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TMI Blog2024 (5) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to members or marketing agriculture produce to member . However, in the instant case, the facts are distinguishable and hence, in my view, the ratio laid down in the case of M/s Totgars Cooperative Sale Society Ltd.(supra) shall not be applied to the instant case. On similar set of facts, in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society [ 2023 (9) TMI 211 - ITAT VISAKHAPATNAM] held in favour of the assessee 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 deleting the addition made by the Ld. AO and hence we find no infirmity in the order of the Ld. CIT(A)-NFAC. - Decided in favour of assessee. - SHRI DUVVURU RL REDDY, HON BLE JUDICIAL MEMBER For the Appellant : Sri GVN Hari, AR. For the Respondent : Dr. Aparna Villuri, Sr. AR. ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the assessee is against the order of the Ld. Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions of the assessee and observed that as per the Act, the interest income derived from any other Cooperative Society is eligible for deduction and not from Co-operative Bank as in the case of the assessee. Thus, the Ld. AO denied the assessee s claim of deduction U/s. 80P(2)(a)(i) of the Act and made addition of Rs. 15,04,982/- on account of interest income earned from cooperative bank as chargeable income under the head income from other sources . While making the addition, the Ld. AO relied on the decision of the Hon ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd vs. ITO [2010] 322 ITR 283 (SC). Accordingly, the Ld.AO determined the total income at Rs. 15,86,850/- and passed the assessment order U/s. 143(3) r.w.s 143(3A) 143(3B) of the Act, dated 30/03/2021. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A)-NFAC. Before the Ld. CIT(A)-NFAC, the assessee also made various submissions. However, the Ld. CIT (A)-NFAC did not consider the submissions and explanations of the assessee and confirmed the disallowance made by the Ld. AO. Further, the Ld. CIT(A)-NFAC also held that the assessee is eligible to get benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is eligible for deduction. The Ld. DR further submitted that in the present case, assessee derived interest from the funds parked with District Cooperative Central Bank and not from a Cooperative Society and therefore the deduction claimed by the assessee is rightly disallowed by the Ld. AO. The Ld. DR further argued that as observed by the Hon ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd vs. ITO [2010] 322 ITR 283 (SC) the income in respect of which deduction is sought must constitute the operational income and not the other which accrues to the society. Therefore, considering the facts and circumstances of the case, the Ld. AO has rightly held that the assessee is not eligible for deduction U/s. 80P of the Act and the Ld. CIT(A)-NFAC sustained the same. The Ld. DR therefore pleaded to uphold the orders of the Ld. Revenue Authorities. 5. I have heard both the sides and perused the material placed on record as well as the orders of the Ld. Revenue Authorities. Now the question before me is to decide whether the assessee is eligible for deduction u/s 80P with respect to the interest income earned on deposits parked with District Cooperative Central Bank, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 computing 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 banking or providing credit facilities to its members, or (ii) a cottage industry, or [(iii) the marketing of agricultural produce grown by its members, or] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions 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: 34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co operative credit society, which was also marketing the agricultural produce of its members. As seen from the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deleting the addition made by the Ld. AO and hence we find no infirmity in the order of the Ld. CIT(A)-NFAC. 13. In the result, appeal of the Revenue is dismissed. 6. Respectfully following the decision of the Hon ble High Court of Andhra Pradesh in the case of Vavveru Cooperative Rural ..... X X X X Extracts X X X X X X X X Extracts X X X X
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