RAYAT SEVA KRUSHI UDYOG SAHAKARI SANGH LTD,KOLHAPUR vs. INCOME-TAX OFFICER, WARD - 1(2), KOLHAPUR

आदेश / ORDER PER R.S.SYAL, VP : These three appeals by the assessee arise out of a common order passed by the ld. CIT(A)-1, Kolhapur, on 10-07-2017 in relation to the A.Yrs. 2012-13 to 2014-15. Since all the appeals are based on common facts and identical grounds, I am, therefore, proceedings to dispose them off by this consolidated order, for the sake of convenience.

2 ITA Nos.2145 to 2147/PUN/2017 Rayat Seva Krushi Udyog Sahakari Sangh Ltd.,

a Co-operative Society engaged in the business of trading of

Fertilizers and Agro related goods to its members. The

assessee claimed deduction u/s. 80P(2)(a)(i) of the Income-tax

Act, 1961 (hereinafter also called as ‘the Act’) on interest

income from banks amounting to Rs.5,62,430/-, other than co-

operative banks. On being called upon to justify the claim of

deduction on such interest income, it was submitted on behalf

of the assessee that it availed overdraft facilities on the basis of

Fixed Deposits maintained with State Bank of India. It was

further submitted that maintenance of account with State Bank

of India was necessary for purchases chiefly from (1) Zuari

Industries Ltd.; (2) Rashtriay Chemicals and Fertilizers; (3)

Indian Farmers Fertilizers Co-op. Ltd.; (4) Krushak Bharti Co-

op. Ltd. (5) Indian Potash Ltd. etc. The assessee submitted

that the payments were required to be made to such suppliers

as and when demanded. Since FDRs were kept with State

Bank of India for obtaining overdraft facility, the assessee

submitted that such interest should be treated as income

arising under the head “Profits and gains from business or

profession”. Negating such opinion, the AO treated interest

3 ITA Nos.2145 to 2147/PUN/2017 Rayat Seva Krushi Udyog Sahakari Sangh Ltd.,

income as arising under the head “Income from other

sources”. Relying on the judgment of Hon’ble Supreme Court

in the case of Totgar’s Cooperative Sale Society Ltd. Vs. ITO

(2010) 322 ITR 283 (SC), the AO denied the benefit of

deduction on such interest income. Facts and circumstances of

the other two years in appeal are similar except with the

difference in the amounts of interest earned by the assessee

from the respective FDRs maintained with State Bank of

India. The ld. CIT(A) echoed the assessment orders on this

issue, against which the assessee has come up in appeal before

the Tribunal.

on record. Notice sent to the assessee has been served and

acknowledgment is placed on record. As the assessee has not

put in any appearance, I am proceeding to dispose of these

appeals ex parte qua the assessee.

categorically stated before the AO that the interest was earned

from bank on FDRs which were required to be maintained for

obtaining credit facilities. It was necessary for the reason that

4 ITA Nos.2145 to 2147/PUN/2017 Rayat Seva Krushi Udyog Sahakari Sangh Ltd.,

all its suppliers, listed above, insisted on having account with

the State Bank of India so as to facilitate the business dealings.

The reliance of the authorities below on the judgment in the

case of Totgar’s Cooperative Sale Society Ltd. (supra) is

misconceived in as much as the Hon’ble Supreme Court has

held that interest income from surplus funds/short term

deposits with banks is “Income from other sources” taxable

u/s.56 of the Act and hence ineligible for deduction u/s. 80P.

As the assessee in the instant case was commercially bound to

maintain overdraft with State Bank of India and for that

purpose it had to place FDRs, on which the interest income

was earned, such an interest arising on these FDRs, in the

given circumstances, is in the nature of income under the head

“Profits and grains from business or profession” and cannot be

characterized “Income from other sources” as held by the

authorities below. Once the interest income is construed as

“Business income”, the same becomes eligible for deduction

u/s. 80P of the Act. I, therefore, overturn the impugned order

and direct to grant deduction u/s.80P on such interest income

in all the three years under consideration.

5 ITA Nos.2145 to 2147/PUN/2017 Rayat Seva Krushi Udyog Sahakari Sangh Ltd.,

Order pronounced in the Open Court on 14th November, 2018.

Sd/- (R.S.SYAL) उपा�य� उपा�य�/ VICE PRESIDENT उपा�य� उपा�य�

पुणे Pune; �दनांक Dated : 14th November, 2018 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. आयकर आयु�(अपील) / The CIT (Appeals)-1, Kolhapur 4. आयकर आयु� / The Pr. CIT-1, Kolhapur 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / DR ‘SMC’, ITAT, Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार

/ True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

ITA Nos.2145 to 2147/PUN/2017 Rayat Seva Krushi Udyog Sahakari Sangh Ltd.,

Date 1. Draft dictated on 13.11.18 2. Draft placed before author 13.11.18 3. Draft proposed & placed before the -- second member 4. Draft discussed/approved by Second -- Member. 5. Approved Draft comes to the Sr.PS/PS 13.11.18 6. Kept for pronouncement on 14.11.18 7. File sent to the Bench Clerk 14.11.18 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. *