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TMI Blog2023 (11) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... uishable and hence, in my view, the ratio laid down in the case of M/s Totgars Cooperative Sale Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT ] shall not be applied. On similar set of facts, coordinate bench of this Tribunal in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society held in favour of the assessee [ 2023 (9) TMI 211 - ITAT VISAKHAPATNAM ] assessee has invested surplus funds out of the activities carried out as per the provisions of section 80P(2)(a) of the Act. We therefore by respectfully following the jurisdictional High Court are of the view that interest income should be allowed as deduction u/s. 80P(2)(a)(i) of the Act and thereby the Ld. CIT(A) - NFAC has rightly held by deleting the addition made by the Ld. AO and hence we find no infirmity in the order of the Ld. CIT(A) -NFAC. Respectfully following the decision of Vavveru Cooperative Rural Bank Ltd. [ 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT ] and in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society Limited [ 2023 (9) TMI 211 - ITAT VISAKHAPATNAM ] we are inclined to quash the order passed by the Ld.CIT(A) and allow the appeal of the assessee. - SHRI DUVVURU RL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.02.2010, upheld the addition made by the AO, holding that interest income earned by the assessee society from fixed deposits pertaining to reserve fund kept with nationalized (schedule) banks / cooperative banks is not eligible for deduction u/s 80(P)(2)(a) and 80P(2)(d) and dismissed the appeal of the assessee. 4. Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before us by raising the following grounds of appeal : 1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) ought to have held the adjustment made in the order passed u/s 143(3) of the Income Tax Act is beyond the scope of permissible adjustments and consequently the Learned Commissioner of Income Tax (Appeals) ought to have directed the Assessing Officer to rectify. 3. The learned Commissioner of Income Tax (Appeals) ought to have known that the interest income pertaining to deposits earmarked for reserve funds is in the course of its business. The deposits were made in DCC Bank as usual along with other deposits. The appellant assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but not with any intention to gain any benefit from other sources. The Ld.AR further submitted that the facts relied on by the revenue authorities in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) are entirely different from that of the instant case. The Ld. AR also submitted that as per Para - 11 of the judgment in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) it is clearly mentioned that this judgment is confined to the facts of the present case and therefore it cannot be applied in the assessee s case, hence, eligible for deduction u/s 80P of the Act. He, therefore, pleaded to quash the order passed by the Ld.CIT(A) and allow deduction u/s 80P of the Act. 6. Per contra, the Ld.DR argued that the Ld.CIT(A) has rightly upheld the addition made by the AO as the assessee is not eligible to claim deduction u/s 80P of the Act. He, therefore, pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the assessee. 7. I have heard both the parties and perused the material placed on record. Now the question before me is to decide whether the assessee is eligible for deduction u/s 80P on interest earned on deposits pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s members u/s. 80P(2)(a)(i) of the Act. In that case, the Society retained the sale proceeds which was otherwise payable to its members from whom the produce was bought which was invested in short term deposits / securities. It is also found that the amount payable to its members realized from sale proceeds of the agricultural produce of its members was retained by the society and was shown as liability on the balance sheet. Therefore, the Hon ble Apex Court has held that interest earned from retaining the amount payable to its members shall not be considered as income from other sources. However, in the instant case the facts are distinguishable and hence in our view the ratio laid down in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) shall not be applied. Section 80P(1) of the Act entitles the Cooperative Societies to deduct the sums specified in sub - section (2) from its gross total income while computi ng the total income. Sub-section (2) of section 80P, in the sub-clause (a) allows deduction to cooperative society which is engaged in the following activities: (a) in the case of a co-operative society engaged in (i) carrying on the business of ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to any one or more of such activities listed in sub-clauses (i) to (vii) of clause-(a), the same may go out of the purview of clause (a) but still the cooperative society may claim the benefit of clause (d) or (e) as per the conditions laid down therein. In the instant case, the original source of investments made by the assessee in Nationalized Banks is admittedly the income of the assessee derived from the activities listed in sub -clauses (i) to (vii) of clause (a). The character of such income must be last, especially when the statute uses the expression attributable to and not any one of the expressions viz., derived from or directly attributable to . The Hon ble jurisdictional High Court of Andhra Pradesh and Telangana in the case of Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another [2017] 396 ITR 0371 (AP) in para 34 has discussed about the decision of the Hon ble Supreme Court in the case of Totgar s Cooperative Sale Society Ltd (supra) and distinguished the facts while deciding the case. For the sake of brevity, we extract the relevant para 34 of the judgment of the Hon ble Andhra Pradesh and Telangana High Court herein below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression attributable to and not any one of the two expressions, namely, derived from or directly attributable to . 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates to treating the interest income as something not allowable as a deduction under section 80P(2)(a), is set aside. 12. Further, the Coordinate Bench of Hyderabad in Tirumala Tirupati Devasthanams Employees Coop. Credit Society vs. ITO also affirmed the same view by following the decision of the Hon ble AP High Court in the case of Vavveru Cooperative Rural Bank Ltd (supra). In the instant case also, the assessee has invested surplus funds out of the activities carried out as per the provisions of section 80P(2)(a) of the Act. We therefore by respectfully following the jurisdictional High Court are of the view that interest income should be allowed as deduction u/s. 80P(2)(a)(i) of the Act and thereby the Ld. CIT(A) - NFAC has rightly held by delet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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