https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=461891 https://www.taxtmi.com/caselaws?id=461891 Deduction u/s 80P(2)(a)(iii) - Interest received on Investments held with Banks in form of FDR's - basic object of the assessee cooperative was the welfare of cane growers. The assessee was registered under the U.P. Sahkari Samiti Adhiniyam, 1965 and was providing facilities to cane growers HELD THAT:- The principle that interest income arising from investments in statutory reserve funds and other funds as per the provisions of sections 58 and 59 of the U.P. Cooperative Societies Act is "attributable" to the main activities of that Society, has been accepted by the Revenue. The assessee is governed by the same U.P. Cooperative Societies Act and Rules as the Cooperative Cane Development Council, Lakhimpur and therefore, in its case also, it must be held that interest earned from investment made by it as per sections 58 and 59 of the U.P. Cooperative Societies Act r.w.r.173 of the U.P. State Cooperative Rules, is attributable to the activity in which the assessee is engaged and therefore, is eligible to be deducted u/s 80P(2)(a) of the Act. As in the case of K. 2058, Saravanampatti Primary Agricultural Co-Operative Credit Societies Ltd. [2020 (2) TMI 214 - MADRAS HIGH COURT] after considering that the Societies was required to maintain a statutory reserve of 25% under the Tamilnadu Cooperative Societies Act held that the same could not be regarded as the surplus funds of the Society as decided in M/s Totgars Cooperative Sale Society Limited [2010 (2) TMI 3 - SUPREME COURT] and therefore, it set aside the assessment of the ld. Assessing Officer in the light of the decision of Nawanshahar Central Cooperative Bank Ltd. [2005 (8) TMI 28 - SC ORDER] Therefore, investment in fixed deposits and other securities or on account of the provisions of sections 58 and 59 of the U.P. Cooperative Societies Act, 1965 and section 173 of the U.P. Cooperative Societies Rules, 1968, it is quite clear that since it has been held that interest on such investment is attributable to the main activity of the assessee cooperative society, the interest earned from such investments ought not to be regarded as a surplus within the meaning of Totgar's Case, but an interest attributable to the main activity of the assessee cooperative and therefore, deductible under section 80P. The assessee has submitted copies of its byelaws and the detailed breakup of investments and interest arising on the same. However, we observe that AO has not examined the breakup of such investments and the interest earned on the same, with reference to the byelaws or sections 58 and 59 of the U.P. Cooperative Societies Act, 1965 and 173 of the U.P. Cooperative Societies Rules, 1968 as he was of the view that no such interest was deductible in view of the decision of Hon'ble Supreme Court in the case of Totgars (supra). Now that the position with regard to such investments has been clarified in the case of Cooperative Cane Development Council, Lakhimpur [2022 (9) TMI 1597 - ITAT LUCKNOW] and accepted by the Revenue in the consequent assessment, we deem it appropriate to restore the matter in all three cases back to the file of the ld. Assessing Officer for the limited purpose of re-computing the admissible deduction under section 80P with reference to the interest earned on investments made in accordance with sections 58 and 59 of the U.P. Cooperative Societies Act, 1965 and 173 of the U.P. Cooperative Societies Rules, 1968 . Ground numbers 1 to 5 are accordingly allowed. Adding back the interest on PF balance of the seasonal employees of the society - As we observe that the same cannot be considered to be the investments of the society and accordingly the interest accruing on the said amount cannot be said to be income of the society. Therefore, any adding back of such interest income to the income of the society is not maintainable and accordingly, additions made on this account in A.Ys. 2017-18 and 2020-21 are deleted. Appeal of assessee is partly allowed. Case-Laws Income Tax Mon, 30 Sep 2024 00:00:00 +0530