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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 ..... 07,008/- U/s. 80P(2) of the Act. Thereafter, the assessee's case was taken up for scrutiny to verify the investments / advances / loans made by the assessee and the deduction claimed under Chapter VI A of the Act. Accordingly, notices U/s. 143(2) and 142(1) of the Act were issued and served on the assessee wherein the assessee was called for to furnish certain information mentioned therein. In response, the assessee submitted its reply and on perusal of the information furnished by the assessee the Ld. AO noticed that the assessee received an interest and dividend income aggregating to Rs. 15,04,982/- from the investments made with District Cooperative Central Bank (DCCB). The Ld. AO further observed that the assessee is not eligible for deduction U/s. 80P(2)(d) of the Act since the assessee made the investments with Cooperative Bank and accordingly, the Ld.AO proposed to disallow the deduction U/s. 80P to the extent of Rs. 15,04,982/- received from the DCCB. Before the Ld.AO, it was the submission of the assessee that the investments were made with DCCB as per the cooperative society's norms and that the DCCB in turn caters to the requirements of the cooperative societies in the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act in respect of the interest and dividends received from investments made with DCCB. 3. The Ld. CIT(A) ought to have held that the interest income and dividends are received from cooperative society and therefore eligible for deduction both U/s. 80P(2)(a) and section 80P(2)(d) of the Act. 4. Any other ground that may be urged at the time of hearing." 3. The only issue involved in this appeal relates to disallowance of deduction claimed u/s 80P of the Act. At the outset, the Ld.AR submitted that the assessee society, being a cooperative society, makes deposits in its regular course of business and accordingly the deposits were made in District Cooperative Central Bank [in short DCCB] in compliance with the statutory regulation of AP Cooperative Societies Act. The assessee is not having any intention to gain any benefit from other sources. The Ld.AR further submitted that the facts relied on by the Ld. Revenue Authorities in the case of M/s. Totgars Cooperative Sale Society Ltd reported in 322 ITR 283 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive society providing credit facilities 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, coordinate Bench of this Tribunal in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society held in favour of the assessee vide I.T.A. No. 107/Viz/2022, CO No. 07/Viz/2022 dated 30.08.2023. For the sake of reference, relevant paragraphs of the order are extracted as under: "8. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee has claimed deduction U/s. 80P(2)(a)(i) of the Act on the interest accrued and received by the assessee U/s. 80P(2)(a)(i) of the Act. The contention of the Ld. AO is that as per section 80P(2)(d), the assessee is eligible to claim deduction U/s. 80P(2)(a)(i) of the Act only when it is invested with any other cooperative society. The Ld. AO also placed heavy reliance in the case of M/s. Totgars Cooperative Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins of business attributable to any one or more of such activities:" 9. Further, we also extract below the provisions of section 80P2(d) and (e) of the Act for reference: "(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income;" 10. From the plain reading of section 80P(2)(a)(i) of the Act, the whole of amount of profits and gains of the business attributable to one or more of such activities shall be allowed as a deduction. Further, section 80P(2)(d) and 80P(2)(e) of the Act also allows similar deductions. It is clear that the deductions available under clauses (a) to (e) of section 80P(2) are activity based whereas clauses (d) and (e) are investment based. The distinction between clauses (a) and clauses (d) & (e) on the other hand is that the benefit under clause (a) is restricted to only into those activities of a cooperative society enlisted in sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived 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." 11. Further, 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 (supra) held that the cooperative society is eligible for deduction U/s. 80P(2)(a)(i) of the Act on the interest income received from investment in banks. The Hon'ble High Court in paras 35 to 37 of its judgment held as under: 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalized banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in o ..... 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