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2019 (9) TMI 978 - AT - Income TaxEligibility for deduction u/s 80P(2)(b) - primarily objects and activities of the appellant society - HELD THAT:- Admittedly, it appears that the assessee is not the primary co-operative society but its activities are depending upon the primary co-operative societies. As such the primary co-operative societies can also not operate without the assessee being a district level society. As such the activities of the assessee are interlinked with the activities of the primary co-operative societies. The primary co-operative societies will be eligible only when they supply milk to a federal co-operative society. To our mind, the assessee is not federal co-operative society to whom these primary cooperative societies are supplying the milk. Thus, even the primary cooperative societies in the given facts and circumstances will not be eligible to enjoy the benefit of the deduction provided under section 80P(2)(b) of the Act. Thus in such a situation we are of the view that the provisions of section 80P(2)(b) of the Act should be read liberally. We also note that the assessee has been claiming the deduction under section 80P(2)(b) of the Act consistently for the last several assessment years and there was no disallowance even in the assessment framed under section 143(3) of the Act pertaining to the assessment years 2004-05, 2005-06, 2007-08 and 2009-10 and 2010- 11. The assessment orders for the assessment years mentioned. Therefore we are of the view that claim of the assessee should be allowed on the basis of principles of consistency. We are of the view that the assessee is eligible for deduction under section 80P(2)(b) of the Act. Accordingly we reverse the order of the authorities below. AO is directed to allow the claim of the assessee as per the provisions of law. Hence the ground of appeal of the assessee is allowed. Disallowance on account of delay in deposit in the contribution of employees Provident fund and employees state insurance - HELD THAT:- Issue is covered against the assessee by the Hon’ble Gujarat High Court in the case of CIT vs. GSTRC [2014 (1) TMI 502 - GUJARAT HIGH COURT] tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act - Decided against assessee Addition u/s 40A(3) - Disallowance on account of cash payment exceeding ₹20,000 - HELD THAT:- As consideration of these documents as discussed above is necessary for adjudication the issue on hand. Therefore we admit the same and restore the issue to the file of the AO for fresh adjudication as per the provisions of law. It is needless to mention that the assessee should co-operate in the proceedings before the AO. Hence the ground of appeal of the assessee is allowed for the statistical purposes. Treating the profit on sale of land as business income and without allowing the indexation benefit under section 48 - HELD THAT:- The facts regarding the impugned dispute are arising from the order of the AO. But there was no discussion in the order of the learned CIT (A). We also note that the AO has not observed the provisions of section 50C and 48 of the Act. Therefore we restore the issue to the file of the AO for fresh/de-novo adjudication as per the provisions of law. It is needless to mention that the assessee should co-operate in the proceedings before the AO. Hence the ground of appeal of the assessee is allowed for the statistical purposes. Non providing deduction of interest u/s 80P(2)(d) - whether the assessee is entitled for the deduction on account of interest income on the deposits made with the nationalized banks/private banks/co-operative banks? - HELD THAT:- There is no mention about any interest income from whatever source. Therefore, we are not in agreement with the argument of the learned counsel for the assessee that the assessee is eligible for the deduction of interest income under section 80P(2)(b). Assessee can claim the deduction of interest /dividend income if it is derived from the investments with any other co-operative society. Thus the possibility of claiming the deduction under section 80P(2)(d) of the Act on account of interest income from the deposits made with the nationalized/private banks is ruled out. Taking up the matter further regarding the interest income from the deposits made with the co-operative banks, we note that a cooperative bank is basically a cooperative Society only. It becomes a cooperative bank upon getting a license from the Reserve Bank of India. Therefore, in our considered view such amount of interest income from the deposits made with the co-operative bank is eligible for deduction under section 80P(2)(d) of the Act. See THE SURAT VANKAR SAHAKARI SANGH LTD. VERSUS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-5. [2016 (7) TMI 1217 - GUJARAT HIGH COURT] We are also conscious to the fact that the assessee has shown interest income as part of the business income, therefore if the same is treated as income from other sources, then the same should be reduced from the business income. But the AO has not done so. Thus in the given facts & circumstances, the amount of interest income has been added twice resulting the double addition to the total income of the assessee. Therefore, we direct the AO to be careful in effect giving order. We also make it clear that in case there arises some loss from the activity carried on by the assessee i.e. procuring and supplying the milk on account of the adjustment as discussed above, then such loss can be set off against the income from any other head as per the provisions of law. In view of the above, we hold that the assessee cannot claim the benefit of section 80P(2)(d) of the Act in respect of the interest earned by it from the deposits made with the nationalized/private banks. But the assessee is eligible for deduction under section 80P(2)(d) of the Act in respect of the interest income on the deposits made with the co-operative bank. We direct the AO, while working out the amount of disallowance with respect to the interest income earned on the deposits made with the nationalized/private banks, to allow the direct corresponding expenses incurred by the assessee with respect to such income. Accordingly, for this limited purpose, we are setting aside the impugned issue to the file of the AO for fresh verification/examination the amount of disallowance under section 80P(2)(d) of the Act as per the provisions of law after providing a reasonable opportunity of being heard to the assessee. Hence the ground of appeal of the assessee is partly allowed for the statistical purposes.
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