INCOME-TAX OFFICER, WARD-7(2)(5), BENGALURU vs. M/S. KAMMAVARI CREDIT CO-OPERATIVE SOCIETY LIMITED, BENGALURU

The appellant is a Credit Co-operative Society established in the year 1994, engaged in activities of providing credit facilities to its members and also taking deposits from its members, filed its return of income for year under consideration on 30.09.2014 showing an income of Rs.9,10,344/-.

During the course of scrutiny assessment, the Ld.AO observed that the appellant earned interest income to the tune of Rs.2,13,74,847/- from various fixed deposits with different banks including some co-operative societies. Following the decision of its predecessor in the preceding year for A.Ys. 2013-14 and 2012-13 he was of the opinion that the interest income was not earned out of business carried on by the appellant credit society and thus the same was liable to be added relying upon the judgment passed by the Hon’ble Apex Court in case of M/s. Totgar Sales Credit Co-op. Society Ltd. vs. ITO, Karnataka reported in 320 ITR 238 SC.

3.1 The case of the assessee was otherwise. According to the assessee the interest earned by the co-operative society was attributable to the business activity of the appellant and a good portion of the said interest income was also from the investment with the other co-operative societies which is exempt u/s. 80P(2)(a)(i) of the Act. The assessee relied upon the judgement passed by the Hon’ble jurisdictional High Page 3 of Court in case of M/s. Guttigedarara Credit Co-operative Ltd. in of 2015 on this aspect. The case further made out by the assessee is that the fixed deposits were made out of the money not required by the society immediately for lending. Further that this was also not out of the money due to the members. In that view of the matter, the interest earned from such investment was attributable to the carrying out of the business of the appellant society and the judgment mentioned hereinabove in case of M/s. Guttigedarara Credit Co-operative Ltd. (supra) squarely applies to the facts of the present case. The ultimate prayer was to allow the income earned by the assessee. However, such contention made by the assessee was found to be not acceptable and the addition was made to the impugned amount which was ultimately deleted by the Ld.CIT(A), relying upon the judgment passed by the Hon’ble jurisdictional High Court in case of M/s. Guttigedarara Credit Co-operative Ltd. (supra) and in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. in ITA no. 307 of 2014 and also the order passed by his predecessor in appeals in case for A.Ys. 2012-13 and 2013- 14.

At the time of hearing the instant appeal, the Ld.Counsel appearing for the assessee submitted before us that the issue is squarely covered by the judgment passed by the Hon’ble jurisdictional High Court in case of M/s. Guttigedarara Credit Co-operative Ltd. (supra) and the impugned addition has been rightly deleted by the Ld.CIT(A) applying the ratio Page 4 of laid down therein. Such contention made by the assessee, however, was not been able to be controverted by the Ld.DR.