TATYASAHEB MOHITE NAGARI,MUMBAI vs. INCOME TAX OFFICER (21)(3)(2), MUMBAI

O R D E R Per B.R. Baskaran (AM) :-

The appeal filed by the assessee is directed against the order dated 18.10.2017 passed by the learned CIT(A)-33, Mumbai and it relates to A.Y. 2013-14. The assessee is aggrieved by decision of the learned CIT(A) in holding that gross interest income of ` 23.32 lakhs received by the assessee on fixed deposits kept with the cooperative banks is not eligible for exemption u/s. 80P(2)(a)(i) of the Act.

members and in this regard, the learned CIT(A) followed the decision rendered by Hon'ble Bombay High Court in the case of Quepem Urban co-operative Credit Society Ltd. Vs. ACIT (2015) 58 taxamnn.com 113. The assessee had also earned interest income of Rs.23.32 lakhs from fixed deposits kept with the cooperative banks. The learned CIT(A) held that provisions of section 80P(2)(a)(i) will not apply to the interest income earned from fixed deposits kept with co-operative banks. The Ld CIT(A) also held that the provisions of sec.80P(2)(d) of the Act will not also apply to the same. In this regard, the learned CIT(A) followed the order passed by the Coordinate Bench in the case of Shri Saidatta Cooperative Credit Society Ltd. Vs. ITO in dated 15.1.2016. Accordingly, he sustained the assessment of ` 23.32 lakhs, being interest income earned by the assessee from fixed deposits kept with co-operative banks. Aggrieved, the assessee has filed this appeal before us.

deposits kept with the banks is attributable to the profit and gains of business of providing credit facility to its members. Accordingly, learned AR submitted that the decision rendered in the case Jaoli Taluka Sahakari Patpedhi Maryadit (supra) may kindly be followed in the instant case also.

4 Shri Tatyasaheb Mohite Nagari Sahakari Patpedhi Ltd.

"8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act.

9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee-Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i)of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law.

immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com66. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order."