TMI Blog2024 (4) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... dy, Hon ble Judicial Member For the Appellant : Shri C.Subrahmanyam, AR For the Respondent : Dr.Aparna Villuri, DR ORDER PER SHRI DUVVURU RL REDDY, JUDICIAL MEMBER : These appeals are filed by the assessee against the orders of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi vide DIN Order No. ITBA/NFAC/S/250/2023-24/1059461103(1) dated 08.01.2024, arising out of order passed u/s 147 r.w.s. 144 of the Income Tax Act, 1961 (in short Act ) dated 07.02.2023 for the Assessment Year (A.Y. ) 2018-19 and ITBA/NFAC/S/250/2023-24/1059519024(1) dated 09.01.2024 arising out of order passed u/s 143(3) of the Act dated 06.09.2022 for the A.Y. 2020-21. Since the grounds raised in these appeals are identical, these appeals are clubbed, heard together and a common order is being passed for the sake of convenience as under. Facts are extracted from I.T.A.88/Viz/2024, A.Y. 2018-19. 2. Brief facts of the case are that the assessee is a Primary Agriculture Cooperative Credit Society, engaged in the banking activities of lending money to the members for agriculture purpose and collecting the deposits from the members and also supplying, marketing of agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices issued by the assessing officer vitiate the subsequent proceedings, rendering the assessment null and void. Therefore, the orders passed under section 143(3) r.w.s. 144B of the IT Act are liable to be quashed. 4. The assessee, being a primary agricultural cooperative thrift society is entitled to claim deduction under section 80P(2)(a)(i) of the IT Act for income earned on its activities. The Ld.CIT(A) erred in confirming the disallowance of the claim of Rs. 14,79,948/- without due consideration of the provisions of Sec. 80P(2)(a)(i). 5. The interest income earned from fixed deposits, which is invested out of surplus funds, is attributable to the activities of the assessee society. The CIT(A) s reliance on the judgement in the case of TOTGARS Cooperative Society Ltd. 322 ITR 283 is misplaced as the facts of the present case are distinguishable. 6. The appellant prays for the quashing of the impugned orders and seeks relief in accordance with the grounds stated above and any additional grounds to be urged during the hearing of the case. 5. Ground No.2 is not pressed, hence, the ground is dismissed as not pressed. 6. Ground No.6 is general in nature, which does not require spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decide whether the assessee is eligible for claiming deduction u/s 80P(2)(a)(i) on interest earned on deposits held with KDCCBL or not. On similar set of facts, this Tribunal in the case of The Kakateeya Mutually Aided Thrift and Credit Coop Society Ltd. vide I.T.A.No.107/Viz/2022, CO No.07/Viz/2022 dated 30.08.2023, held in favour of the assessee, relying on the decision of Hon ble jurisdictional High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. Vs. Chief Commissioner of Income Tax and Another [2017] 396 ITR 0371 (AP). For the sake of clarity and convenience, I extract relevant part of the order of the Tribunal as follows : 8. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee has claimed deduction U/s. 80P(2)(a)(i) of the Act on the interest accrued and received by the assessee U/s. 80P(2)(a)(i) of the Act. The contention of the Ld. AO is that as per section 80P(2)(d), the assessee is eligible to claim deduction U/s. 80P(2)(a)(i) of the Act only when it is invested with any other cooperative society. The Ld. AO also placed h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cooperative 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, processing or facilitating the marketing of commodities, the whole of such income; 10. From the plain reading of section 80P(2)(a)(i) of the Act, the whole of amount of profits and gains of the business attributable to one or more of such activities shall be allowed as a deduction. Further, section 80P(2)(d) and 80P(2)(e) of the Act also allows similar deductions. It is clear that the deductions available under clauses (a) to (e) of section 80P(2) are activity based whereas clauses (d) and (e) are investment based. The distinction between clauses (a) and clauses (d) (e) on the other hand is that the benefit under clause (a) is restricted to only into those activities of a coopera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 Totgar's struck a different note. 11. Further, the Hon ble jurisdictional High Court of Andhra Pradesh and Telangana in the case of Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another (supra) 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. The Hon ble High Court in paras 35 to 37 of its judgment held as under: 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed d ..... 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