEIVED ON 13022014 IN CASE OF YOUR APPELLANT SHRI LAX MI NARAYAN NAGARI SAHAKA RI PAT SANSTHA MARYAD IT, MURGUD, KOLHAPUR H AS ERRED IN BOTH ON FACTS AN D IN LAW. 2. WHETHER ON FACT AND CIRCUMSTANCES OF C ASE, CIT(A) WAS CORRECT IN ARRIVING AT CONCLUSION , THAT PRINCIPLE EMERG ING FROM SUPREME CO URT DECISION IN CASE OF TOT GARS COOPERATIVE SALE S OCIETY LTD. VS. ITO 322 IS APPLICABLE IN CASE OF ASSESSEE (COOPERATIVE SOCIETY) ENGAGED IN THE ACTIVITY OF PROVIDING C REDIT FACILITIES TO ITS M EMBER AND ACCORDINGL Y, TREATING RS.25,01,774/ BEING INTEREST EARNE D ON DEPOSIT KEPT W ITH SCHEDULE BANKS IS NOT EL IGIBLE FOR DEDUCTION U/S .80P(2)(A)(I). 5. THE LD. COUNS EL FOR THE ASSESSEE SU BMITTED THAT THE ASS ESSEE IS ENGAGED IN THE BUS INESS OF PROVIDING CREDIT FACILITIES AND ACCEPTS DEPOSITS WHICH IS AKI N TO CARRYING ON BUSI NESS OF BANKING WHIC H NEEDS TO MAINTAIN LIQUIDITY AS PER RULES AND RE GULATIONS UNDER MAH ARASHTRA 4 ITA NO.604/PN/2014 COOPERATIVE SOCIETIE S ACT, 1960. ACCO RDINGLY, ASSESSEE DU RING THE RELEVANT YEAR UNDER CONSIDERATION, HAS MAINTAINED SUCH LIQUIDITY. CONSIDERING THE REAL IZATION RISK FACTOR IN VOLVED, IT HAS KEPT SU CH SHORT TERM DEPOSITS WIT H SCHEDULE BANK. ASSESSEE HAS EARNED RS.25,01,774/- AS IN TEREST ON SUCH DEPOS ITS. ACCORDING TO THE AO, THE INTEREST EARNED ON S UCH DEPOSIT IS INCOM E FROM OTHER SOURCE S BEING INTEREST INCOME ARIS ING FROM INVESTING S URPLUS FUNDS. CONS EQUENTLY, AS PER THE AO TH E SAID INCOME IS NOT ELIGIBLE FOR DE DUCTION U/S.80P(2)(A)(I). TO ARRIVE AT SUCH CONCLU SION THE AO HAS RELI ED UPON THE DECISION OF SUPRE ME COURT IN THE CASE OF TOTGARS COOPERAT IVE SALE SOCIETY LTD REPORTED IN 322 ITR 283. 6. REFERRING TO TH E DECISION OF HONBL E KARNATAKA IN THE CASE OF TUMKUR MERCHANTS S OUHARDA CREDIT COOP ERATIVE LTD. VS. ITO R EPORTED IN 55 TAXMANN.COM 447 HE SUBMITTED TH AT THE HONBLE HIGH COURT IN THE SAID DECISION H AS HELD THAT WHERE THE COOPERATIVE SOCI ETY WAS ENGAGED IN THE BUSI NESS OF PROVIDING CR EDIT FACILITIES TO ITS M EMBERS, DEPOSITED EXCESS AM OUNT FOR SHORT TERM IN BANK, INTEREST EA RNED ON SUCH DEPOSIT WAS EN TITLED TO DEDUCTION U /S.80P(2)(A)(I). HE S UBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DE CISION HAS DISTINGUIS HED THE DECISION OF THE HO NBLE SUPREME COU RT IN THE CASE OF TOTGARS COOPERATIVE SALE SOC IETY LTD. (SUPRA). HE ACCORDINGLY SUBMITT ED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE BE ALLOWED. 7. THE LD. DEPAR TMENTAL REPRESENTAT IVE ON THE OTHER HA ND WHILE SUPPORTING THE ORDER OF THE CIT(A) REFERRE D TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MANTOLA COOPERATIVE THRIFT & CREDIT SOCIETY LTD. VS. CIT REPORTED IN 50 TAXM ANN.COM 278 WHEREI N IT HAS 5 ITA NO.604/PN/2014 BEEN HELD THAT THE ASSESSEE, A CREDIT CO OPERATIVE SOCIETY ENG AGED IN PROVIDING CREDIT FACI LITIES TO ITS MEMBERS , DEPOSITED SURPLUS FUNDS IN FIXED DEPOSITS AND EARNED INTEREST THER EON, SAID INTEREST W OULD BE ASSESSABLE AS INCOM E FROM OTHER SOURCE S AND THUS NOT ELIG IBLE FOR DEDUCTION U/S.80P(2 )(A)(I). 8. THE LD. COUNS EL FOR THE ASSESSEE IN HIS REJOINDER REFERRIN G TO THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF CIT VS. V EGETABLE PRODUCTS LTD. REPORT ED IN 88 ITR 192 SU BMITTED THAT WHEN T WO VIEWS ARE POSSIBLE THE VIE W WHICH IS IN FAVOU R OF THE ASSESSEE H AS TO BE FOLLOWED. 9. WE HAVE CONSI DERED THE RIVAL ARGUM ENTS MADE BY BOTH TH E SIDES, PERUSED THE ORDERS OF THE ASSESSING OFF ICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSE E. WE HAVE ALSO CON SIDERED THE VARIOUS DECISION S CITED BEFORE US. T HE ONLY DISPUTE TO B E DECIDED IN THE GROUNDS RAIS ED BY THE ASSESSEE IS THAT WHETHER THE INTEREST AMOUNTING TO RS.25 ,01,774/- EARNED BY THE ASSESSEE ON SH ORT TERM DEPOSITS WITH BANKS HAS TO BE TREATED AS INCOME FROM OTHER SOURCES U/S.56 OR THE ASSES SEE IS ELIGIBLE FOR DE DUCTION U/S.80P(2)(A )(I). WE FIND THE AO FOLLOWIN G THE DECISION OF HO NBLE SUPREME COUR T IN THE CASE OF THE TOTGARS COOPERATIVE SALE SOC IETY LTD. (SUPRA) TREA TED THE INTEREST EARNED FROM SUCH SHORT TERM DE POSITS AS INCOME FRO M OTHER SOURCES AND BROUGH T THE SAME TO TAX WH ICH HAS BEEN UPHELD BY THE CIT(A). 10. IT IS THE CASE OF THE ASSESSEE THA T IN VIEW OF THE DEC ISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR ME RCHANTS SOUHARDS CREDIT CO OPERATIVE LTD. (SUPR A) THE INTEREST EARN ED FROM SUCH SHORT TERM DEPOSITS WITH BANK IS ENTITLED TO DE DUCTION 6 ITA NO.604/PN/2014 U/S.80P(2)(A)(I). WE FIND THE HONBLE H IGH COURT OF KARNAT AKA AFTER CONSIDERING THE DEC ISION OF HONBLE SU PREME COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD. (S UPRA) HELD THAT THE INTEREST EARNED BY SUCH CO OPERATIVE SOCIETIES O N SHORT TERM DEPOS ITS WITH SCHEDULED BANKS IS E LIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). THE RELEVANT OBSERVATION OF THE H ONBLE HIGH COURT FR OM PARA 6 ONWARDS READ AS UNDER : 6. FROM THE AFORESAID FACTS AND RIVAL CONTENTI ONS, THE UNDISPUTED FAC TS WHICH EMERGES IS, THE SU M OF RS. 1,77,305/ REPR ESENTS THE INTEREST EARN ED FROM SHORTTERM DEPOSI TS AND FROM SAVINGS BAN K ACCOUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PR OVIDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT CARRYING ON ANY OTHER BUSINESS. THE INTERES T INCOME EARNED BY T HE ASSESSEE BY PROVIDING C REDIT FACILITIES TO ITS ME MBERS IS DEPOSITED IN T HE BANKS FOR A SHORT DURAT ION WHICH HAS EARNED IN TEREST. THEREFORE, WHETH ER THIS INTEREST IS ATTRIBUTA BLE TO THE BUSINESS OF P ROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUE STION. IN THIS REGARD, IT IS NECESSARY TO NOTICE T HE RELEVANT PROVISION OF LAW I.E., SECTION 80P(2)(A)(I ): 'DEDUCTION IN RESPECT OF INCOME OF COOPERATIVE S OCIETIES: 80P (1) WHERE, IN THE C ASE OF AN ASSESSEE BEING A COOPERATIVE SOCIETY, THE GROSS TOTAL INCOME INC LUDES ANY INCOME REFER RED TO IN SUBSECTION ( 2), THERE SHALL BE DEDUCTED , IN ACCORDANCE WITH AN D SUBJECT TO THE PROVISI ONS OF THIS SECTION, THE SUMS SPECIFIED IN SUBSECTION (2), IN COMPUTING THE TO TAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUBSECTION (1) SHALL BE THE FOLLOWING, NAMELY : (A) IN THE CASE OF COOPERATI VE SOCIETY ENGAGED IN (I) CARRYING ON THE BUS INESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS , OR (II) TO (VII) XX XX XX THE WHOLE OF THE AM OUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE O R MORE OF SUCH ACTIVITIES .' 7. THE WORD 'ATTRIBUTAB LE' USED IN THE SAID SECT ION IS OF GREAT IMPORTAN CE. THE APEX COURT HAD A N OCCASION TO CONSIDER THE MEANING OF THE W ORD 'ATTRIBUTABLE' AS SUPPO SED TO DERIVE FROM I TS USE IN VARIOUS OTH ER PROVISIONS OF THE STATUT E IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (SC) AS UNDER: 'AS REGARDS THE ASPECT E MERGING FROM THE EXPRE SSION 'ATTRIBUTABLE TO' OCCURRING IN THE PH RASE 'PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF THE SPECIFIED INDUSTRY (HERE GENERATI ON AND DISTRIBUTION 7 ITA NO.604/PN/2014 OF ELECTRICITY) ON WHICH THE LEARNED SOLICITORG ENERAL RELIED, IT WILL BE PERTINENT TO OBSERVE THAT THE LEGISLATURE, HA S DELIBERATELY USED THE EXPRESSION 'ATTRIBU TABLE TO' AND NOT THE E XPRESSION 'DERIVED FROM'. IT CANNOT BE DISP UTED THAT THE EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPO RT THAN THE EXPRESSION ' DERIVED FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COU LD HAVE WITH SOME FORCE BEEN CONTENDED TH AT A BALANCING CHARGE AR ISING FROM THE SALE OF OLD MACHINERY AND B UILDINGS CANNOT BE REGA RDED AS PROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINES S OF GENERATION AND DISTRIBUTION OF ELECTRICIT Y. IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGIS LATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGEST ED BY THE LEARNED SOLI CITORGENERAL, IT HAS USED THE EXPRESSION 'DE RIVED FROM', AS, FOR INSTA NCE, IN SECTION80J. IN OUR VIEW, SINCE TH E EXPRESSION OF WIDE R IMPORT, NAMELY, 'ATTRIBUTABLE TO', HAS B EEN USED, THE LEGISLATUR E INTENDED TO COVER RECEIPTS FROM SOURCES O THER THAN THE ACTUAL CON DUCT OF THE BUSINESS OF GENERATION AND DISTRI BUTION OF ELECTRICITY. 8. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERT AINLY WIDER IN IMPORT T HAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LE GISLATURE WANTED TO GIVE A RESTRICTED MEANING, THE Y HAVE USED THE EXPRE SSION 'DERIVED FROM'. T HE EXPRESSION 'ATTRIBUTABLE TO' BEING OF WIDER IMP ORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTEND ED TO GATHER RECEIPTS FR OM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A COOPERATI VE SOCIETY WHICH IS CARRYIN G ON THE BUSINESS OF PRO VIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS B Y PROVIDING CREDIT FACILI TIES TO ITS MEMBERS. THE I NTEREST INCOME SO DER IVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS , THEY CANNOT KEEP THE SA ID AMOUNT IDLE. IF THEY DEP OSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, T HE SAID INTEREST INCOME IS A TTRIBUTABLE TO THE PROFIT S AND GAINS OF THE BUSIN ESS OF PROVIDING CREDIT FAC ILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS N OT CARRYING ON ANY SEPARA TE BUSINESS FOR EARNING SUCH INTEREST INCOME. T HE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINE SS ATTRIBUTABLE TO THE ACT IVITY OF CARRYING ON TH E BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIE S TO ITS MEMBERS BY A C OOPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FRO M THE GROSS TOTAL INCOM E UNDER SECTION 80P OF T HE ACT. 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGME NT OF THE APEX COURT IN THE CASE OF M/S. TOTGARS CO OPERATIVE SALE SOCIETY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME CO URT WAS DEALING WITH A CASE WHERE THE ASSESS EE COOPERATIVE SOCIETY, AP ART FROM PROVIDING CRED IT FACILITIES TO THE MEMB ERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICUL TURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CON SIDERATION RECEIVED FRO M MARKETING AGRICULTU RAL PRODUCE OF ITS MEMBER S WAS RETAINED IN MAN Y CASES. THE SAID RETAIN ED AMOUNT WHICH WAS PA YABLE TO ITS MEMBERS FROM WHOM PRODUCE W AS BOUGHT, WAS INVESTED I N A SHORTTERM DEPOSIT /SECURITY. SUCH AN AMO UNT WHICH WAS RETAINED BY THE ASSESSEESOCIETY W AS A LIABILITY AND IT WA S SHOWN IN THE BALANCE SH EET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTE NT, SUCH INTEREST INCOME CA NNOT BE SAID TO BE ATTRIB UTABLE EITHER TO THE ACTIV ITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UNDER SECT ION 80P(2)(A)(III) OF THE AC T. THEREFORE IN THE FACTS OF THE SAID CASE, THE AP EX COURT HELD THE ASSESSIN G OFFICER WAS RIGHT IN T AXING THE INTEREST INCO ME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. F URTHER THEY MADE IT CLE AR THAT THEY ARE CONFININ G THE SAID JUDGMENT T O THE FACTS OF THAT CA SE. THEREFORE IT IS CLEAR, SUP REME COURT WAS NOT LAYI NG DOWN ANY LAW. 8 ITA NO.604/PN/2014 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INV ESTED IN BANKS TO EARN INTEREST WAS NOT AN AMO UNT DUE TO ANY MEMBER S. IT WAS NOT THE LIABILITY . IT WAS NOT SHOWN AS LIABIL ITY IN THEIR ACCOUNT. IN F ACT THIS AMOUNT WHICH I S IN THE NATURE OF PROFITS A ND GAINS, WAS NOT IMM EDIATELY REQUIRED BY TH E ASSESSEE FOR LENDING M ONEY TO THE MEMBER'S, AS THERE WERE NO TAKE RS. THEREFORE THEY HAD DEP OSITED THE MONEY IN A B ANK SO AS TO EARN INTERE ST. THE SAID INTEREST INCOM E IS ATTRIBUTABLE TO CAR RYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P (1) OF THE ACT. IN FACT SIMILA R VIEW IS TAKEN BY THE A NDHRA PRADESH HIGH CO URT IN THE CASE OF CIT V. ANDHRA PRADESH STATE C OOPERATIVE BANK LTD., [2011] 200 TAXMAN 220/12 TAX MANN.COM 66. IN THAT VIEW OF THE MATT ER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UN SUSTAINABLE IN LAW. ACC ORDINGLY IT IS HEREBY S ET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS AN SWERED IN FAVOUR OF T HE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PAS S THE FOLLOWING ORDER: 11. NO DOUBT, A CO NTRARY DECISION TO TH IS EFFECT WAS ALSO CITE D BY THE LD. DEPARTMENTAL RE PRESENTATIVE WHERE T HE HONBLE DELHI HIG H COURT IN THE CASE OF MANTO LA COOPERATIVE THRIFT & CREDIT SOCIETY LTD . (SUPRA) HAS HELD THAT WHERE THE ASSESSEE COOPER ATIVE SOCIETY WAS EN GAGED IN PROVIDING CREDIT FAC ILITIES TO ITS MEMBE RS EARNS INTEREST IN COME ON SURPLUS FUNDS DEPOS ITED AS FIXED DEPOSITS , SUCH INTEREST INCOM E WOULD BE ASSESSABLE AS INC OME FROM OTHER SOUR CES AND THUS NOT EL IGIBLE FOR DEDUCTION U/S.80P(2 )(A)(I). HOWEVER, IT IS ALSO THE SETTLED PROPO SITION OF LAW THAT WHEN TWO V IEWS ARE POSSIBLE, TH E VIEW WHICH IS IN FA VOUR OF THE ASSESSEE HAS TO BE FOLLOWED. SINC E IN THE INSTANT CA SE, TWO DIVERGENT DECISIONS W ERE CITED BEFORE US AN D NO DECISION OF THE HONBLE JURISDICTIONAL HIGH C OURT IS AVAILABLE, THE REFORE, FOLLOWING THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF CIT VS. VE GETABLE PRODUCTS REPORTED IN 88 ITR 192 WE HOLD THAT THE VIEW IN FAVO UR OF THE ASSESSEE, I.E. THE DEC ISION OF THE HONBLE K ARNATAKA HIGH COURT HAS TO BE FOLLOWED. ACCORD INGLY, WE HOLD THAT T HE INTEREST INCOME E ARNED BY THE ASSESSEE ON SHOR T TERM DEPOSITS KEPT WITH BANKS HAS TO BE ALLOWED AS DEDUCTION U/S.80 P(2)(A)(I) OF THE I.T. A CT. THE ORDER OF THE CIT(A) IS 9 ITA NO.604/PN/2014 ACCORDINGLY SET ASID E AND THE GROUNDS RAISED BY THE ASSES SEE ARE ALLOWED. 12. IN THE RESULT, T HE APPEAL FILED BY THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 19 -08-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) / JUDICIAL MEMBER / ACCOUNTANT MEM BER IQ.KS PUNE ; DATED : 19 TH AUGUST, 2015. LRH'K / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) S / THE CIT(A), KOLHAPU R 4 . S / THE CIT, KOLHAPUR 5 . 6. , , IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , //TRUE C //TRUE COPY// / SR. PRIVATE SECRETA RY , IQ.KS / ITAT, PUNE