TaxTMI 
TaxTMI 
2026 (8) TMI 468
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....ve society are un-audited, has assumed facts to disallow expenses and has assumed to deny exemption under Sec 80P. All these show that the order of assessment is passed on surmises and conjectures and is liable to be quashed and set aside. The CIT(A) has overlooked this fact and not given any comment on this to disallow the appellant's appeal. 2. Sec 246A, Sec 80P, Sec 56 Wrong evidence collect by A.O. for idle funds investment. That the appellant had invested surplus and idle funds immediately which evidence is incorrectly collected by A.O and assumed by the Ld. Assessing Officer. In fact the appellant had withdrawn F.D. of Rs. 65 lakh in the year which was explained in letter dt. 31-08-2022. The primary purpose and the objective of the co-operative society is to provide loans to its members for which the society has to manage its own funds to ensure that the members can get money as they want. As a part of the same, the funds are invested in FD and withdrawn so that the interest loss can be shortened. These facts are blissfully ignored by the Ld. Assessing Officer and that he has assumed facts and proceeded to pass a high pitched order. Hence, the o....
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....d reason given to disallow expenses of Rs 4,64,812. That the appellant is working on Principle of Mutuality which fact is never denied by the A.O. in his assessment order and this fact is not understood by A.O. in disallowing expenses. The CIT(A) has also misunderstood the principle of Mutuality to disallow expenses claimed. That the appellant has filed ample evidence to prove the concept of mutuality on which the appellant is operating. Hence expenses incurred of Rs. 4,42,120 are for benefit of members of society which should be allowed u/s. 56 of the income tax act. It is incorrect to conclude by A.O. and CIT(A) that these expenses are claimed against interest income earned, when in fact the nature of income earned should be looked as per the concept of mutuality on which the society is formed. The A.O.'s wrong finding that appellant has claimed expenses just to suppress total income is incorrect. That these expenses are incurred for the members and for benefit of members only. Hence the expenses disallowed of Rs. 4,42,120 should be deleted and be allowed u/s. 56 of the I. Tax Act. The appellant urges that once the assumption about the Society (appellant's) natur....
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....essee has preferred the present appeal. 8. Grounds of Appeal Nos. 1 to 5 challenge the disallowance of deduction under Section 80P; Ground of Appeal No. 6 challenges the disallowances of expenses amounting to Rs. 4,42,120/-; Ground of Appeal No. 7 challenges the disallowance of depreciation, and Ground of Appeal No. 8 challenges the levy of tax at a flat rate of 30% instead of applying slab rate. Ground of Appeal No. 9 is general. The grounds are taken up issue-wise. Disallowance of Deduction u/s 80P 9. The Appellant claims to have invested surplus funds, arising out of contribution received from members, in fixed deposits of Ahmedabad District Co-operative Bank and earned Rs. 12,61,508/- as interest during the year. This fact is accepted by the AO and the CIT(A). This interest was claimed as deduction under Section 80P(2)(d) of the Act. 10. The AO held as under: "Assessing officer relied upon the Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188Taxman 282 (SC) held that such interest income on its surplus and idle funds not immediately required for its business, is not income from business taxable under section 28 of the Act, but was....
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....as claimed as deduction u/s 80P(2)(d) of the Act. The plain reading of the language of Section 80P(2)(d) reveals that any income by way of interest or evidence derived by the cooperative society from its investment with any cooperative society will be wholly admissible as deduction u/s 80P(1). Sub-section (4) of Section 80P provides that the "the provisions of this section shall not apply in relation to any cooperative bank other than primary agricultural credit society or primary cooperative agricultural and Rural Development Bank of India". This provision was introduced by Finance Bill 2006 w.e.f. 01.04.2007 to deny deduction u/s 80P to any cooperative bank other than the exceptions provided therein. As per Memorandum explaining provisions of the Finance Bill, it was clarified that this provision was introduced to bring parity of the cooperative bank with other banks. This provisions cannot be interpreted to mean that the deduction u/s 80P, otherwise admissible to a cooperative society under sub-section (2)(d) will be denied merely because the interest is earned from a cooperative bank. 14. The assessee has relied upon the decision of the Ahmedabad Bench of the ITAT in the cas....