TaxTMI 
TaxTMI 
2024 (12) TMI 1590
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....case are that the assessee is a cooperative society, providing financial accommodation to its members for agricultural and allied activities. The assessee filed its return of income on 12th February, 2021 declaring total income of Rs. 7,26,520, after claiming deduction u/s. 80P of the Income-tax Act, 1961, for an amount of Rs. 1,34,43,513. Subsequently, the case of the assessee was selected for scrutiny and statutory notices were issued to the assessee. During the course of assessment proceedings, the Assessing Officer took a view that the assessee is not entitled for the deduction of interest income earned from co-operative banks neither sec. 80P(2)(a)(i) or 80P(2)(d) of the Act. 3. Aggrieved with the order of the Assessing Offi....
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....e issue whether the assessee is entitled for deduction u/s. 80P(2)(a)(i), a reference can be made to the judgment of the Hon'ble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. v. ITO reported in (2010) 322 ITR 283 (SC). The Hon'ble Apex Court in para 11 of the judgment, has observed as under:- "11. An alternative submission was advanced by the assessee(s) stating that, if interest income in question is held to be covered by section 56 of the Act, even then, the assessee-society is entitled to the benefit section 80P (2)(a)(i) of the Act in respect of such interest income. We find no merit in this submission. Section 80P (2)(a)(i) of the Act cannot be placed at par with Explanation (baa) to section 80HHC, section 80H....
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.... Act. An important point needs to be mentioned. The words "the whole of the amount of profits and gains 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 this particular case, the evidence shows that the assessee society earns interest on funds which are not required for business purposes at the given point of time. Therefore, on the facts and circumstances of this case, in our view, such interest income falls in the category of "Other income" which has been rightly taxed by the Department under section 56 of the Act." 8. We further observed that recently Hon'ble jurisdictional High Court in the case of Sahyadri Co....
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....desh and Karnataka High Courts respectively in The Vavveru Cooperative Rural Bank Ltd. (supra) and Tumkur Merchants Souharda Credit Cooperative Limited (supra)." 9. While interpretating the provisions of section 80-P Hon'ble Apex Court in the case of Mavilayi reported in 431 ITR 1(SC) has observed as under:- "Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication" 10. So far as the claim of the assessee to the deduction of....
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....Co-operative Bank/State Co-operative Bank, in the facts and circumstances of the case, do come within Section 80P(2)(d). Therefore, the income constitutes income from other sources and the only eligible deduction is covered by Section 80P(2)(d) viz. Interest or dividend derived by the assessee from its investments with any other Co-operative Society. The source of interest income is from Bank and Treasury, interest income received from Treasury be included in the computation of total income of the assessee. In other words, interest earned from Treasury is inadmissible for deduction and interest income from Co-operative Societies registered under the Kerala Co-operative Societies Act are eligible for deduction. The contra consideration of Co....