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TMI Blog2022 (4) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s 80P(2)(d) on account of interest income of Rs. 6,46,233/- as taxable under other sources when the same was claimed and was allowable u/s 80P(2)(a)(i). 3. For that alternatively, but not admitting, the ld. CIT(A) should have restricted the disallowance only to the profit element @3.12% from the alleged nonattributable business of Rs. 23,00,239/- i.e. Rs. 71,767/- only. 4. For that the ld. CIT(A) erred in confirming the addition of interest income of Rs. 29,053/- which was allowable u/s 80P(2)(a)(i). 5. For that the ld. CIT(A) erred in confirming the addition of Rs. 8,760/- as alleged undisclosed investment which was duly reconciled and allowable u/s 80P. 6. For that the additions confirmed by the CIT(A) was not in accordance with law and is liable to be deleted." 3. Brief facts of the case as per the records are that the assessee is a cooperative Society engaged in retail business of agricultural products and runs the business of micro finance within its members as per the rules and regulations of the Society. E-return of income was filed for AY 2016-17 on 18.10.2016 by the assessee Society. Case selected for complete scrutiny through CASS followed by servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,46,233/-, Rs. 29,053/- & Rs. 8,760/-. The assessee has also placed reliance on the judgment of the Hon'ble jurisdictional High Court in the case of South Eastern Railway Employees' Cooperative Credit Society Ltd. (supra). The following question of law was formulated by the Hon'ble Court: "Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal by allowing deduction on income earned by the assessee from investment in banks and other financial institutions has rendered the provisions of Section 80P(2)(a)(i) nugatory as the said section of the Act allows deduction to a cooperative Society engaged in carrying on business of banking or providing credit facilities to its members?" 8. We, further, find that the Hon'ble Court decided the issue observing as follows: "7. We have not been impressed by the first submission advanced by Mr. Saraf. If the Multi State Cooperative Societies Act, 2002 does not provide for the consequences of an omission to act in accordance with Section 63 thereof, that is no valid reason why the mandate of law should not be followed. When law requires a business to be done in a particular manner, the business can be done only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain income". The headnote to s. 80P indicates that the said section deals with deductions in respect of income of co-operative societies. Sec. 80P(1), inter alia, states that where the gross total income of a cooperative society includes any income from one or more specified activities, then such income shall be deducted from the gross total income in computing the total taxable income of the assessee-society. An income, which is attributable to any of the specified activities in s. 80P(2) of the Act, would be eligible for deduction. The word "income" has been defined under s.2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically "business profits" into the definition of the word "income". Therefore, we are required to give a precise meaning to the words "profits and gains of business" mentioned in s.80P(2) of the Act. In the present case, as stated above, assessee-society regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression "profits and gains of business". Such interest income cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of co-operative bank is deductible whereas in the case of a society the income attributable to any one or more of the activities laid down in Subsection (2) is deductible. The Division Bench did not give any independent reasoning. The Division Bench proceeded on the basis that the view taken by them was supported by the Judgment in the case of Karnataka State Co-operative Apex Bank (supra) which, with respect, was not a correct impression. The other judgement cited by Mr. Khaitan in the case of Guttigedarara Credit Co-operative Society Ltd. (supra) is not applicable because the caution appearing in sub-section (1) of Section 80P, that only an income referred to in sub-section (2) was deductible, was not taken into account. The subsection (2) provides for only the income attributable to the business of advancing credit facilities to its members. Income arising from any other source including investment of capital "if not immediately required to be lent to the members" was not contemplated. The assessee cannot claim any deduction which is not provided for by the section. Moreover the judgment in the case of Totgars Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount, is not of much importance. What is of importance is whether the benefit is allowable in law? If an answer to that question is in the affirmative, then that benefit has be allowed. 13. In that view of the matter, the question raised for decision is answered in the affirmative and in favour of the revenue to the extent as indicated above. The appeal is allowed. The matter is, however, remanded to the Assessing Officer (a) to work out the interest earned under Sections 63 and 64 of the Multi-State Cooperative Societies Act, 2002 and to allow benefit under Section 80P and (b) to ascertain the interest paid to the members for the purpose of earning the sums of Rs. 99 lakhs and 1.2 crores on account of interest from investments. Such interest shall be deducted from the expenses of eligible business. Consequent increased amount of profits of eligible business as discussed above shall be the amount of deduction available to the assessee under Section 80P. 14. The appeal is thus disposed of." 9. On examining the facts of the case in light of the above judgment, we find that as regards the disallowance of deduction u/s 80P(2)(d) of the Act of Rs. 6,46,233/- we do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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