Judgment :-

S.H. KAPADIA, J.

Heard learned counsel on both sides.

Leave granted.

Assessee(s) is a cooperative credit society. During the relevant assessment years in question, it had surplus funds which the assessee(s) invested in short-term deposits with the Banks and in Government securities. On such investments, interests accrued to the assessee(s). Assessee(s) provides credit facilities to its members and also markets the agricultural produce of its members. The substantial question of law which arises in this batch of civil appeals is - Whether such interest income would qualify for deduction as business income under Section 80P(2)(a)(i) of the Income Tax Act, 1961?

According to the impugned judgement, which affirms the decision of the Income Tax Appellate Tribunal [`Tribunal, for short], such interest income would fall under the Head "Income from other sources" under Section 56 and not under Section 28 of the Income Tax Act, 1961 [`Act, for short], and, consequently, the assessee- Society would not be entitled to deduction under Section 80P(2)(a)(i) of the Act.

The bunch of civil appeals filed by the assessee-Society concerns Assessment Years 1991-1992 to 1999-2000 [excluding Assessment Year 1995-1996]; however, the lead matter is civil appeal arising out of S.L.P. (C) No.7572 of 2009 which relates to Assessment Year 1991-1992.

The assessee-Society was assessed to tax as a cooperative society. The assessee is the appellant in all eight civil appeals. For all the above Assessment Years 1991-1992 to 1999-2000 [except Assessment Year 1995-1996], assessee(s) filed its Returns disclosing income from business, i.e., marketing of agricultural produce of its members and providing credit facilities to them. Assessee(s) also filed its Profits and Loss Accounts and its balance-sheets along with its Returns. In respect of above-mentioned interest income, assessee(s) claimed deduction under Section 80P(2)(a)(i) of the Act. The assessment(s) for the afore-stated period stood re-opened by issue of notice(s) under Section 148 of the Act. In this case, we are only concerned with interest income on short-term Bank deposits and securities. On the basis of the balance-sheets for the relevant assessment years, under instructions from the Assessing Officer, assessee(s) submitted a chart to the Assessing Officer giving break-up of assets and liabilities. We re-produce hereinbelow the said chart [See Annexure `B under the caption `Liabilities]:

LIABILITIES Asstt. Capital Asami A/c + Deposits, Other Total (3), (4) & Year Reserve Fund + Purchasers A/c Loans, Interest Liabilities & (5) Other Funds + Payable Expenditure Profits 1 2 3 4 5 6 1991-92 79,200,553.00 39,341,647.00 45,772,398.00 3,948,442.00 89,176,115.00 1992-93 97,769,923.00 41,684,890.00 59,071,490.00 902,856.00 101,659,132.00 1993-94 116,354,655.00 37,674,924.00 68,927,247.00 2,893,519.00 109,494,694.00 1994-95 133,817,620.00 42,882,786.00 86,462,118.00 1,440,446.00 142,886,414.00 1995-96 156,948,290.00 46,898,160.00 107,201,490.00 4,189,923.00 158,289,580.00

1996-97 180,468,526.00 53,274,684.00 125,289,995.00 3,568,644.00 182,133,326.00

1997-98 211,686,266.00 52,510,175.00 142,529,130.00 46,694,814.00 241,734,125.00

1998-99 253,295,055.00 66,074,107.00 175,757,230.00 17,342,956.00 259,174,281.00

1999-00 269,520,510.00 124,571,325.00 209,202,203.00 25,199,555.00 358,973,088.00

The Assessing Officer held, on the facts and circumstances of these cases, that the interest income which the assessee(s) had disclosed under the Head "Income from business was liable to be taxed under the Head "Income from other sources". In this connection, the Assessing Officer held that the assessee-Society had invested the surplus funds as, and by way of, investment by an ordinary investor, hence, interest on such investment has got to be taxed under the Head "Income from other sources". Before the Assessing officer, it was argued by the assessee(s) that it had invested the funds on short-term basis as the f