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TMI Blog2024 (6) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... of providing credit facility to the members. This aspect requires examination by the AO. Thus we direct the AO to examine whether interest income is earned out of investments which are in compliance under the relevant Karnataka Co-operative Societies Rules and Act. If the same is found to be out of compulsions, the interest income derived would be entitled to deduction under section 80P(2)(a)(i) of the Act. Deduction u/s 80P(2)(a)(iii) - commission earned from Mangalore Agriculturists Souhardha Sahakari Ltd - AO disallowed the claim of deduction due to the absence of any details furnished to establish the entire facts - HELD THAT: Assessee has wrongly claimed deduction u/s 80P(2)(a)(iii) of the Act instead of claiming deduction under section 80P(2)(e) of the Act. Assessee has also not furnished the necessary documents before the AO. Consequently, the claim of deduction was not granted by the AO. In the interest of justice and equity, we are of the view that this issue needs to be examined afresh by the AO. Therefore, as regards the claim of deduction of Rs.1,71,568/- whether assessee is entitled to deduction under any of the limbs under section 80P of the Act shall be examined afr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y (FAA). The CIT(A) partly allowed the appeal of the assessee. The CIT(A) directed the AO to verify the extent of credit facilities provided to non-members and deny the deduction under section 80P of the Act to that extent. As regards claim of deduction under sections 80P(2)(a)(iii) and 80P(2)(d) / 80P(2)(e) of the Act, the CIT(A) confirmed the view taken by the AO. The CIT(A) held that assessee is not entitled to deduction under section 80P(2)(d) or under section 80P(2)(a)(i) of the Act w.r.t. interest / dividend received on investments with co-operative banks. However, the CIT(A) allowed the alternative claim of the assessee and directed the AO to allow cost of funds for earning the interest income which is to be assessed under the head Income from Other Sources under section 56 of the Act. 4. Aggrieved by the Order of the CIT(A), assessee has filed the present appeal before the Tribunal. Assessee has filed two sets of Paper Books enclosing therein case laws relied on, calculation of cost of funds, bye-laws of the assessee society, submissions made before the CIT(A), etc. The learned AR reiterated the submissions made before the AO and the CIT(A). 5. Learned DR, on the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon ble jurisdictional High Court in the case of PCIT Vs. Totgars Co-operative Society Ltd., reported in 395 ITR 611 (Karnataka) which was followed by the Bangalore Bench of the Tribunal in the case of Vasavamba Co-operative Society Ltd., Vs. PCIT in ITA No.453/Bang/2020 (order dated 13.08.2021). The CIT(A) has elaborately extracted the order of the Tribunal in the case of Vasavamba Co-operative Society Ltd., (supra) (refer para 8.1 of the CIT(A) s order). Therefore, we are not reiterating the same in this order. The Bangalore Bench of the Tribunal in the case of Vasavamba Co-operative Society Ltd., (supra) had categorically held that with regard to interest / dividend income earned out of investments made with banks / government securities is not entitled to deduction either under sections 80P(2)(a)(i) or 80P(2)(d) of the Act. Therefore, following the judgment of the Hon ble High Court in the case of PCIT Vs. Totgars Co-operative Society Ltd., (supra) and the order of the Bangalore Bench of the Tribunal in the case of Vasavamba Co-operative Society Ltd., Vs. PCIT (surpa), we hold that CIT(A) is justified in not granting deduction either under section 80P(2)(a)(i) or under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be out of compulsions, the interest income derived would be entitled to deduction under section 80P(2)(a)(i) of the Act. With the aforesaid observations, we restore grounds 5 to 8 to the files of the AO. It is ordered accordingly. 9.2 Issue No. 3 : Deduction under section 80P(2)(a)(iii) of the Act (Ground 3) 9.2.1 During the relevant Assessment Year, assessee society had earned income of Rs.1,71,588/- which was claimed as deduction under section 80P(2)(a)(iii) of the Act. The AO disallowed the claim of deduction due to the absence of any details furnished to establish the entire facts (refer pages 3 to 5 of the Assessment Order). 9.2.2 Aggrieved, assessee filed appeal before the FAA. It was submitted before the FAA that assessee society had earned commission income from MASS Ltd., a co-operative society by marketing the arecanut grown by the members. It is claimed that a copy of the agreement was submitted along with the submissions dated 11.10.2022. The CIT(A), however, dismissed and upheld the addition made by the AO. The CIT(A) stated that agreement has not been enclosed along with the submission and there is no indication as to how signing of the agreement facilitate the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention of the assessee by holding that the activities of storing the pledged agricultural produce against loans given do not qualify for deduction under section 80P(2)(e) of the Act. 9.3.3 Aggrieved by the Order of the CIT(A), assessee has raised this issue before the Tribunal. The assessee, before the Tribunal, submitted that it provides loans against agricultural produce. Therefore, providing loan against pledged article is incident to providing credit facilities to its members. Hence, it is attributed to the business income eligible for deduction under section 80P(2)(a)(i) of the Act. 9.3.4 We have heard the rival submissions and perused the material on record. Assessee had made claim for deduction under section 80P(2)(e) of the Act before the income-tax authorities. The claim of deduction was denied by the AO since complete facts were not produced before him. Before the Tribunal, assessee submits that it is entitled to deduction under section 80P(2)(a)(i) of the Act since assessee gives loans on agricultural produce to its members which is incidental to its business; hence, eligible for deduction under section 80P(2)(a)(i) of the Act. We are of the view that the issue raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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