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TMI Blog2022 (8) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustaining the additions made by the Id AO and assessing the total income at Rs.47,61,530 by not allowing deductions u/s80P. The additions are made as under:- (i) That the Id CIT(A) has erred in sustaining the disallowance of deduction u/s.80P(2) made by the ld AO at Rs.1,39,450 being net loss from banking activities done by the assessee-society by assuming that, the assessee-society has invested its surplus funds with banks while, the real facts is that, the funds invested in FDR/ saving accounts with Co-op. banks, are (i) own funds of the assessee-society, and (ii) member's funds, thereby, the interest income earned by the assessee-society from the banking activities carried out for its members only, would be Rs.1,39,450/- which is Gramin Sewa Sahakari Samiti Maryadit ( a group of 22 cases) clearly eligible for the deduction u/s.80P(2)(a)(i), by assuming that the assessee is a Primary Cooperative Bank and ignoring the fact that it is a Primary Agriculture Cooperative Society. (ii) That the Id CIT(A) has erred in sustaining the disallowance of deduction u/s. 80P(2) made by the ld AO at Rs.41,69,739 being gross profit earned from the paddy procurement business, which is ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Disallowance of the assessee s claim for deduction of profit from PDS u/s.80P(2)(c)(ii) of the Act. Rs.5,54,758/- 5. Disallowance of assessee s claim for deduction of dividend income u/s.80P(2)(d) of the Act. Rs. 23,15,409/- After making the aforesaid disallowances, the A.O vide his order u/s. 143(3) of the Act, dated 11.02.2016 assessed the total income of the assessee society at Rs. 47,61,530/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). However, the CIT(Appeals) not finding favour with the contentions advanced by the assessee upheld the assessment framed by the Assessing Officer and dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. As the assessee appellant (in ITA No.157/RPR/2019) despite having been intimated about the hearing of the appeal had failed to put up an appearance before us, therefore, we are constrained to proceed with and dispose off the said appeal as per Rule 24 of the Appellate Tribunal Rules, 1963, i.e, after hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat was earned on the surplus funds which were deposited by it with Jila Sahakari Kendriya Bank, i.e, a co-operative bank. After deliberating at length on the issue in hand, we find that the aforesaid claim of the assessee hinges around the aspect that as to whether or not the interest income earned by it on its surplus funds which were parked as deposits in the normal course of its business of providing credit facilities to its members, i.e., at the point of time when there were no takers for the said funds, was eligible for deduction u/s. 80P(2)(a)(i) of the Act. We have given a thoughtful consideration to the contentions advanced by the Ld. Authorized representatives for both the parties. Before proceeding any further, we deem it fit to cull out the provisions of section 80P(2)(a)(i) of the Act, the scope and gamut of which is the primary bone of contention before us, which reads as under : 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit/security with the bank would not have been eligible for deduction u/s.80P(2)(a)(i) of the Act. But then, as the amount deposited by the assessee-society with the bank, viz. Jila Sahakari Kendriya Bank (supra) was in the nature of simpliciter surplus or idle funds of the assessee society, for which there were no takers for the time being in course of its business of providing credit facilities to its members, therefore, depositing of the same by way of short-term deposits with the aforesaid bank, as stated by the ld. A.R, and rightly so, would clearly be inextricably interlinked, or in fact interwoven with its aforesaid primary business activity, i.e., providing of credit facilities to its members. At this stage, we may herein observe, that the Hon ble Supreme Court in the case of M/s. Totgars Co-operative Sale Society Ltd. Vs. ITO, Karnataka, 322 ITR 283 (SC), had held, that in a case where the assessee-cooperative society apart from providing credit facilities to its members was also in the business of marketing of agricultural produce grown by its members, and the sale consideration of the agricultural produce due towards its members was thereafter retained and invested a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities. 7. The word attributable used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word attributable as supposed to derive from its use in various other provisions of the statute in the case of CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX, GUJARAT-II reported in ITR Vol.113 (1978) Page 842 at Page 93 as under: As regards the aspect emerging from the expression attributable to occurring in the phrase profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor General relied, it will be pertinent to observe that the Legislature has deliberately used the expression attributable to and not the expression derived from . It cannot be disputed that the expression attributable to is certainly wider in import than the expression derived from . Had the expression derived from been used it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee-society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in section 80P(2)(a)(i) of the Act or under section 80P(2)(a)(iii) of the Act. Therefore, in the facts of the said case, the Apex Court held the assessing Officer was right in taxing the interest income indicated above under section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore, it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, they had deposited the money in a bank so as to earn interest. The said interest income is att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m paddy procurement business of Rs.41,69,739/-under Sec. 80P(2)(a)(iii) of the Act. 11. It is submitted by the Ld. AR that the A.O had declined the assessee s claim for deduction of profit earned under the head paddy procurement business u/s.80P(2)(a)(iii), for the reason that as the assessee society was an agent of Chhattisgarh Marketing Federation (CMF) and was in receipt of commission income for the services therein rendered and was not into marketing of agricultural produce grown by its members, therefore, not entitled for deduction u/s.80P(2)(a)(iii) of the Act. Rebutting the aforesaid observations of the A.O, it was submitted by the Ld. AR that the Tribunal while disposing off the appeal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors Vs. the ITO, Ward-1(3), Raipur in ITA No.114/RPR/2016 Ors., dated 23.02.2022, a similarly placed Cooperative society that was, inter alia, engaged in paddy procurement business, had though accepted the assessee s claim for deduction u/s.80P(2)(a)(iii), but had remanded the matter only for the purpose of quantification of the same. It was, thus, the claim of the Ld. AR that now when the entitlement of a similarly placed co-operativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. A.R before us that the same is highly exorbitant, for the reason, that the assessee had mainly procured paddy from its members only. It was submitted by the Ld. AR that though as per the policy of the Government the assessee18 Gramin Sewa Sahakari Samiti Maryadit ( a group of 22 cases) society is obligated to purchase paddy from each and every farmer, whether member or non-member, i.e whosoever approaches it, but transactions with the non-members during the year under consideration was minimal and by no means exceeded 25% of the total transactions. In order to buttress his aforesaid claim the Ld. AR had taken us through the compilation of paddy purchase by the assessee-society, Page 1 to 55 of additional documentary evidence that was placed on our record. By drawing support from compilation of paddy purchase from its members, i.e. Page 1A to 255 of the additional documentary evidences filed before us, it was submitted by the ld. A.R that only a small fraction of the paddy procurement was carried out by the assessee society from non-members. In the backdrop of his aforesaid contentions, the Ld. AR had claimed that the restriction of its claim for deduction u/s 80P(2)(a)(iii) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the Ld. 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. 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 (ii) raised by the assessee is allowed for statistical purposes in terms of our aforesaid observations. 14. Adverting to the claim of the assessee that the lower authorities had erred in making/sustaining addition of Rs.4,15,517/- on account of TDS o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c 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, observing as under : 19. Before us, it is the claim of the assessee that as the profit from PDS activities after considering the proportionate expenses amounted to Rs.3,08,338/-, therefore, its claim for deduction u/s.80P(2)(c)(i) of the Act was liable to be restricted only to the said extent. After having given a thoughtful consideration to the claim of the Ld. AR, we though principally concur with his aforesaid claim, but then, the same cannot be accepted on the very face of it and would require factual verification. Therefore, for the said limited purpose, we restore the matter to the file of the Assessing Officer for doing the needful. During the course of the set-aside proceedings, the Assessing Officer is directed 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. Needless to say, the assessee shall in the course of set-aside proceedings furnish the requisite details/documents as would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the view taken by the lower authorities that dividend income received by the assessee from Jila Sahakari Kendriya Bank, Raipur, i.e a Cooperative Bank, would not eligible for deduction u/s. 80P(2)(d) of the Act cannot be sustained. Our aforesaid view is fortified by the order of the ITAT, Mumbai in the case of M/s Solitaire CHS Ltd Vs. Principal Commissioner of Income Tax-26, ITA No. 3155/Mum/2019, dated 29.11.2019 (wherein one of us, i.e, the JM was a party), had after exhaustive deliberations held as under: 6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other cooperative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term cooperative society‟ had been defined under Sec. 2(19) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the same being distinguishable on facts had wrongly been relied upon by him. The adjudication by the Hon‟ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). At the same time, we find, that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon ble High Court of Gujarat in the case of State Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to subscribe to the view taken by the lower authorities, therein vacate the disallowance of the assessee s claim for deduction of Rs.1,16,224/- u/s. 80P(2)(d) of the Act. The Ground of appeal No.4 is allowed in terms of the aforesaid observations. We find that as stated by the Ld. AR, and rightly so, as the aforesaid issue in hand i.e, entitlement of a co-operative society for claim of deduction under Sec. 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 ITA No.114/RPR/2016 Ors (supra), dated 23.02.2022, 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. 22. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeal) and allow/allow for statistical purposes the appeal of the assessee in terms of our aforesaid observations. 23. Resultantly, the appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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