TaxTMI 
TaxTMI 
2025 (5) TMI 503
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.... Hon'ble Supreme Court in the case of Totgars Co-Operative Sale Society Ltd. vs. ITO without appreciating that the decision of Hon'ble Supreme Court is distinguishable in facts from the case of the Appellant Assessee. 3. That the Ld. C.I.T. (A) erred on facts and in law in considering that the A. O. has failed to demonstrate in the Assessment Order that the Interest Income on FDR's and Saving Bank Accounts was on account of surplus funds of the Society and in absence of such finding the decision of Hon'ble Supreme Court cannot be relied upon in Appellant's Case. 4. That the Ld. C.I.T. (A) erred on facts and in law in not considering that the Law has used the word "attributable" and not the word "derived" in section 80P so as to include income from sources other than the actual conduct of the Business of the Society and thus Interest Income on FDR's & S. B. A/c is attributable to the business of providing credit facilities and marketing the agriculture produce of members. WITHOUT PREJUDICE TO ABOVE 5. The Ld. C.I.T.(A) erred on facts and in law in not considering that the funds of the Society in form of Share Capital from members....
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.... "attributable" and not the word "derived" in section 80P so as to include income from sources other than the actual conduct of the Business of the Society and thus Interest Income on FDR's & S. B. A/c is attributable to the business of providing credit facilities and marketing the agriculture produce of members. WITHOUT PREJUDICE TO ABOVE 5. The Ld. C.I.T.(A) erred on facts and in law in not considering that the funds of the Society in form of Share Capital from members and the society being cooperative society is statutorily required to maintain a Reserve Fund of a minimum 25% of its profit and thus the investments in form of deposits with Banks to the extent of the Share Capital and Reserve Funds cannot be said to be made out of surplus funds. 6. That Ld. C.I.T. (A) erred on facts and in law in not considering that the P. F. Balance of seasonal employees of society which is held in the form of deposits are not the investments of the society and accordingly interest accruing on the said amount cannot be said to be the Income of the Society. WITHOUT PREJUDICE TO ABOVE 7. That the Authorities below erred on facts and in law in not allowing propo....
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....he word 'derived' in Sect. 80P of L. T. Act so as to include income from sources other than the actual conduct of the business of the Society and thus Interest Income from F.D.R.'s and Saving Bank Accounts is attributable to the business of providing credit facilities and marketing the agriculture produce of members. 6. The addition made is highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon by Ld. A. O. Additional grounds of appeal 1. That the Authorities below erred on facts and in law in not allowing proportionate deduction for 'Management Expenses of Rs. 5,43,58,995/- and 'Interest paid Rs. 51,91,972/- debited in the Profit and Loss Account from the gross interest of Rs. 2,61,79,220/-. 2. That the Authorities erred on facts and in law in not considering that only the real income/ profit can be Taxed and accordingly, the expenses incurred in earning the said income has to be determined and deducted from the Gross Income. 3. The Ld. C.I.T.(A) erred on facts and in law in not considering that the socie....
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....No.37/Lkw/2022, it is observed that the entire delay of 65 days is covered in the period that was excluded for the purposes of limitation due to the Covid -19 pandemic by the Hon'ble Supreme Court in its decision in Suo Moto Writ Petition No. 03/2020. Hence, the delay is condoned and the appeal is admitted for adjudication. In respect of appeal in ITA No. 15/Lkw/2023, where the delay is of 357 days, it is observed that 128 days of said delay are covered in the Covid period as per the decision of Hon'ble Supreme Court in Suo Moto Writ Petition No. 03/2020. For the remaining 229 days, it has been submitted that the order was served on the email ID [email protected], which belonged to the counsel of the assessee and the Society did not receive any intimation from the local counsel about the service of the appellate order. It was only upon the receipt of outstanding demand intimation from the jurisdictional AO that the assessee society enquired from its counsel about the pendency of the first appeal and was informed by the counsel that the order of the Hon'ble CIT(A), NFAC had been passed on 24.11.2021 and received on his email ID. Thereafter, the Secretary of the Society immedi....
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....the ld. CIT(A) in these three cases rejected the plea of the assessee for distinguishing its case from that of the case of M/s Totgars Cooperative Sale Society Limited and pointed out that the Hon'ble Allahabad High Court in a later decision in ITA No.520 of 2008 dated 11.09.2012 in the case of Cooperative Cane Development Union Limited had held that in M/s Totgars Cooperative Sale Society Limited, the Hon'ble Supreme Court had explained the eligibility of deduction under section 80P and held that where the investment in securities was not a primary object of the Cooperative Credit Society, the interest therefrom could not be regarded as income attributable to business but would in fact be regarded as income from other sources. He noted that the Hon'ble Allahabad High Court in the said case had pointed out that the assessee was a Cooperative Cane Development Union and the objects of the society did not provide for investment of money in the post office or bank and to earn interest on the same and therefore, in its case also, the interest earned out of the investments made in the bank would be an interest which would be income from other sources and chargeable to tax under section 5....
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....r section 80P of the Act. Since in the present case, the assessee statutory obliged to maintain reserve to the extent of 25% of its profits in the form of deposits in bank, these could not be held to be made out of the surplus funds of the society and the interest accruing on the said deposits could not be brought to tax under section 56 of the Income Tax Act, 1961 by relying on the decision of the Hon'ble Apex Court in the case of Totgars Cooperative Sale Society Limited. It was submitted that the Hon'ble Madras High Court in the case of K. 2058, Saravanampatti Primary Agricultural Co-Operative Credit Society Ltd. v. ITO 426 ITR 251 (Mad) had held after considering that the society was required to maintain statutory reserve of 25% under the Tamilnadu Cooperative Societies Act, that the same cannot be the surplus fund of the society as decided in the case of Totgars Cooperative Sale Society Limited and after placing reliance on the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax V. Nawanshahar Central Cooperative Bank Limited reported in 289 ITR 6, it had set aside the assessment for de novo and fresh examination. It was, therefore, prayed that in th....
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....unt could not be said to be the income of the society. The ld. AR, therefore, prayed that directions may kindly be given that interest earned on such deposits was not liable to be considered for the purposes of computation of the assessee's income. With regard to the other grounds preferred by him, the ld. AR submitted that if his prayer of restoring the matter back to the file of the ld. AO for reconsideration of his order in the light of the statutory provisions as contained in section 58 and 59 of the U.P. Cooperative Societies Act, 1965 and Rule 173 of the U.P. Cooperative Society Rules, 1968, were accepted and the orders of the Tribunal given earlier on the issue of investment of provident fund of employees was reiterated, he would not press the remaining grounds for a decision at this stage. 7. Responding to these arguments, Sh. Sanjeev Krishna Sharma, ld. Sr. DR (hereinafter referred to as the 'ld. Sr. DR') pointed out that the relevant issue had already been decided in favour of Revenue by the Hon'ble Supreme Court in the case of PCIT, Hubli vs. M/s Totgars Cooperative Sale Society (2017) 83 taxman.com 140 which re-emphasized the fact that the income in respect of which ....
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....tances of the case. And also the arguments made by both parties. Since the case of the Revenue is based on the decision of the Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Limited vs. Income Tax Officer (supra), it would be pertinent to first consider the decision of Hon'ble Supreme Court in that matter. As pointed out by the ld. Sr. DR, as per the said judgment, 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 that particular case, the Hon'ble Supreme Court observed that, in the facts and circumstances of that case, the assessee society had earned interest on funds which were not required for business purposes at the given point of time. Therefore, as it clarified, on the facts and circumstances of that case, they rendered their judgment that such interest income fell in the category of, "other income" which had rightly been taxed by the Department under section 56 of the Act and therefore, was ineligible for deduction under section 80P of the Act. The two judgments of Hon'ble Allahabad High Court that have been cited by the ld. Sr. DR have followed the princ....
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.... and co-operative society. Hon'ble Supreme Court, after acceptance of additional documents had set aside the issue before this Tribunal for read-judication. We find that the arguments of the assessee's are that the assessee's had placed the funds in the form of fixed deposits with nationalized banks and Co- operative banks in view of the specific requirements of U.P. Cooperative Societies Act. We find that section 58 of the U.P. Co- operative Societies Act requires the net profit to be distributed as under: "(a) An amount not less than twenty five percent shall be transferred to a fund called the reserved fund: (b) Not less than such amount as may be prescribed, shall be credited to a Cooperative Education fund to be established in the manner prescribed, and this shall be applicable to such cooperative society also which incur loss in the year, [Provided that the provisions of this clause shall not apply to a Primary Agriculture Credit Co-operative Society, a Central Cooperative Bank or the Apex Bank.',] (c) An amount that may be prescribed shall be credited to the research and development fund created in the Apex Societies of the concern....
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....e Division Bench which we consider binding on us, we too answer the question referred to us in the affirmative in favour of the assessee cooperative Society and against the Revenue." 7.3 Further we find that the assessee has relied on a judgment of Raipur Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit vs. Income Tax Officer [2022] 138 taxmann.com 476 (Raipur-Trib.) wherein the Tribunal has held that the interest earned by the assessee from deposit with co-operative bank and nationalized bank was eligible for deduction u/s 80P(2)(a) of the Act. 7.4 The above two judgments respectively by Hon'ble High Court and Tribunal hold that the interest earned by a Co-operative Society on deposits, which are statutorily required to be kept in the form of bank deposits or Government securities, are attributable to the business of an assessee. 7.4 Here in the present cases, we do not find the figures regarding the interest which the assessee's may have earned on fixed deposits attributable to the making of statutory reserves. We further find that bye laws of the assessee has to be gone through which, though are available in the paper book, but require ....
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....Court in the case of CIT Vs. Krishak Sahkari Ganna Samiti Limited [2002] 258ITR594 (Allahabad) and ITAT, Raipur in the case of Gramin Sewa Sahakari Samiti Maryadit Vs. Income Tax Officer 92022), 138 Taxmann.com 476 (Raipur Tribunal)." 15. Thus, 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 under section 80P(2)(a) of the Act. 16. We have further observed that the Hon'ble Madras High Court in the case of K. 2058, Saravanampatti Primary Agricultural Co-Operative Credit Societies Ltd. v. Income Tax Off....