ACIT, CIRCLE-4, Nagpur V. M/S. THE NIRMAL UJJWAL CREDIT CO-OP. SOCITY, Nagpur

ITA 8/NAG/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2210 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D RAVI KUMAR
• Assessee Lawyers: KAILASH JOGANI; MUKESH AGRAWAQL
• Keywords: Business income
• Section: 56

Judgement Text

1 ITA NOS. 08 & 09/NAG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SH AMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NOS.08 & 09/NAG/2015. ASSESSMENT YEARS : 2010 - 11 & 2011 - 12. ASSTT. COMMISSIONER OF INCOME - TAX, M/S THE NIRMAL UJJWAL CREDIT CIRCLE - 4, NAGPUR. VS. CO - OP. SOCIETY, NAGPUR. PAN AAAAT 6554H APPELLANT. RESPONDENT. APPELLANT BY : SHRI D. RAVI KUMAR. RESP ONDENT BY : SHRI KAILASH JOGANI & SHRI MUKESH AGRAWAQL. DATE OF HEARING : 28 - 04 - 2016 DATE OF PRONOUNCEMENT : 31 ST MAY, 2016 O R D E R PER SHRI SHAMIM YAHYA, A.M. THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 01 - 10 - 2014 FOR ASSESSMENT YEARS 2010 - 11 AND 2011 - 12. SINCE THE ISSUES ARE COMMON AND THE APPEALS WERE HEARD TOGETHER THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. THE GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - II, NAGPUR HAS ERRED IN HOLDING THAT THE AS SESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT 1961 IN RESPECT OF INTEREST INCOME OF RS.1,39,44,916/ - FOR ASSESSMENT YEAR 2010 - 11 AND RS.3,21,57,481/ - FOR ASSESSMENT YEAR 2011 - 12 WITHOUT APPRECIATING THAT THE SAID INCOME IS PART OF IN TEREST EARNED BY CO - OP. CREDIT SOCIETY FROM ITS INVESTMENTS WITH OTHER CO - OP. SOCIETY ONLY AND DEDUCTIBLE U/S 80P(2)(D) OF THE I.T. ACT AND NOT U/S 80P(2)(A)(I) OF THE I.T. ACT AS CLAIMED BY THE ASSESSEE. 2 ITA NOS. 08 & 09/NAG/2015 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - II, NAGPUR HAS FAILED TO APPRECIATE THAT THE INTEREST EARNED ON FDR INVESTMENTS WOULD FALL IN CATEGORY OF INCOME FROM OTHER SOURCES BEING TAXABLE U/S 56 OF THE I.T. ACT FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME C OURT IN THE CASE OF M/S TOTAGARS CO - OP. SALE SOCIETY LTD. REPORTED IN 322 ITR 283 (SC) AND WOULD NOT QUALIFY FOR DEDUCTION AS BUSINESS INCOME U/S 80P(2)(A)(I) OF THE I.T. ACT. SINCE THE FACTS ARE IDENTICAL, WE ARE ADJUDICATING THE ISSUE WITH FACTS AND FIGURES FROM ITA NO. 08/NAG/2015 . 2. IN THIS CASE THE AO NOTED THAT THE ASSESSEE HAD EARNED INTEREST RECEIVED ON INVESTMENT AMOUNTING TO RS.2,37,29,872/ - . THE AO FURTHER NOTED THAT THE ASSESSEE HAD MADE INVESTMENT OF RS.10,22,27,122/ - IN STATUTORY INVES TMENT AND RS.19,78,81,923/ - IN NON - STATUTORY INVESTMENTS AND HAD EARNED INTEREST OF RS.97,84,956/ - AND RS.1,39,44,916/ - RESPECTIVELY FROM THE ABOVE INVESTMENTS. THE AO MADE FURTHER ENQUIRIES WITH REGARD TO NON - STATUTORY INVESTMENTS AND NOTED THAT THE SAID INVESTMENT HAD BEEN MADE AS UNDER : NAGPUR NAGRIK SAHAKARI BANK RS. 13,64,738/ - PUNJAB NATIONAL BANK. RS. 36,279/ - IDBI BANK RS. 5,90,000/ - NIRMAL URBAN CO - OP BANK. RS. 1,19,53,269/ - TOTAL RS. 1,39,44,916/ - 3. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTEREST ACCRUING ON NON - STATUTORY INVESTMENTS SHOULD BE BROUGHT TO TAX AS INCOME FROM OTHER SOURCES. IT WAS EXPLAINED BY THE ASSESSEE THAT OPER ATIONAL FUNDS ARE INVESTED BY THE SOCIETY IN VARIOUS INVESTMENTS, WHICH CAN BE READILY AVAILABLE FOR DISBURSING LOANS TO MEMBERS WHEN THEY REQUIRE FINANCIAL ASSISTANCE. IT WAS EXPLAINED THAT THE SOCIETY EVEN THOUGH IT HAS FUNDS, IT DOES NOT READILY GRANT L OANS TILL THERE IS A GENUINE LOAN AVAILER. THE AO DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND REFERRED THE DECISION OF HONBLE APEX COURT IN THE CASE OF M/S TOTGARS CO - 3 ITA NOS. 08 & 09/NAG/2015 OPERATIVE SALE SOCIETY LTD. 332 ITR 283 THE AO CONCLUDED THAT THE INTEREST T HAT HAS ACCRUED TO THE ASSESSEE FROM FUNDS WHICH ARE NOT IMMEDIATELY REQUIRED FOR ITS BUSINESS PURPOSES AND WHICH HAS BEEN INVESTED IN NON - STATUTORY INVESTMENTS HAS TO BE TREATED AS INCOME FROM OTHER SOURCES AND NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I ). THE AO ALSO NOTED THAT THOUGH BULK OF THE INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE IN CO - OPERATIVE BANKS, DEDUCTION U/S 80P(2)(D) WOULD ALSO NOT BE AVAILABLE TO THE ASSESSEE AND HE THEREFORE BROUGHT TO TAX THE SAID INTEREST OF RS.1,39,44,916/ - AS INCO ME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) REFERRED TO SEVERAL CASE LAWS. THE LEARNED CIT(APPEALS) CONCLUDED AS UNDER : 6.11 THUS FROM THE PERUSAL OF THE FACTS OF THE CASE AND VARIOUS JUDICIAL PRONOUNCEMENTS, IT IS EVIDENT THAT T HE INTEREST EARNED ON VARIOUS FUND INVESTED BY THE APPELLANT WHICH ARE DEPOSITED IN BANK ACCOUNT ARE DIRECTLY ATTRIBUTABLE TO THE BUSINESS OF BANKING HAS TO BE TAXED THE BUSINESS INCOME OF THE APPELLANT. THERE ARE SEVERAL JUDGMENTS WHICH ARE CLEARLY HELD T HAT INTEREST INCOME EARNED BY BANK ON SECURITIES, FDS, INVESTMENT IN UTO ETC OUT OF MONEY AVAILABLE FROM WORKING CAPITAL AVAILABLE WITH THE CO - OPERATIVE BANKS ARE ALL INCOME ATTRIBUTABLE TO BUSINESS OF BANKING AND ELIGIBLE FOR GRANT OF DEDUCTION U/S 80P(2) (A)(I). SOME OF THE JUDGEMENTS WHICH SUPPORT THEIR VIEW ARE AS UNDER : 1. SURAT DISTRICT CO - OP. BANK LTD. & ORS. VS. ITO 78 TTJ 1 (AHD. SPL. BENCH.) 2. CIT VS. RAMANATHAPURAM DISTRICT CO - OP. BANK LTD. (2002) 255 ITR 423 (SC). 3. CIT VS. RATNAGIRI DISTRICT CENTRAL CO - OP. BANK LTD. 2002) 174 CTR 116 (BOM.)/ 4. CIT VS. MADURAI DISTRICT CO - OP. BANK LTD. (1991) 239 ITR 700 (MAD) AND 5. CIT VS. SOLAPUR NAGRI AUDYOGIC SAHAKARI BANK LTD. (2009) 182 TAXMAN, 231 (BOM). 6.12. ALSO, THE RELIANCE PLACED BY THE LD. AO ON DECISION OF THE HONBLE ITAT NAGPUR E - BENCH IN APPEAL NO. ITA 85/NAG /2011, IN THE CASE OF THE MEDICAL COLLEGE HOSPITAL EMPLOYEES CREDIT CO - 0P. SOCIETY LTD. IS MISPLACED AND THE FINDINGS OF THE SAID CASE ACTUALLY SUPPORTS THE CASE OF THE APPELLANT AS THE HONBLE ITAT HAS DISMISSED THE DEPARTMENTS 4 ITA NOS. 08 & 09/NAG/2015 APPEAL. IN THE SAID CASE THE GROUNDS OF APPEAL RAISED BY DEPARTMENT BEFORE HONBLE ITAT WAS THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE IT ACT, 1961 IN RESPECT OF INTEREST INCOME OF RS.11,17,310. IN SUCH CIRCUMSTANCES, IT WAS HELD AS UNDER : 8. ..THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. AFTER ANALYSING VARIOUS PROVISIONS OF THE ACTS AND THE CIRCULARS, HE HAS HELD THAT THE ASSESSEE IS NOT A CO - OPERATIVE BANK. IN OUR CONSIDERED OPINION, ASSESSEE - COOPERATIVE SOCIETY CANNOT BE DEPRIVED OF THE BENEFITS OF DEDUCTIONS AVAILABLE AS PER THE PROVISIONS OF SEC. 80P(2) OF THE ACT WE AGREE WITH FAA, THAT APPELLANT IS A CREDIT CO - OPERATIVE SOCIETY AND N OT A CO - OPERATIVE BANK AND THEREFORE IT IS ENTITLED TO CLAIM DEDUCTIONS AVAILABLE UNDER CHAPTER - VIA OF THE ACT [(SECTION 80(P)]. INTEREST AMOUNTING TO RS.11.17 LAKHS, EARNED FROM RESERVE FUND DEPOSIT, IT HAS TO BE TREATED THE BUSINESS INCOME OF THE ASSESSE E FOR THE AY UNDER CONSIDERATION. 6.13 THE ADDITIONS CONFIRMED THE CIT(A) OF RS.1.48 LACS IN RESPECT OF INTEREST RECEIVED ON SAVING ACCOUNT AND SHORT TERM DEPOSITS IN THE ABOVE CASE WAS NEVER A GROUND OF APPEAL BEFORE THE HONOURABLE ITAT NAGPUR E - BENCH AN D HENCE THERE WAS NO QUESTION OF ANY DECISION ON THE SAME. HENCE AO HAS MIS - CONSTRUED THE FINDINGS OF ITAT AND ERRONEOUSLY RELIED ON THIS CASE. 7. IN CONCLUSION IT MAY BE STATED THAT IN THE APPELLANTS LINE OF BUSINESS, THE APPELLANT HAS TO PAY INTEREST ON THE DEPOSITS IT TAKES AND IT IS NOT POSSIBLE THAT ALL THE DEPOSITS WHICH ARE COLLECTED MAY BE ADVANCED AT THE SAME POINT OF TIME. IT IS ALSO POSSIBLE THAT SOME DEPOSITS MAY BE WITHDRAWN PRIOR TO ITS MATURITY SO FAR AS FIXED DEPOSIT ACCEPTED ARE CONCERNED AND ANY WITHDRAWALS ARE POSSIBLE FROM SAVINGS BANK DEPOSITS OR RECURRING DEPOSIT AT ANY POINT OF TIME FOR WHICH SOCIETY CANNOT GO AND RECOVER THE AMOUNT FROM THE BORROWERS AND THEN PAY TO THE DEPOSIT HOLDERS AND HENCE, SOME CIRCULATING CAPITAL OR OPERATION AL FUNDS BY WAY LIQUID FUNDS ARE ALWAYS REQUIRED TO BE KEPT FOR SMOOTH FUNCTIONING OF THE SOCIETY. EVEN IN CASE OF BANKS, RBI PRESCRIBES SLR AND CLR FOR THIS PURPOSE AND HENCE, FOR MEETING SUCH REQUIREMENTS BANKS HAVE TO KEEP THE FUNDS BY WAY OF LIQUID ASS ETS TO MEET SUCH REQUIREMENTS. TO MAINTAIN SUCH OPERATIONAL FUNDS, IS PART AND PARTIAL OF THE LENDING ACTIVITY AND HENCE, IT CANNOT BE SAID THAT THE INCOME BY WAY OF INTEREST FROM OTHER BANKS IS NOT FOR CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE INVESTMENT OF THE FUNDS BY THE BANKS INCLUDING THE NON - STATUTORY RESERVES ARE PART OF THE LENDING ACTIVITY AND NO BANK WOULD LIKE 5 ITA NOS. 08 & 09/NAG/2015 ITS RESERVE FUNDS TO REMAIN IDLE AND NOT EARN ANY INTEREST. THIS IS NOT ONLY PRUDENT BUSINESS MANAGEMENT BUT IS ALSO A PART OF THE ACTIVITY OF LENDING. THEREFORE, THE INTEREST EARNED ON SUCH DEPOSITS IS DIRECTLY ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS AND THE SAME THEREFORE QUALIFIES FOR THE RELIEF AND DEDUCTION U/S 80P(2)(A)( I) OF I.T. ACT, 1961. 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND T HAT THE ISSUE INVOLVED IS COVERED IN FAVOUR OF THE ASSESSEE BY CATENA OF DECISIONS FROM ITAT A S WELL AS JURISDICTIONAL HIGH COURT. IN THIS REGARD WE MAY GAINFULLY REFER THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. SOLAPUR NAGRI AUDYOGIC SAHAKARI BANK LTD. 182 TAXMAN 231 WHEREIN THE FOLLOWING QUESTION WAS RAISED. WHETHER T HE INTEREST INCOME RECEIVED BY A CO - OPERATIVE BANK FROM INVESTMENTS MADE IN KISAN VIKAS PATRA (KVP FOR SHORT) AND INDIRA VIKAS PATRA (IVP FOR SHORT) OUT OF VOLUNTARY RESERVES IS INCOME FROM BANKING BUSINESS EXEMPT UNDER SECTION 80P(2)(A)(I) OF THE INCO ME - TAX ACT, 1961 ? AFTER CONSIDERING THE ISSUE THE HONBLE JURISDICTIONAL HIGH COURT HAS CONCLUDED AS UNDER : 12. THEREFORE, IN ALL THESE CASES, WHERE THE SURPLUS FUNDS NOT IMMEDIATELY REQUIRED FOR DAY - TO - DAY BANKING WERE KEPT IN VOLUNTARY RESERVES AND I NVESTED IN KVP/IVP, THE INTEREST INCOME RECEIVED FROM KVP/IVP WOULD BE INCOME FROM BANKING BUSINESS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(I) OF THE ACT. 13. IN THE RESULT, THERE BEING NO DISPUTE THAT THE FUNDS IN THE VOLUNTARY RESERVES WHICH WERE UTI LISED FOR INVESTMENT IN KVP/OVP BY THE CO - OPERATIVE BANKS WERE THE FUNDS GENERATED FROM THE BANKING BUSINESS, WE HOLD THAT IN ALL THESE CASES THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE INTEREST INCOME RECEIVED BY THE CO - OPERATIVE BANKS FROM THE INVESTM ENTS IN KVP/IVP MADE OUT OF THE FUNDS IN THE VOLUNTARY RESERVES WERE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ABOVE CASE LAW FULLY SUPPORTS THE ASSESSEES CASE. HERE ALSO SURPLUS FUNDS NOT IMMEDIATELY REQUIRED FOR DAY TO DAY BANKING WERE KEPT IN BANK DEPOSITS. 6 ITA NOS. 08 & 09/NAG/2015 THE INCOME EARNED THERE FROM THUS WOULD BE INCOME FROM BANKING BUSINESS ELIGIBLE FOR DEDUCTION U/S 80 P(2)(A)(I). 7. SIMILARLY WE FIND THAT SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL ON SIMILAR GROUNDS RAISED BY THE REVENUE IN THE CASE OF MSEB ENGINEERS CO - OP. CREDIT SOCIETY LTD. WHEREIN THE ITAT, NAGPUR BENCH VIDE ORDER DATED 05/05/2016 HELD AS UNDER : UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS, WE FIND THAT THE ABOVE ISSUES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS ITAT, REFERRED BY THE LD. CIT(A) IN HIS APPELLATE ORDER. THE DISTINCTION MENTIONED IN THE GROUNDS OF AP PEAL IS NOT AT ALL SUSTAINABLE. WE FURTHER FIND THAT THIS TRIBUNAL AGAIN IN THE CASE OF CHATTISGARH URBAN SAHAKARI SANSTHA MARYADIT VS. ITO IN ITA NO.371/NAG/2012 VIDE ORDER DATED 27.05.2015 HAS ADJUDICATED SIMILAR ISSUE AS UNDER: - 11 UPON CAREFUL CONSIDERATION, WE NOTE THAT IDENTICAL ISSUE WAS THE SUBJECT MATTER OF CONSIDERATION BY ITAT, AHMEDABAD BENCH DECISION IN THE CASE OF DHANLAXMI CREDIT COOPERATIVE SOCIETY LTD. (SUPRA), IN WHICH ONE OF US, LEARNED JUDICIAL MEMBER, WAS A PARTY. THE CONCLUDING PORTION OF THE TRIBUNALS DECISION IS AS UNDER: 4. WITH THIS BRIEF BACKGROUND, WE HAVE HEARD BOTH THE SIDES. IT WAS EXPLAINED THAT THE CO - OPERATIVE SOCIETY IS MAINTAINING OPERATIONS FUNDS AND TO MEET ANY EVENTUALITY TOWARDS RE - PAYMENT OF DEPOSIT, T HE CO - OPERATIVE SOCIETY IS MAINTAINING SOME LIQUIDATED FUNDS AS A SHORT TERM DEPOSIT WITH THE BANKS. THIS ISSUE WAS THOROUGHLY DISCUSSED BY THE ITAT B BENCH AHMEDABAD IN THE CASE OF THE INCOME TAX OFFICER VS. M/S.JAFARI MOMIN VIKAS CO - OP.CREDIT SOCIET Y LTD. BEARING ITA NO.1491/AHD/2012 (FOR A.Y. 2009 - 10) AND CO NO.138/AHD/2012 (BY ASS ESSEE) ORDER DATED 31/10/2012. T HE RELEVANT PORTION IS REPRODUCED BELOW: - 19. THE ISSUE DEALT WITH BY THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS (SUPRA) IS EXTRAC TED, FOR APPRECIATION OF FACTS, AS UNDER: WHAT IS SOUGHT TO BE TAXED 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? THE AS SESSEE(S) MARKETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT. IN THIS CASE, WE ARE CONCERNED WITH THE TAX TREATMENT OF SUCH AMOUNT. SINCE THE FUND CREATED BY SUCH 7 ITA NOS. 08 & 09/NAG/2015 BY SUCH RETENTION WAS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SECURITIES. THE QUESTION, BEFORE US, IS WHETHER INTEREST ON SUCH DEPOSITS/SECURITIES, WHICH STRICTLY SPEAKING ACCRUES TO THE MEMBERS ACCOUNT, COULD BE TAXED AS BUSINESS INCOME UNDER SECTION 28 OF THE ACT? IN OUR V IEW, SUCH INTEREST INCOME WOULD COME IN THE CATEGORY OF INCOME FROM OTHER SOURCES, HENCE, SUCH INTEREST INCOME WOULD BE TAXABLE UNDER SECTION 56 OF THE ACT, AS RIGHTLY HELD BY THE ASSESSING OFFICER... 19.1. HOWEVER, IN THE PRESENT CASE, ON VERIFICATION OF THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2009, IT WAS OBSERVED THAT THE FIXED DEPOSITS MADE WERE TO MAINTAIN LIQUIDITY AND THAT THERE WAS NO SURPLUS FUNDS WITH THE ASSESSEE AS ATTRIBUTED BY THE R EVENUE. HOWEVER, IN REGARD TO THE CASE BEFORE THE HONBLE SUPREME COURT (ON PAGE 286) 7....... BEFORE THE ASSESSING OFFICER, IT WAS ARGUED BY THE ASSESSEE(S) THAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THE FUNDS WERE NOT REQUIRED IMMEDIATE LY FOR BUSINESS PURPOSES AND, CONSEQUENTLY, SUCH ACT OF INVESTMENT CONSTITUTED A BUSINESS ACTIVITY BY A PRUDENT BUSINESSMAN; THEREFORE, SUCH INTEREST INCOME WAS LIABLE TO BE TAXED UNDER SECTION 28 AND NOT UNDER SECTION 56 OF THE ACT AND, CONSEQUENTLY, THE ASSESSEE(S) WAS ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ARGUMENT WAS REJECTED BY THE ASSESSING OFFICER AS ALSO BY THE TRIBUNAL AND THE HIGH COURT, HENCE, THESE CIVIL APPEALS HAVE BEEN FILED BY THE ASSESSEE(S). 19.2. FROM THE ABOVE, IT EMERGES THAT (A) THAT ASSESSEE (ISSUE BEFORE THE SUPREME COURT) HAD ADMITTED BEFORE THE AO THAT IT HAD INVESTED SURPLUS FUNDS, WHICH WERE NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF ITS BUSINESS, IN SHORT TERM DEPOSITS; (B) THAT THE SURPLUS FUNDS AROSE OUT OF THE AMOUNT RETAINED FROM MARKETING THE AGRICULTURAL PRODUCE OF THE MEMBERS; (C) THAT ASSESSEE CARRIED ON TWO ACTIVITIES, NAMELY , (I) ACCEPTANCE OF DEPOSIT AND LENDING BY WAY OF DEPOSITS TO THE MEMBERS; AND (II) MARKETING THE AGRICULTU RAL PRODUCE; AND (D)THAT THE SURPLUS HAD ARISEN EMPHATICALLY FROM MARKETING OF AGRICULTURAL PRODUCES. 19.3. IN THE PRESENT CASE UNDER CONSIDERATION, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THERE WERE NO SURPLUS FUNDS. 8 ITA NOS. 08 & 09/NAG/2015 19.4. WH ILE COMPARING THE STATE OF AFFAIRS OF THE PRESENT ASSESSEE WITH THAT ASSESSEE (BEFORE THE SUPREME COURT), THE FOLLOWING CLINCHING DISSIMILARITIES EMERGE, NAMELY: (1) IN THE CASE OF THE ASSESSEE, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THAT THERE WERE NO SURPLUS FUNDS; - - IN THE CASE OF TOTGARS, IT HAD SURPLUS FUNDS, AS ADMITTED BEFORE THE AO, OUT OF RETAINED AMOUNTS ON MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS; (2) IN THE CASE OF PRESENT ASSESSEE, IT DID NOT CARRY OUT ANY ACTIVITY EXCEPT IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THAT THE FUNDS WERE OF OPERATIONAL FUNDS. THE ONLY FUND AVAILABLE WITH THE ASSESSEE WAS DEPOSITS FROM ITS MEMBERS AND, THUS, THERE WAS NO SURPLUS FUNDS AS SUCH; - IN THE CASE OF TOTGARS, THE HONBLE SUPREME COURT HAD NOT SPELT OUT ANYTHING WITH REGARD TO OPERATIONAL FUNDS; 19.5. CONSIDERING THE ABOVE FACTS, WE FIND THAT THERE IS FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE NOT A CO - OPERATIVE BANK, BUT ITS NATURE O F BUSINESS WAS COUPLED WITH BANKING WITH ITS MEMBERS, AS IT ACCEPTS DEPOSITS FROM AND LENDS THE SAME TO ITS MEMBERS. TO MEET ANY EVENTUALITY, THE ASSESSEE WAS REQUIRED TO MAINTAIN SOME LIQUID FUNDS. THAT WAS WHY, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD INVESTED IN SHORTTERM DEPOSITS. FURTHERMORE, THE ASSESSEE HAD MAINTAINED OVERDRAFT FACILITY WITH DENA BANK AND THE BALANCE AS AT 31.3.2009 WAS RS.13,69,955/ - [SOURCE: BALANCE SHEET OF THE ASSESSEE AVAILABLE ON RECORD]. 19.6. IN OVERALL CONSIDERATION OF ALL THE ASPECTS, WE ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO - OP. SALE SOCIETY LTD. 9SUPRA) CANNOT IN ANY WAY COME TO THE RESCUE OF EITHER THE LD.CIT(A) OR THE REVENUE. IN VIEW OF THE A BOVE FACTS, WE ARE OF THE FIRM VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN COMING TO A CONCLUSION THAT THE SUM OF RS.9,40,639/ - WAS TO BE TAXED U/S.56 OF THE ACT. IT IS ORDERED ACCORDINGLY. 5. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO - ORDINATE BENCH, WE HEREBY HOLD THAT THE BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) WAS RIGHTLY GRANTED BY LD.CIT(A), HOWEVER, HE HAS WRONGLY HELD THAT THE INTEREST INCOME IS TAXABLE U/S.56 OF THE ACT SO DO 9 ITA NOS. 08 & 09/NAG/2015 NOT FALL UNDER THE CATEGORY OF EXEMPTED INCOME U/S.80 P OF THE ACT. THE ADVERSE PORTION OF THE VIEW, WHICH IS AGAINST THE ASSESSEE, OF LD.CIT(A) IS HEREBY REVERSED FOLLOWING THE DECISION OF THE TRIBUNAL CITED SUPRA, RESULTANTLY GROUND IS ALLOWED. 8. WE FIND THAT THE RATIO OF ABOVE CASE ALSO APPLIES TO THE P RESENT CASE. AS OBSERVED IN THE ABOVE CASE LAW, IN THIS CASE ALSO THE SUBMISSIONS OF THE ASSESSEES COUNSEL IS THAT THE ASSESSEE SOCIETY IS MAINTAINING OPERATIONAL FUNDS AND TO MEET ANY EVENTUALITY TOWARDS REPAYMENT OF DEPOSIT THE COOPERATIVE SOCIETY IS M AINTAINING SOME LIQUIDATED FUNDS AS SHORT TERM DEPOSITS WITH BANKS. HENCE ADHERING TO THE DOCTRIN STAIR DESISES, WE HOLD THAT THE ASSESSEE SHOULD BE GRANTED BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I). ACCORDINGLY, THE INTEREST ON DEPOSITS WOULD QUALIF Y FOR DEDUCTION UNDER THE SAID SECTION. ACCORDINGLY, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 3. WE FURTHER FIND THAT BATCH OF SIMILAR APPEALS DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE HAS ALSO BEEN CONSIDERED BY THE JURISDICTIONAL HIGH COURT. THE HONBLE JURISDICTIONAL HIGH COURT HAS DULY AFFIRMED OF THIS TRIBUNAL. ACCORDINGLY, IN THE BACKGROUND AFORESAID DISCUSSION, WE D O NOT INFIRMITY IN THE ORDER OF LD. CIT(A). 8. IN THE BACKGROUND OF AFORESAID DISCUSSION AND DECISION WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY,2016. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 31 ST MAY, 2016. 10 ITA NOS. 08 & 09/NAG/2015 COPY FORWARDED TO : 1. M/S THE NIRMAL UJJWAL CREDIT CO - OP. SOCIETY, 193, MAIN ROAD, NANDANWAN, NAGPUR. . 2. A.C.I.T., CIRCLE - 4, NAGPUR. 3. C.I.T. , NAGPUR. 4. CIT(APPEALS), - II, NAGPUR. 5. D.R., ITAT, RAIPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.