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TMI Blog2024 (4) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 agricultural products and manures for the benefit of members (farmers). The assessee did not file any return of income for A.Y. 2018-19. As per AIR/CIB data, the assessee had deposited total cash of Rs. 1,38,60,103/- with Krishna District Cooperative Central Bank Ltd.(KDCCB) and had withdrawn cash of Rs. 1,14,61,000/-. Accordingly, notice u/s 148 was issued by the Assessing Officer (AO) on 31.03.2022. In response, the assessee filed it's return of income on 03.05.2022, declaring Nil income, but the assessee failed to verify it's return of income in the prescribed time limit and the same was treated as invalid return of income for the year under consideration. During the assessment proceedings, the AO considered the replies and documents furnished by the assessee. In the computation of income / ITR, the assessee had claimed deduction u/s 80P(2)(a)(i)-Banking / Credit Facilities to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant 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 specific adjudication. 7. Grounds No.1 and 3 to 5 relate to the issue of allowance of interest on deposits earned by the cooperative society from fixed deposits in various bank accounts can be allowed as deduction u/s 80P2(a)(i) of the Act or not. At the outset, the Ld.AR submitted that the assessee had deposited total cash of Rs. 1,38,60,103/- with KDCC Bank Ltd. and claimed deduction u/s 80P(2)(a)(i) of the Act on interest income earned. The Ld.AR further submitted that the interest income earned from fixed deposits, which is invested out of surplus funds is attributable to the activities of the assessee society, hence eligible for claiming deduction u/s 80P(2)(a)(i) of the Act. The Ld.AR further submitted that the facts of the case relied on by the Ld.AO in the case of M/s Totgars Cooperative Sale Society Ltd. (supra) are distinguishable to the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 heavy reliance in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) while disallowing the claim made by the assessee U/s. 80P(2)(a)(i) of the Act. We have perused the ratio laid down by the Hon'ble Apex Court in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) and found that in that case the society is engaged in marketing of the agricultural produce by its members as per section 80P(2)(a)(iii) while carrying on the business of banking or providing credit facilities to its members U/s. 80P(2)(a)(i) of the Act. In that case, the Society retained the sale proceeds which was otherwise payable to its members from whom the produce was bought which was invested in short term deposits / securities. It is also found that the amount payable to its members realized from sale proceeds of the agricultural produce of its members was retain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(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 cooperative socie ty enlisted in sub-clause (a) whereas the benefit of clauses (d) & (e) are available to all cooperative societies without any restriction on the activities carried on by them. In simple terms, the benefit under clause (a) will be limited only to the profits & gains of the business attributable to any one or more of such activities. But in case, if the cooperative society has an income not attributable 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression "attributable to" and not any one of the two expressions, namely, "derived from" or "directly attributable to". 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates ..... X X X X Extracts X X X X X X X X Extracts X X X X
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