TaxTMI 
TaxTMI 
2024 (8) TMI 498
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....the figures adopted by the ld. AO (2nd para at page 3 of the ld. AO's order) as the difference of Rs. 26,45,981/- (being total interest income as per computation) (-) Rs. 18,18,751/- (being total interest income earned from members of the Society). Clearly, the differential figure is Rs. 8,27,230/- and not Rs. 8,40,630/- as has been mentioned all along in the orders of the authorities below. It is seen that the ld. AO relied on some judicial pronouncements to distinguish the two sets of interest received and brought the impugned amount (now Rs. 8,27,230/-) as being outside the purview of Section 80P of the Act, mainly following the Hon'ble Apex Court's judgment in the case of Totgars, Co-operative Sale Society Ltd. vs. ITO reported in [2010] 322 ITR 283 (SC). 1.1. Aggrieved with this action, the appellant approached the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as ld. 'CIT(A)'] and averred before him that the assessee deposits its operating funds as per the West Bengal Cooperative Societies Act, 2006, which provides that a cooperative Society may receive deposits and also provides that such Society may invest or deposit its funds in the ....
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.... occasion to advert to later) and the case of CIT vs. Kisan Sahkari Chini Mills Ltd. reported in [2005] 274 ITR 119 (Allahabad) to canvas the point that in case the impugned amount is held to be income from other sources then this case could guide in estimating expenses allowable to earn such income. 1.5. The ld. D/R relied on the Totgars, Co-operative Sale Society Ltd. (supra) case and the findings given in the orders of ld. CIT(A) and the ld. AO. 2. We have considered the rival submissions and carefully perused the documents relied upon by the ld. A/R and the relevant portions of the judgments relied upon by the assessee as also the assessing authorities. To appreciate the fact that the Totgars, Co-operative Sale Society Ltd. (supra) case is absolutely binding on the facts of the present case, it would be necessary to extract some portions from the same as under: "In the instant case, the interest held not eligible for deduction under section 80P(2)(a)(i) was not the interest received from the members for providing credit facilities to them. What was sought to be taxed under section 56 was the interest income arising on the surplus invested in short-term deposits and securiti....
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....s of business' emphasise that the income, in respect of which deduction is sought, must constitute the operational income and not the other income which accrues to the society. In the instant case, the evidence showed that the assessee-society earned interest on funds which were not required for business purposes at the given point of time. Therefore, on the facts and circumstances of the instant case, such interest income fell in the category of 'other income' which had rightly been taxed by the department under section 56. [Para 11]" 2.1. It is clear that an artificial distinction attempted to be created between idle funds and operational funds may be misconceived since the interest arising out of funds advanced as loans to the members has already been allowed by the authorities below. Such funds have been deemed to be operational funds and hence, due credit for the same has been allowed. The remaining funds, available with the assessee for whatever reason, have been treated to be the kind of funds on which the Totgars, Co-operative Sale Society Ltd. (supra) case has specifically ruled that they would be outside the purview of Section 80P of the Act and would constit....
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.... proceeds in many cases. It is this "retained amount" which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities. Such an amount, which was retained by the assessee-society, was a liability and it was shown in the balance-sheet on the liabilities-side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in section 80P(2)(a)(i) of the Act or in section 80P(2)(a)(iii) of the Act. Therefore, looking to the facts and circumstances of this case, we are of the view that the Assessing Officer was right in taxing the interest income, indicated above, under section 56 of the Act." 3. He submits, Totgars Co-operative Sale Society Ltd. (supra) was made applicable to an assessee such as respondent by a Division Bench of this Court, to which one of us was party (Arindam Sinha, J.), in CIT v. Sout Eastern Railways Employees Co-Operative Credit Society Ltd. [2016] 73 taxmann.com 123/[2017] 390 ITR 524 (Cal.). Appeal of revenue is covered by the decision and the question should be answered accordingly. 4. Mr. Majumder, learned senior advocate, Additional Advocate-General app....