TMI Blog2023 (9) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... e to any one or more of such activities listed in sub-clauses (i) to (vii) of clause-(a), the same may go out of the purview of clause (a) but still the cooperative society may claim the benefit of clause (d) or (e) as per the conditions laid down therein. In the instant case, the original source of investments made by the assessee in Nationalized Banks is admittedly the income of the assessee derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income must be last, especially when the statute uses the expression attributable to and not any one of the expressions viz., derived from or directly attributable to . As in the case of Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another [ 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] held that the cooperative society is eligible for deduction U/s. 80P(2)(a)(i) of the Act on the interest income received from investment in banks. In the instant case also, the assessee has invested surplus funds out of the activities carried out as per the provisions of section 80P(2)(a) of the Act. We therefore are of the view that interest income should be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(2)(a)(i) of the Act and taxed it under the head inform from other sources . Further, the Ld. AO also observed a sum of Rs. 1,60,825/- towards locker rent during the relevant FY as not eligible for deduction U/s. 80(P)(2)(A)(i) of the Act. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A)-NFAC. 3. On appeal, the assessee placed various submissions before the Ld. CIT(A)-NFAC. On consideration of the submissions and the facts of the case, the Ld. CIT(A)-NFAC by relying on various case laws as discussed in para 5.4.3 of the order of the Ld. CIT(A)-NFAC and partly allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A)-NFAC, the Revenue is in appeal before us. 4. The Revenue has raised the following grounds of appeal: 1. The order of the Ld. CIT(A) is erroneous both in law and in facts and circumstances of the case. 2. The Ld. CIT (A) erred in not appreciating the aspect that the ratio laid down by the Hon ble Apex Court in the case of M/s. Totgars Cooperative Sale Society Ltd (322 ITR 283) is squarely applicable to the facts and circumstances of the case. 3. The Ld. CIT(A) ought to have considered that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td (supra) are entirely different from that of the instant case. The Ld. AR also submitted that as per Para-11 of the judgment in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) it is clearly mentioned that this judgment is confined to the facts of the present case and therefore it cannot be applied in the assessee s case. The Ld. AR also placed reliance on the decision of the ITAT, Visakhapatnam Bench in the case of M/s. Kakinada Cooperative Building Society Ltd vs. Addl. CIT in ITA Nos. 348 349/Viz/2013, dated 22/01/2016 and submitted that the jurisdictional Visakhapatnam Bench of ITAT by relying on the decision of the Hon ble Jurisdictional High Court in the case of CIT vs. Andhra Pradesh State Cooperative Bank Ltd [2011] 336 ITR 516 (AP) wherein it was held that the interest earned on deposits in the bank shall be quantified for deduction U/s. 80P of the Act. Countering the arguments of the Ld. AR, the Ld. DR submitted that the jurisdictional High Court allowed the deduction U/s. 80P(2)(a)(i) of the Act since the Andhra Pradesh State Cooperative Bank Ltd has to make statutory deposits and it has not invested its surplus funds which were not otherwise used fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry, or [(iii) the marketing of agricultural produce grown by its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, [or] [(vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members,] the whole of the amount of profits and gains of business attributable to any one or more of such activities: 9. Further, we also extract below the provisions of section 80P(2)(d) and (e) of the Act for reference: (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case (supra) was in respect of a co operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the society. It is also found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)-NFAC. 13. In the result, appeal of the Revenue is dismissed. 14. With respect to the Cross Objection, the assessee has raied the following grounds: 1. The Ld. First Appellate Authority erred in not adjudicating the Ground No.9 (as contained in the appeal petition in Form No.35 filed before it. Specifically in that the claim for allowing the expenditure of Rs. 2,39,53,821/- against the interest receipts of Rs. 2,02,62,233/- charged to tax by the AO under section 56 of the Act. 2. The Ld. First Appellate Authority erred in sustaining the addition of Rs. 1,60,825/- for the AY 2017-18. 3. The Ld. First Appellate Authority erred in non-adjudication of the Ground no. 8 specifically (contained in form-35 filed before it) for the AY 2017-18 with regard to exemption of income under the Doctrine of Mutuality. 14. Since, the main appeal of the Revenue has been dismissed and held in favour of the assessee, the grounds of Cross Objections raised by the assessee need no separate adjudication and hence considered as infructuous. 15. In the result, Cross Objection raised by the assessee is dismissed. Pronounced in the open Court on 30th August, 2023. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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