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2022 (9) TMI 296 - AT - Income TaxDeductions u/s 80P - interest earned on banking activities done by the assessee-society - HELD THAT - Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors 2022 (3) TMI 75 - ITAT RAIPUR had after drawing support from the judgment of Tumkur Merchants Souharda Cooperative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT on the basis of its exhaustive deliberations concluded, that interest income earned on the surplus funds which were parked as deposits by the co-operative society in the normal course of the business of providing credit facilities to its members, i.e., at a point of time when there were no takers for the said funds was duly entitled for deduction under Sec. 80P(2)(a)(i). We, thus, in terms of our aforesaid observations direct the AO to allow the assessee s claim for deduction under Sec. 80P(2)(a)(i). Disallowance of deduction of the income from paddy procurement business u/s 80P(2)(a)(iii) - HELD THAT - As in the case of the present assessee, it is the claim of the ld. AR that no part of the procurement of paddy was made by the assessee-society in the course of its paddy procurement business from non-members, therefore, restricting of its claim for deduction u/s. 80P(2)(a)(iii) of the Act to 95.2% of the profits earned from the said business activity by the CIT(Appeals) was not justified. Considering the parity of the facts involved in the present case as against those which were involved in 2022 (3) TMI 75 - ITAT RAIPUR we are of the considered view that the matter in all fairness on the same terms be restored to the file of the AO for fresh adjudication. In the course of the set-aside proceedings the AO shall read-judicate the assessee s claim for deduction under Sec. 80P(2)(a)(iii) i.e. after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, and thus, restrict the it s claim for deduction u/s. 80P(2)(a)(iii) only to the extent of the profit relatable thereto. Needless to say, the assessee shall in the course of the set-aside proceedings furnish the requisite details/documents that are called for by the A.O. Thus, the Ground of appeal No.1(iii) raised by the assessee is allowed for statistical purposes in terms of our aforesaid observations. Deduction u/s 80P(2)(c)(ii) of the profit from PDS activity i.e, distribution of essential commodities to the ration holders through fair price shop - HELD THAT - As stated by the AR, and rightly so, the Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors 2022 (3) TMI 75 - ITAT RAIPUR had after necessary deliberations on the issue in hand remanded the matter to the file of the A.O, with a specific direction i.e, to restrict its claim for deduction as regards its profit from PDS only to the extent of its net profit i.e., after considering the proportionate expenses - we on the same terms restore the matter to the file of the AO, with a direction to restrict the assessee s claim for deduction as regards its profit from PDS only to the extent of its net profit i.e., after considering the proportionate expenses. Thus, the Ground of appeal allowed for statistical purposes in terms of our aforesaid observations. Entitlement of a co-operative society for claim of deduction u/s 80P(2)(d) qua the dividend received on shares of a co-operative bank - HELD THAT - As relying on case of Gramin Sewa Sahakari Samiti Maryadit Ors 2022 (3) TMI 75 - ITAT RAIPUR we herein vacate the disallowance of the assessee s claim for deduction u/s 80P(2)(d) of the dividend received on shares of a co-operative bank, viz. Jila Sahakari Bank. Thus, the Ground of appeal raised in appeal by the assessee is allowed in terms of our aforesaid observations.
Issues Involved:
1. Disallowance of deduction under Sec. 80P(2)(a)(i) for interest income. 2. Disallowance of deduction under Sec. 80P(2)(a)(iii) for income from paddy procurement. 3. Disallowance of deduction under Sec. 80P(2)(c)(ii) for profit from Public Distribution System (PDS) activities. 4. Disallowance of deduction under Sec. 80P(2)(d) for dividend income from a co-operative bank. 5. Disallowance of deduction under Sec. 80P for miscellaneous income and entry fee receipts. Detailed Analysis: 1. Disallowance of Deduction under Sec. 80P(2)(a)(i) for Interest Income: The assessee challenged the disallowance of Rs. 6,90,268/- as interest income earned on surplus funds deposited with banks. The Tribunal referenced its previous decision in ITA No.114/RPR/2016, where it was established that interest income from surplus funds parked as deposits by a co-operative society in the normal course of business is eligible for deduction under Sec. 80P(2)(a)(i). The Tribunal cited the Karnataka High Court's decision in Tumkur Merchants Souharda Cooperative Ltd., which supported the eligibility of such interest income for deduction. Consequently, the Tribunal directed the AO to allow the deduction of Rs. 6,90,268/- under Sec. 80P(2)(a)(i). 2. Disallowance of Deduction under Sec. 80P(2)(a)(iii) for Income from Paddy Procurement: The assessee contested the disallowance of Rs. 1,00,263/- related to paddy procurement income. The Tribunal noted that the CIT(A) had allowed 95.2% of the income as deductible but disallowed the remaining amount, assuming some procurement was from non-members. The Tribunal referenced its previous decision in ITA No.114/RPR/2016, where it remanded a similar issue for verification of whether the procurement was solely from members. The Tribunal directed the AO to re-adjudicate the matter, verifying the claim that procurement was entirely from members and allowing the deduction accordingly. 3. Disallowance of Deduction under Sec. 80P(2)(c)(ii) for Profit from PDS Activities: The assessee contested the disallowance of Rs. 1,64,699/- related to PDS activities. The Tribunal referenced its previous decision in ITA No.114/RPR/2016, where it remanded the issue for verification of net profit after considering proportionate expenses. The Tribunal directed the AO to restrict the deduction to the net profit from PDS activities after accounting for proportionate expenses. 4. Disallowance of Deduction under Sec. 80P(2)(d) for Dividend Income from a Co-operative Bank: The assessee challenged the disallowance of Rs. 1,05,279/- as dividend income from Jila Sahakari Bank. The Tribunal referenced its previous decision in ITA No.114/RPR/2016, where it was held that dividend income from a co-operative bank qualifies for deduction under Sec. 80P(2)(d). The Tribunal vacated the disallowance and allowed the deduction for the dividend income from the co-operative bank. 5. Disallowance of Deduction under Sec. 80P for Miscellaneous Income and Entry Fee Receipts: The Tribunal did not provide specific details or a separate analysis for this issue in the provided text. However, it is implied that the Tribunal's decision in favor of the assessee on other grounds would similarly apply to this issue, allowing the deduction for miscellaneous income and entry fee receipts under Sec. 80P. Conclusion: The Tribunal allowed the appeals of the assessee, directing the AO to allow the deductions under Sec. 80P as claimed, subject to verification and proportionate adjustments as specified. The Tribunal's decisions in similar previous cases were applied mutatis mutandis to the current appeals, ensuring consistency in the application of legal principles.
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