TMI Blog2022 (3) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the interest income earned by the assessee society on its deposits with the co-operative bank. Deduction of the income earned from paddy procurement business u/s 80P(2)(a)(iii) - Scaling down 35% of its claim - HELD THAT:- We find substantial force in the claim of the Ld. AR that now when only a small fraction of the procurement of paddy was made by the assessee-society in the course of its paddy procurement business from non-members, therefore, restricting of its claim for deduction u/s. 80P(2)(a)(iii) of the Act to 35% of the profits earned from theee said business activity was not justified. Be that as it may, we are of the considered view that as the compilation of the paddy procurement by the assessee-society has been filed before us as additional documentary evidence, and the same was not there before the lower authorities, therefore, the matter in all fairness requires to be re-visited by the AO - In terms of the aforesaid observation set-aside the matter to the file of the AO, with a direction to re-adjudicate the same after considering the additional documentary evidence that had been filed by the assessee before us - AO shall after determining as to what extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the CIT(Appeals)-1, Raipur, which in turn arises from the respective orders passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short the Act ) for assessment year 2011-12. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off together by way of a consolidated order. 2. We shall take up the appeal in ITA No.114/RPR/2016 for the assessment year 2011-12 as the lead matter, and the order therein passed shall mutatis-mutandis apply to the remaining cases. Before us the assessee has assailed the impugned order on the following grounds of appeal: 1. Banking Business : 1.1. That under the facts and the law, the Ld. CIT(Appeals) erred in rejecting the deduct claimed by the appellant u/s.80P(2)(a)(i) pertaining to its banking business amounting to ₹ 7,98,705/- as rejected by the ld. AO. Prayed that ₹ 7,98,705/- is income from banking business deduction be allowed. 1.2. Without prejudice to above, the Ld. CIT(Appeals) further erred in not deducting the interest paid amounted to ₹ 2,58,520/- from the aforesaid sum of ₹ 7,98,705/-. Prayed without pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 7,98,705/- 2. Disallowance of the assessee s claim for deduction of profit from paddy procurement business u/s. 80P(2)(a)(iii) of the Act. ₹ 12,24,880/- 3. Disallowance of the assessee s claim for deduction of profit from PDS u/s.80P(2)(c)(i) of the Act. ₹ 8,38,228/- 4. Disallowance of assessee s claim for deduction of dividend income u/s.80P(2)(d) of the Act. ₹ 1,16,224/- and also, scaling down its claim for deduction of expenses, to the extent, the same was related to the amount which qualified for deduction u/s.80P of the Act, the Assessing Officer vide his order u/s. 143(3) of the Act, dated 30.03.2014 assessed the total income of the assessee society at ₹ 20,80,789/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). However, the CIT(Appeals) not finding favour with the contentions advanced by the assessee upheld the assessment framed by the Assessing Officer. 5. Assessee being aggrieved with the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid judicial pronouncement, it was claimed by the Ld. AR that the provisions of section 80P(2)(a)(i) of the Act was to be liberally construed and thus, the interest income received by the assessee society from its surplus money deposited with the co-operative bank be held as eligible for claim of deduction under the said statutory provision. On a specific query by the bench as regards the entitlement of the assessee society for claim of deduction of the interest on its deposits with the banks u/s.80P (2)(a)(i) of the Act in the backdrop of the judgment of the Hon ble Supreme Court in the case of M/s. Totgars Co-operative Sale Society Ltd. Vs. ITO, Karnataka (2010) 188 taxmann.com 282 (SC), it was submitted by the ld. AR that the facts therein involved were distinguishable as against those involved in the case of the present assessee before us. In order to support his aforesaid contention the Ld. AR had relied on the judgment of the Hon ble High Court of Karnataka in the case of Tumkur Merchants Souharda Cooperative Ltd. Vs. ITO, Tumkur, ITA No.307/2014, dated 28.10.2014. It was claimed by the Ld. AR that the Hon ble High Court in its aforesaid order had after referring to the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its business of banking was thus entitled for deduction u/s. 80P(2)(a)(i) of the Act. On the basis of his aforesaid contentions, it was submitted by the Ld. AR that as the surplus money deposited by the assessee with the bank i.e. Jila Sahakari Kendriya Bank, i.e, a co-operative bank, was attributable to its business of providing credit facilities to its members, and not in the nature of an amount that was payable by it to its members that was retained and invested in the form of short term deposit/security, therefore, the interest income therein earned was clearly attributable to its activity of providing credit facilities to its members and eligible for deduction u/s.80P(2)(a)(i) of the Act. 7. Adverting to the disallowance of 35% of the assessee s claim for deduction u/s 80P(2)(a)(iii) of its income of ₹ 16,21,218/- qua the Paddy Procurement business, it was submitted by the Ld. AR that the said disallowance was excessive, considering the fact that the assessee had mainly procured paddy from its members only. Elaborating on the facts leading to part disallowance of its aforesaid claim for deduction u/s 80P(2)(a)(iii), it was submitted by the Ld. AR that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s aforesaid contention, it was averred by the Ld. AR that even if the aforesaid disallowance of the assessee s claim for deduction u/s 80P(2)(c)(i) of its profit from PDS business was to be sustained, the profit after considering/attributing the proportionate expenses of the said business activity worked out at an amount of ₹ 3,08,338/-. It was, thus, claimed by the Ld. AR that the disallowance of its claim for deduction u/s. 80P(2)(c)(i) of the Act may be scaled down in the backdrop of the aforesaid factual premises. 9. As regards the disallowance of assessee s claim for deduction of the dividend income of ₹ 1,16,224/- that was earned on the shares of Jila Sahakari Kendriya Bank, i.e, a co-operative Bank u/s. 80P(2)(d) of the Act, it was submitted by the Ld. AR that both the lower authorities had failed to appreciate the facts of the case in the backdrop of the settled position of law. Elaborating on his aforesaid contention, it was submitted by the Ld. AR that as the dividend income was earned by the assessee society on the shares of a co-operative bank, therefore, the same was duly eligible for deduction u/s.80P(2)(d) of the Act. In order to fortify his aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) in the case of a co-operative society engaged in- (i). carrying on the business of banking or providing credit facilities to its members, or (ii) to (iii) (Emphasis by underlining supplied by us) On a perusal of the aforesaid statutory provision, we find that the same, contemplates, that the income of a co-operative society from its business of banking or providing credit facilities to its members is eligible for deduction u/s. 80P(2)(a)(i) of the Act. Our indulgence in the present appeal is confined to the limited aspect, i.e, as to whether or not the interest income earned by the assessee-society by depositing its surplus funds with a bank can be brought within the meaning of income from carrying on the business of banking or providing credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-cooperative society apart from providing credit facilities to its members was also in the business of marketing of agricultural produce grown by its members, and the sale consideration of the agricultural produce due towards its members was thereafter retained and invested as a short-term deposit/security with the bank, then, the interest income therein earned to the said extent could not be said to be attributable to its activity of providing credit facilities to its members. As is discernible from the aforesaid judicial pronouncement of the Hon ble Supreme Court, we find the Hon ble Apex Court had clarified beyond doubt that they have confined the judgment to the facts of the case before them, and the same was not to be considered as laying down of any law. Be that as it may, the aforesaid judgment of the Hon ble Supreme Court in the case of M/s. Totgars Co-operative Sale Society Ltd. (supra) had thereafter been considered by the Hon ble High Court of Karnataka in the case of Tumkur Merchants Souharda Cooperative Ltd. (supra) in ITA No.307/2014, dated 28.10.2014, wherein the Hon ble High Court had after exhaustive deliberations held as under : 6. From the aforesaid fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to is certainly wider in import than the expression derived from . Had the expression derived from been used it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General it has used the expression derived from , as for instance in s. 80J. In our view since the expression of wider import, namely, attributable to has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. 8. Therefore, the word attributable to is certainly wider in import than the expression derived from . Whenever the legislature wanted to give a restricted meaning, they have used the expression derived from . The expression attributable to being of wider import, the said expression is used by the legislature whenever they intended to gather recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore, it is liable to be deducted in terms of section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME TAX III HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD. Reported in (2011) 200 TAXMAN 220/12. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly, it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order: Appeal is allowed. The impugned order is hereby set aside. Parties to bear their own cost. In the backdrop of the aforesaid observations of the Hon ble High Court, we are of a considered view, that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of its paddy procurement for the year under consideration. As the register produced by the assessee society did not reveal the requisite details which were required to identify the members and non-members, therefore, the Assessing Officer in the backdrop of the said fact had restricted the assessee s claim for deduction u/s.80P(2)(a)(iii) of the Act on an ad-hoc basis to 35% (i.e. nearly 1/3rd of the aforesaid gross profit) of the profit that was earned by it from paddy procurement business, and had disallowed assessee s claim for deduction as regards the balance amount of profit. Assailing the restriction of the assessee s claim for deduction u/s 80P(2)(a)(iii) to 35% of its income of ₹ 16,21,218/-, it is the claim of the ld. A.R before us that the same is highly exorbitant, for the reason, that the assessee had mainly procured paddy from its members only. It was submitted by the Ld. AR that though as per the policy of the Government the assessee-society is obligated to purchase paddy from each and every farmer, whether member or non-member, i.e whosoever approaches it, but transactions with the non-members during the year under consideration was minimal and by no mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations. 18. We shall now advert to the claim of the assessee that the CIT (Appeals) had erred in confirming the addition of ₹ 8,38,228/-, i.e., the gross profit earned by the assessee-society from its public distribution activity during the year under consideration, viz. distributing essential commodities to the ration card holders through fair price shop. Observing, that as the claim of deduction u/s.80P(2)(c)(i) of the Act was available only in the case of a consumer co-operative society, the Assessing Officer had declined the assessee s claim for deduction of its profit earned from PDS activities under the said statutory provision. 19. Before us, it is the claim of the assessee that as the profit from PDS activities after considering the proportionate expenses amounted to ₹ 3,08,338/-, therefore, its claim for deduction u/s.80P(2)(c)(i) of the Act was liable to be restricted only to the said extent. After having given a thoughtful consideration to the claim of the Ld. AR, we though principally concur with his aforesaid claim, but then, the same cannot be accepted on the very face of it and would require factual verification. Therefore, for the said lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x-26, ITA No.3155/Mum/2019, dated 29.11.2019 (wherein one of us, i.e, the JM was a party), had after exhaustive deliberations held as under: 6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of subsection (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term cooperative society‟ had been defined under Sec. 2(19) of the Act, as under:- (19) Co-operative society means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies; We are of the considered view, that though the co-operative banks pursuant to the insertion of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly been relied upon by him. The adjudication by the Hon‟ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). At the same time, we find, that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a co-operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. We find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal) and allow/allow for statistical purposes the appeal of the assessee in terms of our aforesaid observations. 24. Resultantly, the appeal of the assessee in ITA No.114/RPR/2016 for the assessment year 2011-12 is allowed/allowed for statistical purposes in terms of our aforesaid observations. ITA Nos. 115 to 117/RPR/2016, ITA Nos.303 305/RPR/2016, ITA Nos.119 to 121/RPR/2016, ITA Nos.144 238/RPR/2016 ITA Nos.242 to 246/RPR/2016 A.Y.2011-12 25. As the facts and issues involved in the captioned appeals remains the same as were there before us in the appeal of Gramin Sewa Sahakari Samiti Maryadit in ITA No. 114/Rpr/2016 for assessment year 2011-12, therefore, our order therein passed while disposing off the said appeal shall apply mutatis-mutandis for disposing off the captioned appeals, i.e, in ITA Nos. 115 to 117/RPR/2016; ITA Nos. 303 305/RPR/2016, ITA Nos.119 to 121/RPR/2016, ITA Nos.144 238/RPR/2016 ITA Nos.242 to 246/RPR/2016 all for assessment year 2011-12. 26. In the combined result, all the captioned appeals (16 appeals) of the aforementioned assessee s are allowed/allowed for statistical purposes in terms of our a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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