TMI Blog2022 (7) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 revisited by the AO. We, thus, in terms of the aforesaid observation set-aside the matter to the file of the Assessing Officer, with a direction to re-adjudicate the same after considering the additional documentary evidence that had been filed by the asssessee before us. A.O shall after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, therein, restrict the assessee s claim for deduction u/s. 80P(2)(a)(iii) of the Act only to the extent of the profit relatable thereto. - ITA No. 85 to 91/RPR/2018 - - - Dated:- 26-7-2022 - Shri Ravish Sood, Judicial Member And Shri Rathod Kamlesh Jayantbhai, Accountant Member For the Assessee : Shri G.S. Agrawal, AR For the Revenue : Shri G.N Singh, DR ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the aforementioned cooperative societies are directed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety hence out of first 10 members in appeal order only 6 members sold paddy to the society. Based on the above error the addition should be deleted. 3. PDS Business: - That the Ld. CIT(Appeals) further erred in confirming the addition of Rs.1,47,499/- which is gross profit in PDS a/c. made by the Ld. AO. Prayed that in PDS account, after considering proportionate expense of Rs.2,48,190/-, there is loss of Rs.72,341/-. Prayed that addition of Rs.1,47,499/- is unjustified be deleted. 4. Dividend Income: - That the Ld. CIT(Appeals) further erred in confirming the rejection of claim of the exemption of dividend received from Jila Sahakari Kendriya Bank Ltd., Raipur at Rs.86,800/- u/s. 80P(2)(d). Prayed that dividend is exempted and the addition of Rs.86,800/- be deleted. 3. Briefly stated, the assessee which is a primary agricultural cooperative society engaged in the business of banking, paddy procurement, sale of fertilizers, seeds, manures and pesticides as well as sale of controlled items under the Public Distribution System (PDS), had on 22.03.2013 e-filed its return of income for the assessment year 2012-13, declaring a total income of Rs. Nil (after c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assesse s claim for deduction of the interest on bank deposits of Rs.4,36,196/- u/s.80P(2)(a)(i) of the Act, the Ld. Authorized Representative (for short AR ) submitted that the issue was squarely covered by the order of this Tribunal in ITA No.114/RPR/2016 Ors., dated 23.02.2022 in the case of Gramin Sewa Sahakari Samiti Maryadit Ors Vs. the ITO, Ward-1(3), Raipur. The Ld. AR submitted that the facts and the issue involved in the present appeal qua its claim for deduction remains the same as were there before the Tribunal in its aforesaid order. 8. Per contra, the Ld. Departmental Representative (for short DR ) conceded to the submissions put forth by the Ld. AR of the assessee. 9. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the order of the Tribunal in ITA No.114/RPR/2016 Ors (supra) that have been pressed into service by the Ld. AR to drive home his contentions. As stated by the ld. AR, and rightly so, the Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors Vs. the ITO, Ward-1(3), Raipur in ITA No.114/RPR/2016 Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, 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 facilities to its members , and thus, would fall within the realm of the deduction contemplated in Section 80P(2)(a)(i) of the Act. At this stage, we may herein observe, that it is the claim of the assessee, that as depositing of its surplus funds, i.e, the funds for which there were no takers at the relevant point of time, in the course of its business of providing credit facilities to its members, is inextricably interlinked; or in fact interwoven with its said stream of its business activity, therefore, the interest income received on such short-term deposits was duly eligible for deduction under the aforesaid statutory provision, i.e., Sec. 80P(2)(a)(i) of the Act. We may her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 facts and rival contentions, the undisputed facts which emerges is, the sum of Rs.1,77,305/- represents the interest earned from short term deposits and from savings bank account. The assessee is a cooperative society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law i.e. section 80P(2)(a)(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 receipts from sources other than the actual conduct of the business. A cooperative society which is carrying on the business providing credit facilities to its members, earns profit and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 in the case of the assessee before us the surplus funds parked by way of short-term deposit with the co-operative bank, viz. Jila Sahakari Kendriya Bank are inextricably interlinked, or in fact interwoven with its business of providing credit facilities to its members, therefore, the same as claimed by the Ld. AR, and rightly so, would duly be eligible for deduction u/s. 80P(2)(a)(i) of the Act. We, thus, in terms of our aforesaid observations, direct the Assessing Officer to allow deduction of Rs.7,98,705/- u/s. 80P(2)(a)(i) of the Act on the interest income earned by the assessee society on its deposits with the co-operative bank. Thus, the Ground of appeal No.1 raised before us is allowed in terms of our aforesaid observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Tribunal while disposing off the appeal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors Vs. the ITO, Ward-1(3), Raipur in ITA No.114/RPR/2016 Ors., dated 23.02.2022, while dealing with the assessee s claim for deduction of the income from paddy procurement business u/s.80P(2)(a)(iii) of the Act, had remanded the issue to the file of the A.O by observing as under: 16. Admittedly, the assessee as an agent of Chhattisgarh Marketing Federation (CMF) had facilitated the procurement of paddy from the agriculturists, and for the said service was paid a fixed commission as per the rates prescribed by the Government. The gross profit of Rs.16,21,218/- that was earned by the assessee from its aforesaid stream of business activity, i.e., paddy procurement business was claimed by it as a deduction u/s. 80P(2)(a)(iii) of the Act. However, as per the mandate of Sec. 80P(2)(a)(iii) the deduction therein contemplated was only available qua the marketing of the agricultural produce grown by members of the society, therefore, the Assessing Officer in the course of assessment proceedings had called upon the assessee society to produce the register maintained in respect of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profits earned from the 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 revisited by the Assessing Officer. We, thus, in terms of the aforesaid observation set-aside the matter to the file of the Assessing Officer, with a direction to re-adjudicate the same after considering the additional documentary evidence that had been filed by the asssessee before us. The A.O shall after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, therein, restrict the assessee s claim for deduction u/s. 80P(2)(a)(iii) of the Act only to the extent of the profit relatable thereto. Needless to say, the assessee shall in the course of the set-aside proceedings furnish the requisite details/documents that are called for by the A.O. The Ground of appeal No.2 is allowed for statistical purposes in terms of our aforesaid observations. Ak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. We have given a thoughtful consideration to the aforesaid issue in the backdrop of the contentions advanced by the ld. Authorised Representatives of both the parties. As stated by the ld. AR, and rightly so, the Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors Vs. ITO, Ward- 1(3), Raipur in ITA No.114/RPR/2016 Ors., vide its order dated 23.02.2022 had after necessary deliberations on the issue in hand remanded the matter to the file of the A.O, with a specific direction i.e, to restrict its claim for deduction as regards its profit from PDS only to the extent of its net profit i.e., after considering the proportionate expenses, observing as under : 19. Before us, it is the claim of the assessee that as the profit from PDS activities after considering the proportionate expenses amounted to Rs. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety on the shares of a co-operative bank held by it would be eligible for deduction under Sec. 80P(2)(d) of the Act. It was observed by the Tribunal as under: 22. After having given a thoughtful consideration to the aforesaid issue in hand, we are unable to concur with the view taken by the lower authorities. In our considered view, as a Co-operative bank falls within the realm of the definition of Co-operative Society as contemplated in Section 2(19) of the Act, therefore, the view taken by the lower authorities that dividend income received by the assessee from Jila Sahakari Kendriya Bank, Raipur, i.e a Co-operative Bank, would not eligible for deduction u/s. 80P(2)(d) of the Act cannot be sustained. Our aforesaid view is fortified by the order of the ITAT, Mumbai in the case of M/s Solitaire CHS Ltd Vs. Principal Commissioner of Income Tax-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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect 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; On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the same being distinguishable on facts had wrongly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set aside‟ his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016. 10. Resultantly, the appeal filed by the assessee is allowed. Backed by our aforesaid observations, we not being able to persuade ourselves to subscribe to the view taken by the lower authorities, therein vacate the disallowance of the assessee s claim for deduction of Rs.1,16,224/- u/s. 80P(2)(d) of the Act. The Ground of appeal No.4 is allowed in terms of the aforesaid observations. We find that as stated by the Ld. AR, and rightly so, as the aforesaid issue in hand i.e, entitlement of a co-operative society for claim of deduction under Sec. 80P(2)(d) qua the dividend received on shares of a co-operative bank is squarely covered by the aforesaid decision of the Tribunal in ITA No.114/RPR/2016 Ors (supra.), dated 23.02.2022, therefore, principally concurring with the claim of the ld. AR we herein vacate the disallowance of the assessee s clai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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