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TMI Blog2018 (1) TMI 1524X X X X Extracts X X X X X X X X Extracts X X X X ..... rative Societies Act. Further as per the financial statements filed, the assessee is carrying on the activity of accepting the deposits and lending whereby it has income from both lending money and income from deposits. Assessee has shown the expenditure on payment of interest. The AO has wrongly held that the assessee was carrying on the banking activity and is therefore not entitled to the benefit of Section 80P(2) and therefore as held that the assessee is not eligible for deduction u/s.80P(2)(a)(i) and has also held that the assessee is not eligible for the interest earned on the deposits made with other cooperative societies /banks. 03. The assessee filed appeal before the CIT (A) who, in para 4c of his order has held that the society is eligible for the benefit u/s.80P(2)(a) and deleted the addition of Rs. 5,65,666/-. 04. On the other ground of disallowance of Rs. 6,72,805/- in respect of AY 2011-12, the CIT (A) relying upon the order of the Hon'ble Supreme Court in the matter of Totgars Cooperative Sale Society Ltd v. ITO [(2010) 188 Taxman 0282] and the recent judgment of the Hon'ble High Court in Totgars Cooperative Sale Society Ltd v. ITO [(2017) 83 taxmann.com 140] had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits in cooperative society / banks would be an activity relatable to the business of the assessee and is therefore eligible for deduction u/s.80P(2)(a) and 80P(2)(d). If the restrictive meaning as sought to be given by the authorities below is given to the interplay of sections 80P(2)(a) and 80P(2)d), in that eventuality then 80P(2)(d) would become redundant and would not have any consequence. The Ld. AR relied upon the judgment of the Hon'ble Karnataka High Court in the matter of ITO v. Tumkur Merchants Souharda Credit Cooperative Ltd [55 taxmann.com 447] and has submitted that the ratio of the Hon'ble Supreme Court has been distinguished by the Hon'ble jurisdictional High Court on the basis of the facts as the aims and objects and activities of the assessee society in that case i.e, Tumkur Merchants Souharda (supra) were found to be distinguishable from Totgars Cooperative Sale Society Ltd. Our attention was drawn to para 9 and 10 to the following effect : 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee-Coope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pr. CIT v. Totgars Cooperative Sale Society [83 Taxmann.com 140]. Our attention was drawn to para 22 and 23 which read as under : 22. Again, the Division Bench of Punjab and Haryan High Court in still a later decision reported in the same volume of ITR in the case of CIT v. Punjab State Co-operative Agricultural Development Bank Ltd. [2016] 389 ITR 607/76 taxmann.com 307 (Punj. & Har.) concurred with the aforesaid view of the Gujarat High Court, distinguishing the view taken by the Andhra Pradesh High Court and Karnataka High Court, held in the following terms: '30. We are entirely in agreement with the judgment of the Gujarat High Court especially the observation that the judgment of the Supreme Court is not restricted only to the investments made by the assessee from the amounts retained by it which were payable to its members and that the judgment also applies in respect of other funds not immediately required for business purposes. We reproduced paragraph 15 of the judgment only to indicate that we uphold the appellant's case only on the ground that the assessee is not entitled to the said deduction on the basis that it is engaged in carrying on the business of prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under section 80P of the Act. 9. In this context when we look at the judgment of the apex court in the case of Totgar's Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee-co-operative society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the judgment is not distinguishable on this ground, we would with respect disagree with the same in view of the judgments that we have already referred to and on the basis of our interpretation of Totgar's case. In any event, we are with respect unable to agree with the observations that the Supreme Court in Totgar's case (supra) did not lay down any law. 33. For the same reason, the judgment of the Karnataka High Court in Guttigedarara Credit Co-operative Society Ltd. v. ITO [2015] 377 ITR 464 (Karn); [2015] 60 taxmann.com 215 (Karn) is of no assistance to the respondent-assessee.' 23. Thus, the aforesaid judgments supports the view taken by this Court that character of income depends upon the nature of activity for earning that income and though on the face of it, the same may appear to be falling in any of the specified Clauses of Section 80P(2) of the Act, but on a deeper analysis of the facts, it may become ineligible for deduction under Section 80P(2) of the Act. The case in Udaipur Sahakari Upbhokta Thok Bhandar Ltd.(supra) was that of Section 80P(2)(e) of the Act, whereas in the present case, it is under Section 80P(2)(d) of the Act. Hence, the income by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Totgars Cooperative Sale Society, as well as before _______. Therefore in our considered opinion the reliance of the CIT (A) on the judgment of the Hon'ble jurisdictional High Court in the matter of Totgars Cooperative Sale Society [2017] 83 taxmann.com 140 is not correct though in our humble understanding of the legal provision as laid down by the Hon'ble jurisdictional High Court in the matter of Totgars Cooperative Sale Society [ ITA 100066 of 2016, dt.16.06.2017] that the ground raised in the appeal before the Hon'ble jurisdictional High Court pertaining to 80P(2)(d) of the Act, but nonetheless the activities of Totgars Cooperative Sale Society was not falling within the realm of banking and activities as falling under 80P(2)(a)(i). Therefore this judgment will not be of any help to the Revenue. In our view the reasoning given by the Hon'ble jurisdictional High Court in the matter of Tumkur Merchants (supra) in para 9 and 10 (supra) are clearly applicable to the facts and circumstances of the case. In our view therefore the assessee is entitled to deduction u/s.80P(2)(a)(i) r.w.s. 80P(2)(d) of the Act. In view of the above, appeal of the assessee is allowed. ITA.2753/Bang ..... X X X X Extracts X X X X X X X X Extracts X X X X
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