2024 (6) TMI 1360 - AT - Income Tax

Deduction u/s. 80P(2)(a)(i) - deduction denied as the assessee co-operative society was carrying on the business of banking and providing credit facilities to its members, therefore, it being a co-operative bank was disentitled from claiming deduction as per mandate of Section 80P(4) - 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). As stated by the Ld. AR, and rightly so, as the facts and the issue involved in the present appeal i.e, allowability of the assessee s claim for deduction under Sec. 80P(2)(a)(i) on the interest on bank deposits remains the same as were there in the aforesaid case we direct the AO to allow the assessee s claim for deduction under Sec. 80P(2)(a)(i). Decided in favour of assessee. Paddy Procurement Business - Tribunal while disposing off the appeal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors 2022 (3) TMI 75 - ITAT RAIPUR while dealing with the assessee s claim for deduction of the income from paddy procurement business u/s.80P(2)(a)(iii) of the Act, had remanded the issue to the file of the A.O as held now when only a small fraction 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 35% of the profits earned from the said business activity was not justified. Be that as it may, we are of the considered view that as the compilation of the paddy procurement by the assessee-society has been filed before us as additional documentary evidence, and the same was not there before the lower authorities, therefore, the matter in all fairness requires to be re-visited by the Assessing Officer. Thus, 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 re-adjudicate the assessee s claim for deduction under Sec. 80P(2)(a)(iii) after verifying and determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, and thus, restrict it s claim for deduction u/s. 80P(2)(a)(iii) only to the extent of the profit relatable thereto.Decided in favour of assessee for statistical purposes. Dividend Income - dividend income received on the investments declined for the reason that as the same was not a co-operative society, hence, the dividend income received therefrom would not be eligible for deduction under Sec. 80P(2)(d) - HELD THAT - Admittedly, in the case of Gramin Sewa Sahakari Samiti Maryadit Ors. 2022 (3) TMI 75 - ITAT RAIPUR Tribunal, had observed, that the dividend income received by a co-operative society on the shares of a co- operative bank held by it would be eligible for deduction under Sec. 80P(2)(d) of the Act. Thus we vacate the disallowance of the assessee s claim for deduction of the dividend received on shares of a co-operative bank, viz. Jila Sahakari Bank u/s 80P(2)(d) . Decided in favour of assessee.

Issues Involved:
1. Banking Business
2. Paddy Procurement Business
3. Trading Business (Sale of Khad/ Beej)
4. Dividend Income
5. Total Deduction

Detailed Analysis:

1. Banking Business:

The primary issue was whether the assessee society, engaged in banking and providing credit facilities to its members, was eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer (A.O) had disallowed the deduction, arguing that the society was a cooperative bank and thus ineligible under Section 80P(4).

Upon review, the Tribunal found that the assessee, being a primary agriculture cooperative society, was not a primary cooperative bank and thus not hit by Section 80P(4). The Tribunal cited that a cooperative society must obtain a license from the Reserve Bank of India to operate as a cooperative bank, which the assessee had not done. Thus, the assessee was entitled to the deduction under Section 80P(2)(a)(i) for its banking business income of Rs. 7,00,937.

2. Paddy Procurement Business:

The assessee claimed a deduction under Section 80P(2)(a)(iii) for income from paddy procurement business, arguing it was engaged in marketing agricultural produce grown by its members. The A.O had disallowed this, stating the society acted as an agent for Chhattisgarh Marketing Federation and was not directly engaged in marketing the produce.

The Tribunal noted that a similar issue had been remanded for verification in another case (Gramin Sewa Sahakari Samiti Maryadit & Ors Vs. ITO). The Tribunal directed the A.O to verify the claim that the society procured paddy solely from its members and to restrict the deduction only to the extent of profit attributable to marketing produce grown by non-members.

3. Trading Business (Sale of Khad/ Beej):

The assessee's claim for deduction under Section 80P(2)(a)(iv) for income from trading of seeds, manure, fertilizers, and pesticides was dismissed. The Tribunal observed that this issue did not emanate from the orders of the A.O or the CIT(Appeals), and thus refrained from dealing with it.

4. Dividend Income:

The assessee claimed a deduction under Section 80P(2)(d) for dividend income received from investments in a cooperative bank. The lower authorities had disallowed this, arguing that the income was not from a cooperative society.

The Tribunal referred to its earlier decision in Gramin Sewa Sahakari Samiti Maryadit & Ors Vs. ITO, which held that dividend income from a cooperative bank qualifies for deduction under Section 80P(2)(d). The Tribunal vacated the disallowance and allowed the deduction for the dividend income of Rs. 59,760.

5. Total Deduction:

The total disallowance of Rs. 14,03,428 claimed under Section 80P was contested. The Tribunal's findings on individual issues led to a partial allowance of the total deduction claimed. The Tribunal set aside the order of the CIT(Appeals) and allowed the appeal for statistical purposes, directing further verification where necessary.

Conclusion:

The Tribunal allowed the appeal in part, directing the A.O to verify specific claims and allowing deductions where appropriate. The appeal was allowed for statistical purposes in terms of the observations made.

← Previous Next →