SUMMARY OF THE CASE LAWS
The funds kept in bank can be said to be ready for utilization by the co-operative society in its business of providing credit facilities to its members; the income from such monies, kept in the bank, can be said to be attributable to the business of providing credit facilities, so as to fall within the ambit of section 80P(2)(a)(i) .
CASE LAWS DETAILSI
DECIDED BY: ITAT, CHANDIGARH BENCHES (B), IN THE CASE OF: Punjab State Cooperative Federation of House Building Societies Ltd. v. ACIT, APPEAL NO: ITA 996/Chd/2009, DECIDED ON January 29, 2010
9. The salient features of the impugned case have already been noted by us namely, that the assessee is a Co-operative Society, set up by the Government of Punjab registered under the Punjab Co-operative Societies Act, 1961. The Assessing Officer has duly noted that its primary business is to grant loans to members in Urban and Rurah Co-operative Housing Societies of the State of Punjab for construction of houses and Housing Complexes. The assessee has been earning interest by way of providing credit facilities to its members. The Assessing Officer has not treated the income earned from the monies kept in the commercial banks as eligible for 80P(2)(a)(i) of the Act. The point to be decided is as to whether such interest can be said to be earned from an activity attributable to the assessee’s business of providing credit facilities to its members. No doubt, the direct source of income is not the loans advanced to the members of the society. So however, in view of the expression ‘attributable to’ present in Section 80P(2)(a).(. i), the said income can be said to be incidental and in proximity to the business of the assessee of providing credit facilities to its members. Clearly, the funds available with the assessee for its business have been kept in the banks which has resulted in earning of the impugned interest income. The parity of reasoning laid down by the Hon’ble Supreme Court in the case of Karnataka State Co-operative Apex Bank, 251 ITR 194 and that of the Special Bench of the Tribunal in the case of Surat District .Co-operative Bank, 85 ITD 1 (SB) (And) clearly aids the aforesaid inference. In our view./the funds kept in bank; can be said to be ready for utilization by the Assessee in its business of providing credit facilities to its members; the income from such monies, kept in the bank, can be said to be attributable to the| business of providing credit facilities, so as to fall within the ambit of Section 80P(2)(a)(i) j of the Act. Accordingly, the income in question qualifies for exemption u/s 80P(2)(a),(i) of the Act. In view of our aforesaid conclusion, the stand of the Assessing Officer that such income is to be “assessed as ‘income from other sources’, is rendered academjc. In, any case, we find that the Hon’ble Uttrakhand High Court in the case of Iqbalpur Cooperative Cane Development Union Ltd. (supra) has held that interest of similar nature constitutes a part of the profits &’ gains of business of the Society. Further, the Hon’ble Patna High Court in the case of Bihar State Housing Co-operative Society Ltd. (supra) also supports the proposition that income earned on deposit of surplus funds with the bank is entitled to exemption u/s 80P(2)(a)(i) of the Act. It is noteworthy that the assessee before the Hon’ble Patna High Court was also an Apex Housing Cooperative Society, whose members were primary Co-operative Societies, which is also the case before us. The judgement of the Hon’ble Patna High Court, in our view, fully covers the dispute in question, in favour of the assessee.
10. Before parting, we may refer to the judgement of the Hon’ble Madhya High Court in the case of Devi Ahilya New Cloth Market Co. Ltd. (supra) relied upon by the learned DR. The issue before the Hon’ble Madhya Pradesh High Court related to the principle of mutuality and in this connection, it was held that the Income earned from banks was to be assessed as ‘other sources. The facts and the circumstances of the dispute in the present case stand on a completely different footing than that was before the Hon’ble Madhya Pradesh High Court and therefore, the said decision does not help the case of the Revenue.
11. In the result, we set aside the order of the lower authorities and direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) in relation to the income earned by way of interest from commercial banks. Thus, on this issue the assessee succeeds.