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2022 (8) TMI 597 - AT - Income TaxDeduction of the interest on bank deposits u/s.80P(2)(a)(i) - HELD THAT - As in the case of the assessee before us the surplus funds parked by way of short-term deposit with the co-operative bank, viz. Jila Sahakari Kendriya Bank are inextricably interlinked, or in fact interwoven with its business of providing credit facilities to its members, therefore, the same as claimed by the Ld. AR, and rightly so, would duly be eligible for deduction u/s. 80P(2)(a)(i). We, thus, in terms of our aforesaid observations, direct the AO to allow deduction u/s. 80P(2)(a)(i) on the interest income earned by the assessee society on its deposits with the co-operative bank.Ground of appeal No.1 raised before us is allowed. Deduction of the income from paddy procurement business u/s 80P(2)(a)(iii) - HELD THAT - We, though concur with the claim of the AR that the assessee society is entitled for deduction of its income from paddy procurement business u/s.80P(2)(a)(iii), but restore the matter to the file of the A.O for the limited purpose of restricting the said claim of deduction to the extent of the profit relatable to the marketing of the agricultural produce of the members of the assessee society. 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) i.e. after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by its members, and thus, restrict it s claim for deduction u/s. 80P(2)(a)(iii) only to the extent of the profit relatable thereto. The assessee shall in the course of the set-aside proceedings furnish the requisite details/documents that are called for by the A.O. Addition on account of TDS on commission received from paddy procurement business - HELD THAT - As stated by the ld. 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 No.1 (iv) is allowed for statistical purposes. 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 is squarely covered by the aforesaid decision of the Tribunal in 2022 (3) TMI 75 - ITAT RAIPUR therefore, principally concurring with the claim of the ld. AR we herein vacate the disallowance of the assessee s claim for deduction u/s 80P(2)(d) qua the dividend received on shares of a co-operative bank, viz. Jila Sahakari Bank. Thus, the Ground of appeal No.1(v) raised in appeal by the assessee is allowed in terms of our aforesaid observations.
Issues Involved:
1. Disallowance of deduction u/s 80P(2)(a)(i) for interest income on bank deposits. 2. Disallowance of deduction u/s 80P(2)(a)(iii) for income from paddy procurement business. 3. Addition on account of TDS deducted from commission received on paddy procurement business. 4. Disallowance of deduction u/s 80P(2)(c)(ii) for profit from PDS business. 5. Disallowance of deduction u/s 80P(2)(d) for dividend income and entry fee. Issue-wise Detailed Analysis: 1. Disallowance of Deduction u/s 80P(2)(a)(i) for Interest Income on Bank Deposits: The tribunal addressed the disallowance of the assessee's claim for deduction of interest income on bank deposits amounting to Rs. 1,39,450/- u/s 80P(2)(a)(i). It was argued that the issue was covered by a prior order in ITA No. 114/RPR/2016, where the interest income on surplus funds parked as deposits by a cooperative society was deemed eligible for deduction under Sec. 80P(2)(a)(i). The tribunal concluded that the interest income from surplus funds deposited with a cooperative bank is inextricably linked with the business of providing credit facilities to its members and thus eligible for deduction. The tribunal directed the AO to allow the deduction of Rs. 1,39,450/-. 2. Disallowance of Deduction u/s 80P(2)(a)(iii) for Income from Paddy Procurement Business: The tribunal examined the disallowance of the assessee's claim for deduction of Rs. 41,69,739/- from paddy procurement business u/s 80P(2)(a)(iii). The lower authorities had denied the deduction on the grounds that the assessee acted as an agent for Chhattisgarh Marketing Federation (CMF) and earned commission, not marketing agricultural produce grown by its members. The tribunal referred to a similar case (ITA No. 114/RPR/2016) where the matter was remanded for quantification. It was held that the assessee was entitled to deduction but the AO was directed to restrict the deduction to the extent of profit related to marketing the agricultural produce of its members. 3. Addition on Account of TDS Deducted from Commission Received on Paddy Procurement Business: The tribunal addressed the addition of Rs. 4,15,517/- related to TDS deducted from commission received on paddy procurement business. The assessee claimed it had not treated TDS as an expense. The tribunal restored the issue to the AO for verification. If the assessee had not claimed the TDS as an expense, no addition would be warranted. 4. Disallowance of Deduction u/s 80P(2)(c)(ii) for Profit from PDS Business: The tribunal considered the disallowance of Rs. 5,54,758/- claimed under Sec. 80P(2)(c)(ii) for profit from Public Distribution System (PDS) business. Referring to a prior case (ITA No. 114/RPR/2016), the tribunal remanded the issue to the AO with directions to restrict the deduction to the net profit after considering proportionate expenses. 5. Disallowance of Deduction u/s 80P(2)(d) for Dividend Income and Entry Fee: The tribunal reviewed the disallowance of deduction for dividend income and entry fee amounting to Rs. 23,15,154/- and Rs. 255/- respectively. It was argued that the issue was covered by a prior order (ITA No. 114/RPR/2016) which held that dividend income from shares of a cooperative bank is eligible for deduction under Sec. 80P(2)(d). The tribunal vacated the disallowance and allowed the deduction. Conclusion: The tribunal set aside the order of the CIT(A) and allowed the appeals of the assessee for statistical purposes. The AO was directed to allow the deductions and make necessary verifications as per the tribunal's observations. The consolidated order applied mutatis mutandis to all related appeals.
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