TMI Blog2020 (8) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... the restriction that it should not exceed 25% of the remaining profit after transfer to reserve fund and contribution to Cooperative Education Fund. The dividend is payable as percentage of investment of members out of remaining profit after deducting all other payments to be made such as transfer to reserve fund, contribution to Cooperative Education Fund, Bonus to Members, contribution towards infrastructure fund, contribution towards Nandini Dairy Farmers welfare trust, contribution towards development of affiliated milk union, contribution towards the co-operative propaganda fund, contribution towards Bad Debt Fund and contribution towards charitable fund and dividend is payable only if there is remaining profit after these transfers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of bonus received by the assessee from M/s. Karnataka Co-operative Milk Producers Federation (KMF) of ₹ 22,67,980/-. 2. In the course of hearing, learned AR of the assessee submitted that the terms used in section 80p(2)(d) of the Act are interest or dividend derived by the Co-operative Society from its investments with any other Co-operative Society. Regarding this aspect that the investments of the assessee society is KMF, she submitted that the balance sheet of the assessee society is available on page 40 of the Paper Book as per which there is investment of ₹ 7,70,53,491/- and the details of these investments are available on page 55 of the Paper Book and she pointed out that this includes an amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of all, we reproduce the provisions of section 80p(2)(d) of the Act which are as under: (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; 4. Now we reproduce the relevant paras of Bye Law of KMF which is at paras 32 and 33 on pages 92 and 93 of the Paper Book. 32.0 Distribution of Profits: To distribute net profit, the following procedure shall be adopted All interest accrued due, but not actually realised shall be deducted from the gross profits for the year, before the net profits are arrived at. So much of the accrued interest that has been so deducted from the profits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s eligible for deduction under section 80p(2)(d) of the Act and this is the stand of the AO and the CIT(A) that out of the dividend received by the assessee from KMF is eligible for deduction under section 80p(2)(d) of the Act but the amount of bonus received by the assessee from KMF is not eligible for deduction under section 80p(2)(d) of the Act. Hence, we have to decide this aspect as to whether the nature of bonus income received by the assessee from KMF can be considered as dividend received from KMF or not. In this regard, we find that Rules 33 and 34 of the Bye Law of the KMF as reproduced above are relevant in this regard. We find that as per these Rules, 25% of the profit is to be transferred to reserve fund and 25% to be transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is payable only if there is remaining profit after these transfers as noted above and such dividend should not exceed 25% of share investment. Hence, it is seen that the computation mechanism for payment of bonus and dividend are different but both are towards distribution of net profit of KMF. This is also accepted legal position that divided is only distribution of net profits. Under these facts, we find force in the argument of learned AR of the assessee that the nature of bonus received by the assessee from KMF is nothing but dividend only although the mechanism of its computation is different because both bonus and dividend are paid to the assessee as distribution of net profit only. We, therefore, direct the AO to consider the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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