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TMI Blog2023 (12) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... owed 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 - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... edit societies like the assessee only are the members of the DCCB. The assessee further submitted that as per the Cooperative Societies Rules the assessee is required to make investment with DCCB and such investment constitutes the capital fund of the DCCB and that the DCCB advances the same to various primary cooperative credit societies as per their requirements, hence, the interest income received from DCCB on share capital is eligible for deduction u/s 80P of the Act. The assessee also submitted that the interest income received from other banks is also eligible for deduction u/s 80P of the Act. The AO completed the assessment vide order dated 16.02.2021 u/s 143(3) of the Act by disallowing to the extent of Rs. 2,59,54,906/-, the deduction claimed u/s 80P(2) of the Act towards interest income received from District Central Cooperative Bank, Andhra Bank, AP Cooperative bank and interest received on savings account and disallowance of dividend income of Rs. 3,70,365/-, aggregating to 2,63,25,271/- and the tax payable was computed at Rs. 1,22,77,993/- including the interests of Rs. 31,82,165/- u/s 234B and Rs. 4852/- u/s 234C of the Act. 3. Aggrieved by the order of the AO, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court in the case of Totgars Co-operative Sale Society Ltd. Vs. Income Tax Officer (2010) 311 ITR 283 (SC) dated 08.02.2010, 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) of the Act. He, therefore, pleaded to quash the order passed by the Ld.CIT(A) and uphold the addition made by the AO. 7. Per contra, the Ld.AR filed paper book before us and contended that the Ld.CIT(A) is justified in deleting the addition made by the AO since the assessee society, being a cooperative society, make deposits in its regular course of business and accordingly the deposits were made in DCC bank as usual, 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 mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Cooperative Sale Society Ltd (supra) while disallowing the claim made by the assessee U/s. 80P(2)(a)(i) of the Act. We have perused the rati o laid down by the Hon'ble Apex Court in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) and found that in that case the society is engaged in marketing of the agricultural produce by its members as per section 80P(2)(a)(iii) while carrying on the business of banking or providing credit facilities to its 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 Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society enlisted in sub-clause (a) whereas the benefit of clauses (d) & (e) are available to all cooperative societies without any restriction on the activities carried on by them. In simple terms, the benefit under clause (a) will be limited only to the profits & gains of the business attributable to any one or more of such activities. But in case, if the cooperative society has an income not attributable 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the petitioners derived from the activities listed in sub-clauses (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 Coope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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