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TMI Blog2023 (5) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and none of such fund represents any liability of the assessee to its members or anyone else. On a threadbare analysis of the provisions under section 80P in the light of various decisions including the decision of Totgars Co-operative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT] and CIT vs. Andhra Pradesh State Co-operative Bank Ltd[ 2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT] the Hon ble High Court reached a conclusion that if the investment is made in fixed deposits in nationalised banks from out of the own funds of the assessee, the interest derived from such investment would be from the activities listed in clause (i) to (vii) of section 80P(2)(a) of the Act and would be eligible for deduction. It is theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest income from investment with nationalised bank/commercial bank which is not attributable to the activities specified in section 80P(2)(a) of the Act has to be necessarily assessed under the head income from other sources . To reach this conclusion, the learned CIT(A) placed reliance on the decision of the Hon ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO [2010] 188 Taxman 282 (SC) and Katlary Kariyana Merchant Shkari Safari Mandali Ltd. vs. ACIT [2022] 140 taxmann.com 602 (Gujarat). Learned CIT(A) accordingly upheld the disallowance. 4. Submission of the learned AR is that the assessee is a Primary Agricultural Cooperative Society as is evident from the registration of the society, funds deposited a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of payment of any dues to them. All these things clearly establish that the funds deposited by the assessee with the Union Bank of India are undoubtedly the own funds of the assessee and none of such fund represents any liability of the assessee to its members or anyone else. 7. Coming to the objection of the authorities that any interest accrued from investment with a commercial bank and not attributable to the activities specified in section 80P(2)(a) of the Act, cannot be allowed as a deduction is concerned, this issue is no longer res integra. Hon ble jurisdictional High Court considered the same in extenso in The Vavveru Co-operative Rural Bank Ltd. (supra). On a threadbare analysis of the provisions under section 80P of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. Therefore, what follows is that when a co-operative society engaged in any one of the activities stipulated in sub-clauses (i) to (vii) of clause (a) makes profits and gains out of business attributable to anyone of those activities, the case would fall under clause (a). The moment the income derived from one of those activities is invested in another co-operative society and an interest or dividend is derived therefrom, the case would be covered by clause (e). In case the profits and gains of business arising out of the activities listed in sub-clauses (i) to (vii) of clause (a) is invested in immovable properties, such as, godowns or warehouses and an income is derived therefrom, the case would be covered by clause (e) of section 80P( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orary parking of the profits and gains of business in nationalised banks and the earning of interest income therefrom is only one of the methods of multiplying the same income. To accept the stand of the Department would mean that co-operative societies carrying on the activities listed in clauses (i) to (vii), which invest their profits and gains of business either in other co-operative societies or in the construction of godowns and warehouses, may benefit in terms of clause (d) or (e), but the very same societies will not be entitled to any benefit, if they invest the very same funds in banks. Such an understanding of section 80P(2) is impermissible for one simple reason. The benefits under clauses (d) and (e) are available in general to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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