The order of the Bench was delivered by
Abraham P. George (Accountant Member).-In this appeal filed by the assessee its grievances is that the Assessing Officer denied deduction of Rs. 9,24,543 under section 80P(2)(a)(i) of the Income-tax Act, 1961, on the reasoning that such amount was interest from investments, which income fell under the head "Income from other sources".
2. When the case came up before us, learned counsel for the assessee submitted that the lower authorities erred in applying the judgments of the hon'ble apex court in the case of Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283 (SC). According to the learned authorised representative, the assessee was in the business of providing credits to its members and therefore, interest arising to it on deposits with bank was attributable to such credit business. The learned authorised representative further submitted that the amounts which were held in deposits with bank were not out of profits or surplus but out of deposits received from the members.
3. Per contra, the learned Departmental representative submitted that the hon'ble apex court in the case of Totgar's Co-operative Sale Society Ltd. [2010] 322 ITR 283 (SC) had held that income attributable to the business of a co-operative society would be eligible under section 80P(2)(a)(i) only if it fell under any of the clause mentioned therein. Interest from deposit held with bank was nothing but "Income from other sources". According to him, the lower authorities were justified in denying deduction under section 80P(2)(a)(i) of the Act on such interest income.
4. Ad libitum reply of the learned authorised representative was that the issue stood decided by the hon'ble jurisdictional High Court in the case of Sri Renukadevi Urban Credit Co-operative Society Ltd., in I. T. A. No.5002/2009 dated April 1, 2011.
5. We have perused the orders and heard the rival contentions. There is no dispute that the assessee was in the line of credit business and its claim was under section 80P(2)(a)(i) of the Act. In the case of Renukadevi Urban Credit Co-operative Society Ltd., the hon'ble jurisdictional High Court in their judgment dated April 1, 2011 held as under, at paras 4 to 7 of its order.
"4. It is necessary at this juncture to notice under section 80P(2)(a)(i) of the Income-tax Act and the same reads as under :
'Section 80P. Deduction in respect of income of co-operative societies.-(2) The sums referred to in sub-section (1) shall be the following, namely, :-
(a) in the case of a co-operative society engaged in-
(i) carrying on the business of banking or providing credit facilities to its members, or.'
5. A reading of the above provision specifies that the assessee is entitled for deduction on the interest earned from the business of banking. The word 'banking' is not defined in the Income-tax Act. Therefore, it is necessary for us to take into consideration the definition clause in the Banking Regulation Act, 1949 wherein section 5(b) defines banking as under :
'(b) 'banking' means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft order or otherwise.'
6. From this definition, it is manifest that deposit of money which earns interest falls under the definition of 'banking'. In the instant case, the assessee had the excess money with them which was not taken by its shareholders. Instead of keeping money idle with the assessee, they have deposited the same in a private limited company so that it can earn interest. In the instant case, the appellant-assessee deposited the same in a private limited company namely M/s. Renuka Sugars Ltd.
7. This court in identical circumstances, in CIT v. Grain Merchants Co-operative Bank Ltd. [2004] 267 ITR 742 (Karn) held that the interest earned on the deposits made by the assessee in any banking activity is exempted under section 80P of the Income-tax Act. Therefore, for the reasons stated above, we answer the quantum of law framed above in favour of the assessee/appellant and against the Revenue. Ordered accordingly."
6. We are of the opinion that in view of the abovementioned judgment and the hon'ble jurisdictional High Court the assessee has to succeed in this appeal.
7. In the result, the appeal of the assessee is allowed.
The order pronounced in the open court on on the 20th February, 2015.