TaxTMI 
TaxTMI 
2026 (8) TMI 1174
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.... common or interlinked and emanate from substantially similar facts, they were heard together and are being disposed of by this consolidated order. 2. The assessee is a co-operative society registered under the Rajasthan State Co-operative Societies Act and is engaged in the activity of collection, preservation, processing and supply/disposal of milk. The principal controversy which runs through these appeals relates to the assessee's claim of deduction under section 80P of the Income-tax Act, 1961, particularly in respect of interest earned on income-tax refund and interest earned from deposits/investments with banks. In one of the years, certain additional issues relating to contribution to approved gratuity fund and interest on delaye....
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.... and the material placed before us, we do not find any reason to take a different view. Section 80P(2)(b), insofar as relevant, provides deduction of the whole of the profits and gains of the business of a primary co-operative society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to the specified entities mentioned therein. What is contemplated by the provision is, therefore, profits and gains arising from the specified business activity and not every receipt which may remotely or historically be traceable to funds generated in the course of carrying on such business. 6. Interest received on income-tax refund arises because excess tax paid, collected or deducted has remained with the Revenue and....
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....ng business finance. More importantly, the interest admittedly arose from deposits with commercial banks. 9. Section 80P(2)(d) permits deduction in respect of any income by way of interest or dividend derived by a co-operative society from its investments with any other co-operative society. The statutory requirement is explicit. It is not sufficient that the recipient of the interest is a co-operative society; the investment from which the interest arises must itself be with another cooperative society. In the present case, the interest of Rs. 8,73,047 has admittedly been earned from commercial banks and not from investments with any other cooperative society. The essential statutory condition contained in section 80P(2)(d) is thus not ....
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....e funds deposited, nor does it qualify under section 80P(2)(d), since the investment is not with another co-operative society. Accordingly, the claim of deduction in respect of interest earned from commercial banks is rejected and the order of the Ld. CIT(A), to this extent, is confirmed. 14. However, the assessee has specifically claimed that certain interest and dividend income was derived from investments with other co-operative societies and was therefore eligible for deduction under section 80P(2)(d). This part of the claim stands on an altogether different statutory footing. Section 80P(2)(d) specifically provides for deduction of the whole of any income by way of interest or dividends derived by a co-operative society from its inv....
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....rposes. 17. The next ground relates to disallowance of Rs. 7,72,003 towards excess contribution to the approved gratuity fund. The Assessing Officer noticed that the assessee had debited total salary expenditure of Rs. 7,16,30,198 and had contributed Rs. 67,38,798 to the gratuity fund. Applying the limit of 8⅓ per cent under Rule 103 of the Income-tax Rules, the permissible ordinary annual contribution was worked out at Rs. 59,66,795 and the balance amount of Rs. 7,72,003 was disallowed. The assessee's contention was that section 36(1)(v) itself did not prescribe any such ceiling and, therefore, once the contribution had been made to an approved gratuity fund, the entire amount ought to have been allowed. 18. We are unable to ac....
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....erest arising on delayed discharge of the statutory liability. We, therefore, find no reason to interfere with the conclusion reached by the authorities below and the disallowance of Rs. 33,475 is confirmed. 20. The assessee has also challenged the initiation of penalty proceedings under section 270A for under-reporting of income. At this stage, the challenge is merely against initiation of the proceedings. Whether the conditions prescribed under section 270A are ultimately satisfied and whether any penalty is exigible are matters to be examined in the penalty proceedings independently in accordance with law. The ground challenging mere initiation of penalty proceedings is, therefore, premature and is dismissed as such. 21. Thus, in A....