TMI Blog2024 (3) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 [the Act] for the AY 2020-21. 2. At the outset, it is noticed that there is a delay of 98 days in filing this appeal before the Tribunal. With respect to belated filing of the appeal, the assessee filed petition for condonation of delay along with the affidavit and the relevant paras of the affidavit is extracted herein below for reference: 1 . 2 3 4 5 6. The Ld. CIT(A), NFAC vide his order dated 14/7/2003 disallowed the claim for deduction under section 80P but remanded the matter back to the jurisdictional AO to allow proportionate expenses incurred for earning the income after affording the assessee an opportunity of hearing and after verifying the same with documentary evidence. The CIT(A) has not decided the issue of mistake of business income in the computation sheet. 7. The Income Tax Officer, Ward-1, Srikakulam passed an order 11/11/2023 giving effect to the directions of the Ld. CIT(A), NFAC. Though he did not allow the assessee s claim for deduction under section 80P he has rectified the mistake with respect to wrong amount taken in the computation sheet. 8. That on receipt of the order when we approached the consultant for filing appeal against the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order u/s. 143(3) r.w.s144B of the Act wherein the Ld. AO disallowed the assessee s claim of deduction u/s. 80P of the Act amounting to Rs. 21,96,002/- against the interest income received on deposits made with Andhra Bank and assessed the total income at Rs. 29,54,372/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A)-NFAC, the assessee submitted that on identical issue, the Ld. CIT(A)-9, Hyderabad vide his order in Order No. 10220/CIT(A)-9, Hyd/2017-18 allowed the assessee s claim of deduction u/s. 80P(2)(a)(i) of the Act for the AY 2014-15. Before the Ld. CIT(A)-NFAC, the assessee also made various submissions along with bye-laws of the society, certification of registration, computation of income etc. However, the Ld. CIT (A)-NFAC did not consider the submissions and explanations of the assessee and confirmed the disallowance made by the Ld. AO. Further, the Ld. CIT(A)-NFAC also held that the assessee is eligible to get benefit of deduction in respect of proportionate cost, administrative and other expenses which are incurred in order to earn such interest income and the accordingly directed the Ld. AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ie., Andhra Bank, or not? It is an admitted fact that the assessee has claimed deduction u/s 80P of the Act. The contention of the Ld. AO is that interest accrued on Reserve Fund Deposits is not eligible for deduction U/s 80P of the Act. The Ld. Revenue Authorities relied on various case laws to state that income from interest on securities ear marked to reserve fund has been held not eligible for deduction u/s 80P. The Ld. Revenue Authorities have also placed relied on the decision of Hon ble Supreme Court of India in Civil Appeal No.1622 of 2010 in the case of M/s Totgars Cooperative Sale Society Ltd., wherein it was held that investment of surplus on hand not immediately required in Short Term deposits and securities by a co- operative society providing credit facilities to members or marketing agriculture produce to member . However, in the instant case, the facts are distinguishable and hence, in my view, the ratio laid down in the case of M/s Totgars Cooperative Sale Society Ltd.(supra) shall not be applied to the instant case. On similar set of facts, coordinate Bench of this Tribunal in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society held in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to its members, or (ii) a cottage 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 80P2(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 co-operative 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, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect 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 business. This is why To ..... X X X X Extracts X X X X X X X X Extracts X X X X
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