PR.CIT-21 v. THE MANTOLA COOPERATIVE THRIFT & CREDIT SOCIETY LTD.

1. Allowed,subjectto alljust exceptions.

2. The applications are disposed off. ITA Nos. 148/2017 & CM No.5881/2017. ITA 151/2017 & CM No.5883/2017,ITA 152/2017 & CM No.5885/2017.ITA 153/2017 & CM Nos.5887/2017.ITA 155/2017& CM No.5890/2017.ITA 156/2017& CM No.5892/2017. ITA 157/2017 & CM No.5894/2017 & ITA 158/2017 & CM Ng.6032/2017

3. The Revenue is aggrieved by the order ofthe Income Tax Appellate Tribunal(TTAT')whereby it granted reliefto the respondent,a Cooperative Thriftand Credit Society. It urgesthattheITAT fell into errorin holding ITA 148/2017& other connectedappeals Page 1 of[4] 2017:DHC:9036-DB tiiat despite the assessee's inability to earmark accurately any expenditure^ incurred in earning income under Section 56 ofthe Income Tax Act, 1961 (hereinafter to be referred as'the Act'),the assessee was entitled to claimdeduction. The assessee is a Thrift and Credit Society, which mobilises savingsfrom its members.

4. The issue arose in 2008-09 and 2009-10. In 2008-09, it reported Rs.1,44,04,060/-as grossincometo claim benefitofSection80P ofthe Act\ It is not in dispute thatthe income derived by the assessee was eligible for deduction under Section 80P(2)(d)ofthe Act as it arose from investment in respect ofincome derived from investment in other Cooperative Societies. The assessee also had, in the normal course of its activities, deposited amounts in short term fixed deposits scheduled in other Banks which resulted in accrual of income. It is not in dispute that this income was assessed under Section 56 ofthe Act. However,the AO,and later the CIT (A), disallowed the expenditure claim, on the ground that no specificV amounts could be attributed or shown by the assessee. Before the ITAT,it was contended that the respondent as a Thrift and Credit Society was engaged in dual business, which involved accepting deposits and saving them and at the same time investing them in different kinds of securities. Hence, the assessee could claim deduction in respect of that part of the income which was derived from other sources which, as in this case, all its expenditure incurred for deriving an income vis-a-vis investing in Cooperative Societies (i.e. which resulted in the income deductible under Section 80P). The ITAT after considering the rival submissions held as follows ITA 148/2017& other connectedappeals ^ '11. We have perused the orders passed by the authwities below andthejudgmentrelied upon by the assessee.Itis notin dispute that the source of such income was due to the investmentofsurplusfunds which the assessee did notrequire for its business activities. It is logical that when Revenue is permitted to assess the interest income u/s.56 ofthe Act by treating the income earned by way ofinterest as incomefrom other sources, the assessee should be entitled for proportionate expenses incurred in mobilizing the deposits yi placed with banks/cooperative societies. What can be taxed is only the net income earned after deducting the expenditure attributable to such earning. We accordingly direct the Ld. A.O. to allow the allocation ofexpenses asper the method of calculation arrived by the assessee."

5. The Revenue contends that in the absence ofany specific expenditure that could be attributed to the income derived from other sources; no expenditure could be allowed at all.

6. This Court is of the opinion that the ITAT's reasoning cannot be faulted. Concededly the nature of the activities i.e. that which resulted in income under Section SOP and that which resulted in income from other sources are identical. This involves the collection,deposits and management of funds from the assessee's subscribers/members. In other words, the source is inextricable to the nature ofthe expenditure. In the circumstances, all that the AO could have possibly done was to scrutinize the returns to find whether,having regard to the income derived under Section 56,the expenses claimed were extraordinary or seemingly disproportionate. In the present case, the very nature of the expenditure i.e. inextricability would, in the absence ofany factual inquiry,lend credence to the assessee's claim. ITA 148/2017& other connectedappeals Page 3of[4]

7. Forthesereasons,theITAT'sreasoning issound and doesnotcall any interference. The appeals alongwith pending applications are dismissed. Accordingly,the AO may give appropriatetax effect.

FEBRUARY 15,2017 sb S.RAVINDRA BHAT,J. K NAJMIWAZIRI,J. ITA 148/2017& other connectedappeals ^of[4]