Income-tax Officer, V. M/s. Kundlika Nagari Sahkari Patsanstha Maryadit, Raigad

ITA 756/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1668 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT DUA

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 7 56 /PN/201 5 / ASSESSME NT YEAR : 20 0 6 - 07 THE INCOME TAX OFFICER, WARD - 1, PANVEL. . / APPELLANT VS. M/S. KUNDLIKA NAGARI SAHAKARI PATSANSTHA MARYADIT, GROUND FLOOR, VARUN APARTMENT, NEAR BHATE VACHANALAYA, SONAR ALI, ROHA, DIST. RAIGAD . / R ESPONDENT / APPELLANT BY : SHRI AMIT DUA / RESPONDENT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 2 9 . 0 6 .201 6 / DATE OF PRONOUNCEMENT: 29 . 0 6 .201 6 / ORDER PER SUSHMA C HOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - 2 , THANE , DATED 13 . 0 2 .20 1 5 RELATING TO ASSESSMENT YEAR 20 0 6 - 07 AGAINST ORDER PASSED UNDER SECTION 14 3(3) R.W.S. 147 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENU E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S.80P(2)(A) OF THE I.T. ACT, 1961 EVEN THOUGH THE INTEREST INCOME EARNED BY THE ASSESSEE IS BY WAY OF INTEREST OR DIVIDENDS DERIVED FROM ITS INVESTMENTS WITH OTHER CO - OPERATIVE BANK AND IS NOT DERIVED FROM CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS PROVIDED U/S.80P(2)(A)(I) OF THE I.T. ACT, 1961. ITA NO. 7 5 6 /PN/20 1 5 M/S. KUNDALIKA NAGARI SAH. PATSANSTHA MARYADIT 2 2. ON THE FACTS AND CIRCUM STANCES OF THE CASE, THE DECISION OF CIT(A) TO ALLOW DEDUCTION U/S.80P(2)(A) OF THE I.T. ACT, 1961 IS CONTRARY TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO - OPERATIVE SALES SOCIETY LTD. WHEREIN IT WAS HELD THAT INTEREST ON FUNDS W HICH ARE NOT REQUIRED FOR BUSINESS PURPOSES AT THE GIVEN POINT OF TIME FALLS IN THE CATEGORY OF OTHER INCOME. 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUAR ELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 201 0 - 1 1 . 4. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT AND IN RESPECT OF INTEREST EARNED BY WAY OF INTEREST ON INVESTMENT WITH OTHER CO - OPERATIVE BANKS. 5 . BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A CO - OPERATIVE SOCIETY AND WAS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE AND WAS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DEPLOYED CERTAIN FUNDS WITH OTHER CO - OPERATIVE BANKS AND HAD EARNED INCOME FROM ON THE SAID DEPOSITS TOTALLING RS.44,31,915/ - . THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE CO - OPERATIVE BANKS WERE REGULATED BY THE BANKING REGULATION ACT, 1949, THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT , WHICH WAS AVAILABLE ON INVESTMENTS MADE WITH CO - OPERATIVE SOCIETIES. ACCORDINGLY, AN ADDITION WAS MADE OF RS. 44,31,915/ - . 6 . THE CIT(A) DELETED THE AFORESAID ADDI TION OF RS. 44,31,915/ - , IN TURN, RELYING ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN THE CASE OF NIPHAD NAGARI SAHAKARI PAT SANSTHA LTD. IN ITA NO.1336/PN/2011, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 31.07.2013. 7 . THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). ITA NO. 7 5 6 /PN/20 1 5 M/S. KUNDALIKA NAGARI SAH. PATSANSTHA MARYADIT 3 8 . ON PERUSAL OF RECORD AND DOCUMENTS FILED BY THE ASSESSEE, IT IS ESTABLISHED THAT THE ASSESSEE HAD RECEIVED INTEREST ON FIXED DEPOSITS WITH CO - OPERATIVE BANKS AMOUNTING TO RS. 42,12,611/ - . I N ADDITION, THE ASSESSEE HAD RECEIVED INTEREST ON SAVINGS BANK ACCOUNT WITH CO - OPERATIVE BANKS AMOUNTING TO RS. 2,19,304/ - , TOTALLING RS. 44,31,915/ - . THE BREAK - UP OF INTEREST INCOME IS AS UNDER: - SR. NO. NAME OF THE BANK TOTAL INCOME EARNED (RS. ) A INTEREST ON FIXED DEPOSIT 1 THE ROHA ASHTAMI CO OP URBAN BANK LTD 13,89,305/ - 2 PEN CO OP URBAN BANK LTD 6,56,274/ - 3 GOREGAON CO OP URBAN BANK LTD 3,43,087/ - 4 RAIGAD DISTRICT CENTRAL CO - OP BANK 14,04,351/ - 5 RAIGAD DISTRICT PATSANSTHA MAHASANGH ALIBAG 1,12,651/ - 6 JANKALYAN SAHAKA RI BANK LTD 2,75,270/ - 7 MAHAD CO OP URBAN BANK 31,673/ - TOTAL (A) 42,12,611/ - B SAVING BANK INTEREST 8 RAIGAD DISTRICT CENTRAL CO OP BANK 2,10,526/ - 9 THE ROHA ASHTAMI CO OP URBAN BANK LTD. 8,778/ - TOTAL (B) 2,19,304/ - A+B TOTAL INCOME EARNED 44 ,31,915/ - A+B TOTAL INCOME EARNED 44 ,31,915/ - 9 . THE ASSESSEE CLAIMED THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF AFORESAID INTEREST INCOME, WHICH WAS DENIED TO THE ASSESSEE BY THE ASSESSING OFFICER. 10 . ON PERUSAL OF RECORD, I FIND THAT THE ISSUE OF CLAIM OF DEDUCTI ON UNDER SECTION 80P(2)(A)(I) OF THE ACT AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2010 - 11 IN APPEAL FILED BY THE REVENUE IN ITA NO.900/PN/2014, THE TRIBUNAL VIDE CONSOLIDATED ORDER DATED 29.01.2016 HELD AS UNDER: - 16. WE HAVE HE ARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE US IS A CREDIT CO - OPERATIVE SOCIETY, WHICH IS ACCEPTING DEPOSITS FROM ITS MEMBERS AND USING THE SAME FOR GIVING LOANS TO ITS MEMBERS. IN ADDITION, THE ASSESSEE IS ALSO MAKING INVESTMEN TS WITH OTHER CO - OPERATIVE SOCIETIES, WHICH IT CLAIMS TO HAVE MADE AS PER THE MANDATE OF MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960. THE ISSUE ARISING BEFORE US IS WHETHER THE INTEREST INCOME EARNED BY THE ASSESSEE ON SUCH INVESTMENTS IS LIABLE FOR DEDU CTION UNDER SECTION 80P(2) OF THE ACT IN THE HANDS OF THE ASSESSEE. THE ITA NO. 7 5 6 /PN/20 1 5 M/S. KUNDALIKA NAGARI SAH. PATSANSTHA MARYADIT 4 ASSESSING OFFICER RELYING ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) WAS OF THE VIEW THAT THE SAID INTEREST EARNED BY THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE FOR CLAIMING THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT WAS RAISED BEFORE THE CIT(A), WHO DID NOT ADJUDICATE THE SAME AS HE WAS OF TH E VIEW THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. BEFORE US, THE THIRD CONTENTION HAS BEEN RAISED THAT IN CASE, NO DEDUCTION IS AVAILABLE TO THE ASSESSEE, THEN AT BEST ONLY THE NET INCOME ON SUCH RECEIPTS IS TO BE ADDED IN THE HANDS OF THE ASSESSEE, FOR WHICH THE ASSESSEE HAS PLACED THE CALCULATION SHEET ON RECORD. THE CASE OF THE REVENUE ON THE OTHER HAND, IS THAT THE DECISION OF THE HONBLE APEX COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUP RA) IS CLEARLY APPLICABLE. IN THE ALTERNATE, RELIANCE WAS PLACED ON NEWLY INSERTED SECTION 80P(4) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2006 W.E.F. 01.04.2007 AND IT WAS POINTED OUT THAT THE SAID SECTION HAD OVERRIDING PROVISIONS AND HENCE, T HE SAME WAS APPLICABLE. 17. IN ORDER TO ADJUDICATE THE ISSUE, FIRST REFERENCE IS MADE TO THE DECISION OF HONBLE SUPREME COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA). IN THE FACTS OF THE SAID CASE, THE ASSESSEE BEFORE THE HONBLE APEX COURT WAS A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO THE MEMBERS OR MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS. THE ASSESSEE HAD PARKED ITS FUNDS IN SHORT TERM BANK DEPOSITS AND SECURITIES AND THE INTEREST EARNED ON THE SAME WAS CLAIMED AS DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE REVENUE AUTHORITIES HELD THAT THE SAME WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CLAIM OF THE ASSESSEE WAS THAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THESE WERE NOT REQUIR ED IMMEDIATELY FOR BUSINESS PURPOSES AND CONSEQUENTLY, INTEREST RECEIVED BY THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. FURTHER, THE CONTENTION OF THE ASSESSEE BEFORE THE COURT WAS THAT UNDER REGULATIONS 23 AND 28 R.W.S. 57 AND ASSESSEE BEFORE THE COURT WAS THAT UNDER REGULATIONS 23 AND 28 R.W.S. 57 AND 58 OF THE KARNATAKA CO - OPERATIVE SOCIETIES ACT, 1959, A STATUTORY OBLIGATION WAS IMPOSED ON CO - OPERATIVE CREDIT SOCIETIES TO INVEST ITS SURPLUS FUNDS IN SPECIFIED SECURITIES AND IN VIEW OF THE AFORESAID STATUTORY OBLIGATIONS, THE ABOVE MENTIONED IN VESTMENT WAS MADE BY THE ASSESSEE AND THE SAME WAS IN THE NATURE OF ITS BUSINESS ACTIVITY. THE SAID INTEREST INCOME WAS CLAIMED TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT, IRRESPECTIVE OF THE SOURCE OR HEAD UNDER WHICH SUCH INCOME WOULD FALL. THE HONBLE APEX COURT NOTED THAT THE INTEREST INCOME ARISING ON SURPLUS INVESTMENT IN SHORT TERM DEPOSITS AND SECURITIES, WHICH SURPLUS WAS NOT REQUIRED FOR BUSINESS PURPOSE, WAS TO BE TAXED UNDER SECTION 56 OF THE ACT. THE HONBLE APEX COUR T FURTHER NOTED THAT THE ASSESSEE MARKETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT AND THE TAX TREATMENT OF SUCH AMOUNT WAS THE ISSUE BEFORE THEM. THE HONBLE APEX COURT HELD THAT WHERE THE INTEREST ON DEPOSITS / SECURIT IES, WHERE THE FUNDS WERE NOT IMMEDIATELY REQUIRED FOR BUSINESS PURPOSES, WAS INVESTED IN SPECIFIED SECURITIES, WOULD BE TAXABLE AS INCOME UNDER SECTION 56 OF THE ACT. IT FURTHER HELD THAT WHERE THE ASSESSEE SOCIETY REGULARLY INVESTS ITS FUNDS NOT IMMEDIA TELY REQUIRED FOR BUSINESS PURPOSES, INTEREST ON SUCH INVESTMENT COULD NOT FALL WITHIN THE EXPRESSION OF PROFITS AND GAINS OF BUSINESS AND THE SAME COULD NOT BE HELD TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY I.E. CARRYING ON OF BUSINESS OF PROVID ING CREDIT FACILITIES TO ITS MEMBERS OR MARKETING THE AGRICULTURAL PRODUCE OF ITS MEMBERS. THE HONBLE APEX COURT FURTHER REITERATED THAT WHERE THE ASSESSEE MARKETS THE AGRICULTURAL PRODUCE OF ITS MEMBERS AND IT RETAINS THE SALE PROCEEDS IN MANY CASES AND WHERE THE RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS, FROM WHOM THE PRODUCE WAS BOUGHT, WAS INVESTED IN SHORT TERM DEPOSITS / SECURITIES, THE SAID AMOUNT WAS LIABILITY OF THE ASSESSEE AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITIES SIDE, TH EREFORE, TO THAT EXTENT, THE HONBLE SUPREME COURT HELD THAT SUCH INTEREST INCOME COULD NOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN 80P(2)(A)(I) OR 80P(3) OF THE ACT. IN VIEW THEREOF, THE HONBLE SUPREME COURT UPHELD THE ORDER OF AS SESSING OFFICER IN TAXING THE ITA NO. 7 5 6 /PN/20 1 5 M/S. KUNDALIKA NAGARI SAH. PATSANSTHA MARYADIT 5 SAID AMOUNT UNDER SECTION 56 OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE THAT EVEN IF THE SAID INTEREST INCOME WAS HELD TO BE COVERED UNDER SECTION 56 OF THE ACT, WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF TH E ACT, WAS REJECTED. 18. IN THE FACTS OF THE CASE BEFORE HONBLE HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA), THE ASSESSEE CO - OPERATIVE SOCIETY WAS ENGAGED IN THE ACTIVITY OF CARRYING ON OF BUSINESS OF P ROVIDING CREDIT FACILITIES TO ITS MEMBERS AND IT HAD EARNED INTEREST INCOME ON ITS DEPOSITS. ANOTHER FACT NOTED BY THE HONBLE HIGH COURT OF KARNATAKA WAS THAT THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT THE AMOUNT DUE TO ANY MEMBERS A ND IT WAS NOT THE LIABILITY OF THE ASSESSEE. IN FACT, THE SAID AMOUNT WAS IN THE NATURE OF PROFITS AND GAINS, WHICH WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKERS AND THE ASSESSEE IN SUCH CIRCUMSTANCE S, DEPOSITED THE MONEY IN BANK SO AS TO EARN INTEREST. THE HONBLE HIGH COURT OF KARNATAKA IN SUCH CIRCUMSTANCES HELD THAT THE INTEREST INCOME WAS ATTRIBUTABLE TO CARRYING ON OF BUSINESS OF BANKING AND THEREFORE, IT WAS LIABLE TO BE DEDUCTED IN TERMS OF S ECTION 80P(1) OF THE ACT, THEY TOOK NOTE OF INSERTION OF SECTION 80P(4) OF THE ACT, WHICH WAS APPLIED BY THE ASSESSING OFFICER TO DENY THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE HONBLE HIGH COURT OF KARNATAKA REFERRED TO THE JUDGMENT OF HON BLE APEX COURT IN TOTGAR CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) AND POINTED OUT THAT IN THE FACTS OF THE SAID CASE, THE AMOUNT WHICH WAS RETAINED BY THE ASSESSEE WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON LIABILITIES SIDE. WHERE THE INTEREST INCOME WAS EARNED ON SUCH FUNDS, THEN THE SAME WAS HELD BY THE HONBLE APEX COURT TO BE TREATED UNDER SECTION 56 OF THE ACT. HOWEVER, THE DISTINCTION WAS DRAWN BY THE HONBLE HIGH COURT OF KARNATAKA IN PARA 10 AND IT WAS POINTED OUT THAT IN THE CASE BEFORE THEM, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN THE INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBER, IT WAS NOT BANKS TO EARN THE INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBER, IT WAS NOT THE LIABILITY AND IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNTS. IN FACT, THE AMOUNT WAS IN THE NATURE OF PROFITS AND GAINS WHI CH WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKERS AND HENCE, WAS DEPOSITED IN THE BANKS SO AS TO EARN INTEREST, SUCH INTEREST INCOME EARNED BY THE ASSESSEE WAS HELD TO BE ATTRIBUTABLE TO CARRYING ON TH E BUSINESS AND THEREFORE, SAME WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. 19. ANOTHER DECISION REFERRED TO BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS GUTTIGEDARARA CREDIT CO - OPERATIVE SOCIETY LTD. VS. ITO (SUPRA), WHEREIN THE ASSESSEE WAS A CO - OPERATIVE SOCIETY ENGAGED IN THE ACTIVITY OF CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER IN VIEW OF INSERTION OF SECTION 80P(4) OF THE ACT, HAD DECLINED TO EXTEND THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE INTEREST INCOME EARNED ON SHORT TERM DEPOSITS AND FROM SAVING BANKS ACCOUNT WAS HELD LIABLE TO INCOME TAX. THE HONBLE HIGH COURT HELD THAT WHERE THE ASSESSEE SOCIETY WAS PROVIDING CREDIT FACILITIE S TO ITS MEMBERS AND WAS NOT CARRYING ON ANY OTHER BUSINESS, THEN THE SURPLUS FUNDS WHICH IT HAD EARNED AS PROFITS OF ITS BUSINESS WHEN TEMPORARILY NOT REQUIRED WERE INVESTED IN BANKS TO EARN INTEREST WAS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE, LIABLE TO BE DEDUCTED UNDER SECTION 80P(1) OF THE ACT. 20. FURTHER, THE PUNE BENCH OF TRIBUNAL IN ITO VS. NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. (SUPRA) HAD LAID DOWN THE SIMILAR PROPOSITION AS BY THE HONBLE HIGH COURT OF KARNATAKA. 21 . THE ISSUE ARISING BEFORE US IS WHETHER THE INTEREST EARNED BY THE ASSESSEE ON ITS INVESTMENTS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS MADE ITA NO. 7 5 6 /PN/20 1 5 M/S. KUNDALIKA NAGARI SAH. PATSANSTHA MARYADIT 6 SEVERAL PROPOSITIONS BEFORE US. THE FIRST AND FOREMOST PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THAT THE INTEREST INCOME IS ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER, WITHOUT PREJUDICE TO THE SAME, THE LEARNED AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE MADE AN ALTERNATE PROPOSITION THAT IN CASE THE INTEREST EARNED BY THE ASSESSEE IS HELD TO BE ASSESSABLE AS INCOME FROM OTHER SOURCES, THEN THE PROPORTIONATE EXPENDITURE RELATABLE TO SUCH INVESTMENTS IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE AND THEN ONLY BALANCE INTEREST INCOME IS TO BE TAXED AS INCOME FROM OTHER SOURCES. ANOTHER PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT WHERE THE INVESTMENTS WERE MADE WITH OTHER CO - OPERATIVE SOCIETIES, THEN THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT AND NO AMOUNT WAS ASSESSED IN THE HANDS OF THE ASSESSEE EXCEPT THE DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND SUNDARAM FINANCE OF RS.87,087/ - AND RS. 88,519/ - . THE ASSESSEE HAS PLACED ON RECORD ITS BALANCE SHEET ALONG WITH PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION AT PAGES 22 TO 31 OF THE PAPER BOOK WITH ITS ENGLISH TRANSACTION. THE PERUSAL OF THE BALANCE SHEET AS ON 31.03.2010 REFLECTS T HE ASSETS IN THE FORM OF BANK BALANCE, CASH, INVESTMENTS AND OTHER DEPOSITS ALONG WITH THE LOAN ADVANCED TO MEMBERS, PROPERTY HELD BY THE ASSESSEE AND INTEREST RECEIVABLE ON INVESTMENTS AND OUTSTANDING LOAN. ON THE LIABILITIES SIDE, THE ASSESSEE HAS DECLA RED SHARE CAPITAL, SHARE CAPITAL FUND OF THE ASSESSEE SOCIETY, THE DEPOSITS RECEIVED FROM ITS MEMBERS AND OTHER DEPOSITS AND THEREAFTER, PROVISION OF RS.41,62,699/ - . THE BREAK - UP OF THE INVESTMENT OF RS.5.55 CRORES IS PROVIDED BY THE ASSESSEE AT PAGE 56 O F THE PAPER BOOK. THE BREAK - UP OF THE INVESTMENT IS IN DIFFERENT FDS WITH CO - OPERATIVE SOCIETIES TOTALLING TO RS.5.47 CRORES AND THE OTHER INVESTMENT IN UTI MUTUAL FUNDS, SUNDARAM FINANCE, GRATUITY FUND AND SHARES TOTALLING RS.7,48,216/ - , TOTALLING RS.5.5 5 CRORES. THE ASSESSEE HAS FURTHER FURNISHED THE BREAK - UP OF FDS WITH DIFFERENT CO - OPERATIVE BANKS AT PAGES 57 TO 68 OF THE PAPER BOOK WITH SAMPLE COPIES OF FDS AT PAGES 69 TO 75 OF THE PAPER BOOK. PAPER BOOK WITH SAMPLE COPIES OF FDS AT PAGES 69 TO 75 OF THE PAPER BOOK. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT IT WAS ENGAG ED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OUT OF LOAN RECEIVED FROM ITS MEMBERS ITSELF. THE SURPLUS AMOUNT WHICH WAS ON ACCOUNT OF AMOUNT RECEIVED FROM ITS MEMBERS ONLY, WHICH HAD NOT BEEN ADVANCED TO ANY OF THE MEMBERS WAS INVESTE D IN THE BANKS, AGAINST WHICH THE SAID INVESTMENT WAS MADE OUT OF SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE, WHICH IN TURN, WERE AMOUNTS ADVANCED BY THE MEMBERS ITSELF. THE SAID PARKING OF FUNDS WITH THE CO - OPERATIVE BANKS WAS CLAIMED BY THE ASSESSEE TO B E IN THE NATURE OF ITS BUSINESS ACTIVITY AS IT WAS THE REQUIREMENT OF MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960, THAT 20 TO 30% OF TOTAL DEPOSITS ARE TO BE PARKED IN THE INVESTMENTS WITH CO - OPERATIVE BANKS. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE AMOUNT INVESTED BY THE ASSESSEE WAS OUT OF ANY LIABILITIES DUE BY THE ASSESSEE. IN THE ABSENCE OF THE SAME AND FOLLOWING THE SAME PARITY OF REASONING LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. V S. ITO (SUPRA) AND THE FACTS OF THE PRESENT CASE BEING AT VARIANCE TO THE FACTS BEFORE THE HONBLE SUPREME COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2 )(A)(I) OF THE ACT. IN THE ALTERNATE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT AT BEST THE INCOME WHICH CAN BE ASSESSED IN THE HANDS OF ASSESSEE IS THE NET INCOME AND NOT THE GROSS INCOME AS PROPORTIONATE EXPENDITURE INCURRED IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. HOWEVER, WE ARE NOT ADJUDICATING THIS ISSUE SINCE WE HAVE ALREADY HELD THE ASSESSEE TO BE ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN VIEW THEREOF, WE ALSO DO NOT ADJUDICATE THE SECOND ALTERNATE PLEA RAISED BY THE ASSESSEE THAT IT IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. HOWEVER, THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT RELATING TO DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND S UNDARAM FINANCE OF RS.87,087/ - AND RS.88,519/ - , WHICH ARE TO BE INCLUDED AS INCOME FROM OTHER SOURCES, ON WHICH THE ASSESSEE IS ENTITLED TO PROPORTIONATE EXPENDITURE. ITA NO. 7 5 6 /PN/20 1 5 M/S. KUNDALIKA NAGARI SAH. PATSANSTHA MARYADIT 7 SIMILARLY, THE PROFIT OF RS.25,786/ - FROM OTHER ACTIVITIES AND SERVICES IS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, WE PARTLY UPHOLD THE ORDER OF CIT(A). IN VIEW THEREOF, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. 1 1 . THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENTICA L TO THE ISSUE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2010 - 11 AND FOLLOWING THE SAME PARITY OF REASONING, THE ORDER OF CIT(A) IS UPHELD. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 1 2 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF JUNE , 201 6 . SD/ - (SUSHMA CHOWLA ) / JUDICIAL MEMBER / PUNE ; DATED : 29 TH JUNE , 201 6 . GCV SR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 2 , THANE ; 4. / THE CIT - 2, THANE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE