Commissioner Of Income Tax-Ii, Chandigarh v. M/S Punjab State Cooperative Federation Of Housing Building Societiesltd

ITA No. 643 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 643 of 2010 Date of Decision: 10.5.2011 Commissioner of Income Tax-II, Chandigarh ....Appellant. Versus M/s Punjab State Cooperative Federation of Housing Building SocietiesLtd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant. None for the respondent. ADARSH KUMAR GOEL, ACJ. 1.This appeal has been preferred by the revenue underSection 260A of the Act, 1961 (in short “the Act”) against the orderdated 29.1.2010 passed by the Income Tax Appellate Tribunal,Chandigarh Bench “B” (hereinafter referred to as “the Tribunal”) in ITANo. 996/Chandi/2009, for the assessment year 2006-07, claimingfollowing substantial question of law:- “Whether on the facts and in the circumstances ofthe case and in law the order of the Hon'ble Tribunalis perverse in holding that interest income fromcommercial banks, being attributable to the business activity of the assessee, qualifies for deduction u/s80P(2)(a)(i) of the Act, ignoring the facts that directsource of income is not the loans advanced to themembers of the Society and it is only the interestincome from commercial banks in the forms of fixeddeposits and saving banks accounts?” 2.The assessee is a Cooperative Federation and claimedexemption under Section 80P(2)(a)(i) of the Act in respect of interestincome. The Assessing Officer disallowed the claim which was upheldby the CIT(A). On further appeal, the Tribunal upheld the plea of theassessee for exemption holding that interest income was incidental tothe business of the assessee of providing credit facilities to itsmembers. 3. We have heard learned counsel for the revenue. Noneappears for the assessee despite service. 4.Plea on behalf of the revenue is that interest received bythe assessee from commercial banks was not covered by Section 80P(2)(a)(i). It has nothing to do with the interest income on the loanadvanced to the members. Reliance has been placed on the judgmentof the Hon'ble Supreme Court in The Totgars Cooperative SaleSociety Ltd. v. I.T.O., 2010 (35) DTR 25 holding that interest on bankdeposits or Government securities derived by a Cooperative Societycould not be attributed to the activities of the Society of providingvarious facilities to its members and was taxable under Section 56being income from other sources. It appears that since the judgment ofthe Tribunal is prior to the judgment of the Hon'ble Supreme Court ITA No. 643 of 2010 -3- relied upon on behalf of the revenue, the Tribunal did not haveadvantage of the law laid down therein. The matter is, thus, covered infavour of revenue by the judgment of Hon'ble Supreme Court. Contraryview of the Tribunal cannot be sustained. 5.In view of above, following the judgment of the Hon'bleSupreme Court in The Totgars Cooperative Sale Society Ltd. case(supra), we decide the question in favour of the revenue. The appeal isallowed. (ADARSH KUMAR GOEL) ACTINGCHIEF JUSTICE May 10, 2011gbs (AJAY KUMAR MITTAL)JUDGE