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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI R.S. SYAL
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.,
Facts relating to the A.Y. 2012-13 are that the assessee is
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.
I have heard the ld. DR and perused the relevant material
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.
It is found from the assessment order that 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.,
The other ground raised in these appeals about the levy of interest u/s.234A, 234B and 234C is consequential and disposed off accordingly.
In the result, all the three appeals are allowed.
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. *