TaxTMI 
TaxTMI 
2023 (12) TMI 61
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.... in the business of providing credit facilities, supply of agricultural inputs and consumer goods to it's members filed it's return of income for the A.Y. 2018-19 on 18.08.2018, admitting "Nil" income, after claiming deduction of Rs. 2,91,39,357/- u/s 80P(2) of the Act. The return was processed u/s 143(1) and vide intimation dated 12.07.2019 the total income was computed at Rs. 3,70,370/-. The increase in income was on account of disallowance of deduction claimed u/s 80P in respect of dividend of Rs. 3,70,365/-. The assessee's case was selected for scrutiny under CASS to verify the investments / advances / loans made by the assessee and the deductions claimed under Chapter VI A of the Act and a notice u/s 143(2) was issued. In response, the assessee furnished details of it's receipts and the deduction claimed u/s 80P(2) of the Act as under : Head of Income Gross Receipts (Rs.) Net Income (Rs.) Deduction claimed (Rs.) Credit facilities to members 4,07,38,473 2,87,52,592 2,87,52,592 Agricultural inputs 53,40,280 4,229 4229 Consumer goods 1,31,93,265 7,171 7171 Dividends 3,70,365 3,70,365 2,91,39....
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....nterest received on savings account and disallowance of dividend income of Rs. 3,70,365/-, aggregating to 2,63,25,271/- and the tax payable was computed at Rs. 1,22,77,993/- including the interests of Rs. 31,82,165/- u/s 234B and Rs. 4852/- u/s 234C of the Act. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A), relying on the decision of Hon'ble Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. & Ors. Vs. CIT, Calicut & Ors dated 12.01.2021, allowed the appeal of the assessee. 4. Aggrieved by the order of the Ld.CIT(A), revenue preferred an appeal before the Tribunal by raising the following grounds of appeal : 1. The learned Commissioner of Income Tax (Appeals) is not justified in deleting the addition of Rs. 2,59,54,906/- made by the AO on account of disallowance of deduction claimed by the assessee u/s 80P(2)(a)(i) of the Act. 2. The learned Commissioner of Income Tax (Appeals) is not justified in deleting the addition of Rs. 3,70,365/- made by the AO on account of disallowance of deduction claimed by the assessee u/s 80P(2)(a)(i) of the Act. 3. The learned Commissioner....
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....s. The Ld.AR further submitted that the facts relied on by the revenue authorities in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) are entirely different from that of the instant case. The Ld. AR also submitted that as per Para-11 of the judgment in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) it is clearly mentioned that "this judgment is confined to the facts of the present case" and therefore it cannot be applied in the assessee's case, hence, eligible for deduction u/s 80P of the Act. He, therefore, pleaded to quash the order passed by the Ld.CIT(A) and allow deduction u/s 80P of the Act. 8. We have heard both the parties and perused the material placed on record. Now the question before us is to decide whether the revenue is correct in disallowing deduction claimed by the assessee u/s 80P on interest earned on deposits pertaining to reserve fund with DCC Bank which is a cooperative bank and other nationalised banks, or not. It is an admitted fact that the assessee has claimed deduction u/s 80P of the Act. The contention of the AO is that interest accrued on Reserve Fund Deposits is not eligible for deduction u/s 80P. He relied on the decisi....
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....and was shown as liability on the balance sheet. Therefore, the Hon'ble Apex Court has held that interest earned from retaining the amount payable to its members shall not be considered as income from other sources. However, in the instant case the facts are distinguishable and hence in our view the ratio laid down in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) shall not be applied. Section 80P(1) of the Act entitles the Cooperative Societies to deduct the sums specified in sub - section (2) from its gross total income while computing the total income. Sub-section (2) of section 80P, in the sub-clause (a) allows deduction to cooperative society which is engaged in the following activities: "(a) in the case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or [(iii) the marketing of agricultural produce grown by its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, withou....
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....alized Banks is admittedly the income of the assessee derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income must be last, especially when the statute uses the expression "attributable to" and not any one of the expressions viz., "derived from" or "directly attributable to". 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 [2017] 396 ITR 0371 (AP) in para 34 has discussed about the decision of the Hon'ble Supreme Court in the case of Totgar's Cooperative Sale Society Ltd (supra) and distinguished the facts while deciding the case. For the sake of brevity, we extract the relevant para 34 of the judgment of the Hon'ble Andhra Pradesh and Telangana High Court herein below: "34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision ....