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2023 (2) TMI 57 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - assessee received interest from Sardar Sarovar Narmada Nigam Limited (SSNL Ltd.) - HELD THAT - Assessee received interest from Sardar Sarovaor Narmada Nigam Limited which is not co-operative society. The Interest earned on investment in SSNL Limited deposits though claimed as from the operational funds of the assessee society, the same is from surplus funds of the assessee society. The decisions cited by the Ld. AR in respect of Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Limited and others 2021 (1) TMI 488 - SUPREME COURT has categorically mentioned in paragraph no.35 that interest or dividend income derived from Co-operative Society from investments with other Co-operative Society are entitled to deduct the whole of such income, but in earlier paragraph i.e. paragraph no.33 it has clearly stated/held that facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. Thus, in the entirety of the decision of the Hon ble Apex Court it has categorically differentiated the investments done in Co-operative Societies and non-co-operative Societies/non-members. In the present case, the SSNL Limited are not Co-operative Society or member as well as S.K. District Bank. Thus, the CIT(A) was right in confirming the disallowance. Appeal of the assessee is dismissed.
Issues:
Appeal against reassessment order for AY 2013-14 - Escapement of income - Nature of interest income from SSNNL - Eligibility for deduction under Section 80P(2)(a)(i) - Applicability of SC decision in Totgar's case - AO's failure to follow CIT(A) order for AY 2009-10 - Investment source - Operational vs. surplus funds. Analysis: The appeal was filed against the reassessment order for the Assessment Year 2013-14. The primary issues raised by the assessee included the contention that there was no escapement of income as per the Supreme Court decision in the Totgar's case. The assessee argued that the interest income of Rs.15,32,285 from SSNNL was considered as business income and allowed as a deduction under Section 143(3) earlier, and changing this view amounted to a mere change of opinion. The CIT(A) confirmed that the interest from SSNNL was income from other sources, not eligible for deduction under Section 80P(2)(a)(i), relying on the Totgar's case. The assessee further contended that the AO failed to follow the CIT(A) order for AY 2009-10, where the interest from SSNNL was treated as business income and allowed as a deduction under Section 80P(2)(a)(i) based on a specific ITAT order. The source of investment, whether from operational or surplus funds, was a crucial aspect in this case. Regarding the nature of the interest income from SSNNL, the assessee, a Co-operative Society providing credit facilities, argued that the interest income should be eligible for deduction under Section 80P(2)(a)(i) due to the nature of its operations. The assessee highlighted its investments in different banks and FDRs, emphasizing that the credit facilities provided to members should not deny it the benefit of Section 80P(2)(a)(i). The assessee cited relevant tribunal and court decisions to support its position, distinguishing between investments in cooperative societies and non-cooperative entities. The argument focused on the source of investment funds and the applicability of various legal precedents to the current case. In the final decision, the Tribunal upheld the CIT(A)'s ruling, confirming that the interest income from SSNNL, derived from surplus funds of the assessee society, was not eligible for deduction under Section 80P(2)(a)(i). The Tribunal differentiated between investments in cooperative societies and non-cooperative entities, citing relevant legal precedents, including a specific mention of the Supreme Court's position on income derived from non-members. The Tribunal found no grounds to interfere with the CIT(A)'s findings, ultimately dismissing the appeal of the assessee. The judgment emphasized the distinction between investments made in cooperative societies and those made in non-cooperative entities, determining the eligibility for deductions under Section 80P(2)(a)(i) based on the nature of the investments and the source of funds used for such investments.
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