TaxTMI 
TaxTMI 
2023 (11) TMI 1207
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....e A.Y. 2017-18 on 31.03.2018 admitting NIL income, after claiming Chapter VIA deduction u/s 80P of Rs. 70,73,619/-. The Assessing Officer (AO) relied on the decisions in the case of CIT Vs. Jilla Jahakari Kendriya Bank Manyadit (1997) 225 ITR 421(MP), which held that income from interest on securities earmarked to reserve fund is not eligible for deduction u/s 80P and also relied on the decision of Hon'ble Supreme Court of India in Civil Appeal No.1622 of 2010, in the case of M/s Totgars Co-operative Sale Society Ltd. which held that "investment of surplus on hand not immediately required in Short Term deposits and securities by a co- operative society providing credit facilities to members or marketing agriculture produce to member". Interest on such deposits is not business income and hence the same is treated as income from other sources. Hence, the AO completed the assessment u/s 143(3) and passed an order dated 28.12.2019 and arrived at taxable income at Rs. 3,13,822/- by disallowing deduction claimed u/s 80P of the Act, being the interest on Reserve Fund deposits. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A), rel....
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.... a beneficial provision and the interpretation of the Assessing Officer while taking an adverse view of the eligibility of the claim does not go in the true spirit of the provisions of the section. 6. The learned Commissioner of Income Tax (Appeals) ought to known that the income in respect of which the disallowance was made is nothing but the operational income in the form of interest pertaining to the deposits made towards the reserve fund, deposits being is a statutory obligation, which the assessee during the course of carrying its activities is required to deposit, therefore, under such circumstances denying the claim is not legally tenable. 7. The Hon'ble Commissioner of Income Tax (Appeals), Rajahmundry & NFAC (Delhi) has allowed the appeals in the subject of interest on Reserve Fund and allowed the deductions a. The Malakapalli Large Sized Co-operative Society for the AY 2015-16 & 2016-17 - Order passed by the Hon'ble CIT(Appeals) - Rajahmundry b. The Kommugudem Large Sized Co-op Credit Society Ltd. - 2023 - Passed by the CIT Appeals NFAC, Dated 15.03.2023 8. Any other grounds that may be urged at the time of hearing of the appea....
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....acts are distinguishable and hence, in my view, the ratio laid down in the case of M/s Totgars Cooperative Sale Society Ltd.(supra) shall not be applied. On similar set of facts, coordinate bench of this Tribunal in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society held in favour of the assessee vide I.T.A.No.107/Viz/2022, CO No. 07/Viz/2022 dated 30.08.2023. For the sake of clarity and convenience, relevant part of the order is extracted as under : "8. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee has claimed deduction u/s. 80P(2)(a)(i) of the Act on the interest accrued and received by the assessee u/s. 80P(2)(a)(i) of the Act. The contention of the Ld. AO is that as per section 80P(2)(d), the assessee is eligible to claim deduction u/s. 80P(2)(a)(i) of the Act only when it is invested with any other cooperative society. The Ld. AO also placed heavy reliance in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) while disallowing the claim made by the assessee u/s. 80P(2)(a)(i) of the Act. We have perused the ratio laid down by ....
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.... 9. Further, we also extract below the provisions of section 80P2(d) and (e) of the Act for reference: "(d) in respect of any income by way of interest or dividends derived by the co- operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income;" 10. From the plain reading of section 80P(2)(a)(i) of the Act, the whole of amount of profits and gains of the business attributable to one or more of such activities shall be allowed a s a deduction. Further, section 80P(2)(d) and 80P(2)(e) of the Act also allows similar deductions. It is clear that the deductions available under clauses (a) to (e) of section 80P(2) are activity based whereas clauses (d) and (e) are investment based. The distinction between clauses (a) and clauses (d) & (e) on the other hand is that the benefit under clause (a) is restricted to only into those activities of a cooperative society enlisted in sub-clause (a) whereas the benefit of claus....
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.... along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note." 11. Further, the Hon'ble jurisdictional High Court of Andhra Pradesh and Telangana in the case of Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another (supra) held that the cooperative society is eligible for deduction u/s. 80P(2)(a)(i) of the Act on the interest income received from investment in banks. The Hon'ble High Court in paras 35 to 37 of its judgment held as under: 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative ....