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TMI Blog2024 (8) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered u/s 80P of the Act where also the West Bengal Cooperative Societies Act, 2006 was applicable and the issue was required to be dealt with keeping in view the Totgars, Co-operative Sale Society Ltd. (supra) case by the Hon'ble Jurisdictional High Court. Thus, it is held that the impugned amount of interest income cannot be considered for relief u/s 80P of the Act. However, the alternative submission of the appellant, as per ground no. 2, deserves to be considered and for this limited purpose, the matter is restored to the file of ld. CIT(A) for allowing a reasonable expense for earning the said income. For that purpose, the ld. CIT(A) may refer to the case of Kisan Sahkari Chini Mills Ltd. [ 2004 (7) TMI 57 - ALLAHABAD HIGH COURT ] for necessary guidance in terms of identifying the quantum of expense to be allowed as relief on the said disallowance. Appeal filed by the assessee is partly allowed. - Pradip Kumar Choubey, Judicial Member And Sri Sanjay Awasthi, Accountant Member For the Assessee : Siddharth Agarwal, Adv. And Silpi Mukherjee, Adv. For the Department : Ranu Biswas, Addl. CIT DR. ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER: The appellant is a Cooperative Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) by saying that the funds in question in the said case were surplus funds, as opposed to which in assessee s case they are operating funds. However, the ld. CIT(A) did not agree with the contentions raised before him and confirmed the addition not only on the basis of the Totgars, Co-operative Sale Society Ltd. (supra) case but also relied on some other authorities to confirm the addition so made by the ld. AO. 1.2. Once again aggrieved with the action of ld. CIT(A) the assessee has approached the ITAT initially with as many as four grounds of appeal which were later revised to two grounds of appeal which are as under: 1. For that the Ld. CIT(A) was not justified in confirming the action of the A.O. in not granting the benefit of deduction u/s 80P to the tune of Rs. 8,40,630/- in respect of income earned from deposits with bank. 2. Without prejudice to the above, the CIT(A) ought to have directed the A.O. to grant the benefit of deduction of interest payable to members attributable to the deposits with the bank. 1.3. The appellant also filed a paper book enclosing computation of income for the present year, assessment order of the immediately previous year in which no addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section deals with deductions in respect of income of co-operative societies. Section 80P(1), inter alia, states that where the gross total income of a co-operative society includes any income from one or more specified activities, then such income shall be deducted from the gross total income in computing the total taxable income of the assessee-society. An income, which is attributable to any of the specified activities in section 80P(2) would be eligible for deduction. The word 'income' has been defined under section 2(24)(i) to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically 'business profits' into the definition of the word 'income'. Therefore, one is required to give a precise meaning to the words 'profits and gains of business' mentioned in section 80P(2). In the instant case, the assessee-society regularly invested funds not immediately required for business purposes. Interest on such investments, therefore, could not fall within the meaning of the expression 'profits and gains of business'. Such interest income could not be said to be attributable to the activities of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserve to be extracted to appreciate the fact that the funds deposited with Banks on which the impugned amount has been earned would be outside the purview of Section 80P of the Act: 1. Revenue has appealed against order dated 17th November, 2017 passed by Income-tax Appellate Tribunal D Bench, Kolkata in ITA 144/Kol/2016 pertaining to assessment year 2012-13. The substantial question of law, on which the appeal was admitted, is set out below: Was Totgar's (supra) made applicable to Co-operative Societies carrying on the business of banking or providing credit facilities to its members, by South Eastern Railway Employees Co-operative Credit Society Ltd. (supra)? 2. Mr. Bhowmick, learned advocate appears on behalf of appellant-revenue and submits, declaration of law in Totgars Co-operative Sales Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283 (SC) was on the question whether interest on deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under section 28 of Income-tax Act, 1961? Supreme Court said, such interest income would come in the category of income from other sources. Hence, such interest income would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Act, Rules and its existing bye-laws, the latter not being inconsistent with the provisions in the Act of 2006. Interest on these investments are profits and gains of his client, being a cooperative society, carrying on business of banking and providing credit facilities to its members. As such, the whole amount of profits and gains achieved from interest earnings on such investments, is to be deducted in computing the total income. . . 9. We find that revenue's case is covered by South Eastern Railways Employees Co-operative Credit Society Ltd. (supra). The Act of 2006 and Rules thereunder mandate 10% of net profit in every cooperative year to be transferred to a reserve fund. Interest income on rest of the net profit of respondent appears to be similar income or to be similarly treated as interest income on investment of sale of agricultural produce of the assessee in Totgar's (supra), that assessee being one coming within sub-clause (a)(iv) under sub-section (2) in section 80P. Assessee being a credit society similar to assessee South Eastern Railways Employees Co-operative Credit Society Limited, Totgars Co-operative Sale Society Ltd. (supra) would apply to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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