TMI Blog2024 (2) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... erative Sale Society , finds reported [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] wherein their lordships referring to the decision of Hon ble Apex Court in the case of Totgars Co-operative Sales Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] held that the ratio of decision of the Hon ble Supreme Court in the aforesaid case (supra) not to be applied in respect of interest income on investment as same falls u/s 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act Thus we hold that the interest income earned by the appellant society from its investment held with other cooperative banks since being a registered co-operative society under respective state laws, qualifies for deductions u/s 80P(2)(d) of the Act. Resultantly, we set-aside the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term deposits and interest of ₹83,638/ from SB a/c held with various cooperative banks. The assessee filed its return of income [ ITR hereinafter] declaring NIL income claiming a deduction of ₹33,05,345/- u/s 80P(2) of the Act. While framing regular assessment u/s 143(3) of the Act, the Ld. AO after vouching the source of interest as from various co-operative banks has denied the deduction u/s 80P(2)(a)(i) as well u/s 80P(2)(d) of the Act by pressing into service the decision of the Hon ble High Court of Karnataka rendered in PCIT Vs Totagars Co-op. Sale Society reported in 83 taxmann.com 140 [Equi: 395 ITR 611] and COC Vs Dilip Kumar reported in 9 SCC 1 (SC). 3.2 Insofar as ITA No 1046/PUN/2023 i.e. AY 2020-21 is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s activity of the society hence qualifies for deduction u/s 80P(2)(a)(i) of the Act and (ii) alternatively since no portion of interest is earned from nationalised bank but from co-operative banks like Janseva Sahakari bank, PDCC Bank, Rajashri Shahu Sahakari Bank, Maheshwari Urban Development Co-op. Bank etc., where these are registered as credit co-operative societies therefore eligible for deduction u/s 80P(2)(d) of the Act. It is also brought to our notice that, the co-ordinate bench in assessee s own case for AY 2017-18 in ITA 404/PUN/2022 vide order dt. 06/12/2022 has adjudicated the very same issue in favour of the appellant by quashing the revisionary order. It is prayed that, since there is much less change in facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply to credit co-operative society for the reasons that, (i) credit co-operative society owning to regulatory supervision operates with liquid funds which cannot be characterised as other than business funds and (ii) such liquid funds for the purpose of generation of income are invested into liquid assets like fixed deposits / term deposits, etc. The interest generated from such liquid investment partakes the character of business income being earned while carrying on the business of providing credit facilities to its members. The surplus fund theory as applied in Totagars Co-op. Sale Society and as binding precedents shall apply to societies other than credit cooperative societies. The appellant in the present case, undisputedly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Totgars Co-operative Sales Society Ltd. (supra) held that the ratio of decision of the Hon ble Supreme Court in the aforesaid case (supra) not to be applied in respect of interest income on investment as same falls u/s 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. We further note that, the co-ordinate bench in Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO , reported in 120 taxmann.com 10, after making reference to the decisions of the Hon ble Supreme Court in the case of Totgars Cooperative Sales Society Ltd. (supra) and having noticed the divergent views of the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. Vs ITO , 55 taxmann.com 447 and decision of Hon ble Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). 10. Insofar as the reliance of the ld. DR on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is concerned, we find that the issue in that case was the eligibility of deduction u/s. 80P(2)(d) of the Act on interest earned by the assessee cooperative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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