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TMI Blog2024 (10) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... Urban Co operative Society [ 2024 (6) TMI 1404 - ITAT NAGPUR] wherein the Tribunal has considered this issue in detail and held that interest income earned by the assessee trust is eligible for deduction under Chapter VIA (80P). In the above decision, the Co ordinate Bench has already considered the judgment of the Hon ble Supreme Court in The Totgars Co operative Sale Society Ltd [ 2010 (2) TMI 3 - SUPREME COURT] and held that the facts of this case are distinguishable and not applicable to the facts of the present case. Therefore, following the decision of The Ismailia Urban Co operative Society [ 2024 (6) TMI 1404 - ITAT NAGPUR] set aside the impugned order passed by the learned CIT(A) and hold that the assessee is eligible to claim deduction under Chapter VIA (80P) - Assessee appeal allowed. - Shri V. Durga Rao, Judicial Member For the Assessee : Shri Abhishek Kumar For the Revenue : Shri Abhay Y. Marathe ORDER PER V. DURGA RAO, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 08/03/2023, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [ learned CIT(A) ], for the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt as per Societies Act and its annexures, computation of total income, etc. In response the questionnaire issued by the Assessing Officer, the assessee submitted that in accordance with the legal requirements under Maharashtra State Co-operative Societies Act, the assessee maintained saving and current account and reserve account with Wardha District Central Co-operative Bank, Arvi. The assessee submitted that as the said bank had collapsed which resulted in loss of an amount ₹ 11.16 lakhs, therefore, in order to safeguard the interest of their members and secure the money the society opened accounts with nationalised banks and kept deposits with such banks. The assessee society has also stated that the deposits with nationalised banks are purely its business income earned during the regular course of business and to comply with certain legal requirements. It was submitted that the FDRs are made to meet any eventuality towards repayment of deposits and share capital. The assessee has also submitted that as per section 56(2)(d) of the Act, interest by way of interest on securities is chargeable under the residuary head i.e, other sources only if the income is not chargeable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.5 After considering all the facts and circumstances of the case under consideration, I am of the considered opinion that the AO has rightly disallowed the deduction of Rs. 3,27,687/- u/s 80P of the IT Act, 1961. Therefore, the disallowance made by the AO u/s 80P of the IT Act of Rs. 3,27,687/- is hereby confirmed. Accordingly, the grounds of appeal are dismissed. 8. Before us, the learned Counsel for the assessee reiterated the submissions made before the authorities below and prayed that the claim so made. 9. The learned Departmental Representative vehemently relied upon the order of the authorities below. 10. I have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. I find that the assessee suffered loss of ₹ 11.16 lakh, as the money deposited in the bank was collapsed. It was the intention of the assessee to safeguard the interest of its members and to secure the money, the assessee society kept money in the Nationalised Banks which are assessee s business income earned during the course of regular business as well as to comply with its legal requirement. Thus, I do not find any ambiguity on such ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative banks from the investments in KVP/IVP made out of the funds in the voluntary reserves were eligible for deduction under section 80P(2)(a)(i) of the Act. The above case law fully supports the assessee s case. Here also surplus funds not immediately required for day to day banking were kept in Bank deposits. The income earned there from thus would be income from banking business eligible for deduction u/s 80P(2)(a)(i). 10. Similarly we find that similar issue was considered by this Tribunal on similar grounds raised by the Revenue in the case of MSEB Engineers Co-Op. Credit Society Ltd., wherein the ITAT, Nagpur Bench, vide order dated 05/05/2016 held as under : Upon hearing both the counsel and perusing the records, we find that the above issue is covered in favour of the assessee by the decision of this ITA, referred by the Ld. CIT(A) in his appellate order. The distinction mentioned in the grounds of appeal is not at all sustainable. We further find that this Tribunal again in the case of Chattisgarh Urban Sahakari Sanstha Maryadit Vs. ITO in ITA No. 371/Nag/2012 vide order dated 27.05.2015 has adjudicated similar issue as under:- 11. Upon careful consideration, we not that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not required immediately for business purposes and consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under section 28 and not under section 56 of the Act and, consequently, the assessee(s) was entitled to deduction under section 80P(2)(a)(i) of the Act. The argument was rejected by the assessing officer as also by the Tribunal and the High Court, hence these civil appeals have been filed by the assessee(s). 19.2 From the above, it emerges that (a) that assessee (issue before the Supreme Court) had admitted before the AO that it had invested surplus funds, which were not immediately required for the purpose of its business, in short term deposits; (b) that the surplus funds arose out of the amount retained from marketing the agricultural produce of the members; (c) that assessee carried on two activities, namely, (i) acceptance of deposit and lending by way of deposits to the members; and (ii)marketing the agricultural produce; and (d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3 In the present case under consideration, the entire funds we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is against the assessee, of ld. CIT(A) is hereby reversed following the decision of the Tribunal cited supra, resultantly ground is allowed. 8. We find that the ratio of above case also applies to the present case. As observed in the above case law, in this case also the submissions of the assessee s counsel is that the assessee society is maintaining operational funds and to meet any eventuality towards repayment of deposit the cooperative society is maintaining some liquidated funds as short term deposits with banks. Hence adhering to the doctrine stair desises, we hold that the assessee should be granted benefit of deduction under section 80P(2)(a)(i). Accordingly, the interest on deposits would qualify for deduction under the said section. Accordingly, we set aside the order of authorities below and decide the issue in favour of assessee. 4. We further find that batch of similar appeals decided by the ITAT in favour of the assessee has also been considered by the Jurisdictional High Court. The Hon ble Jurisdictional High Court has duly affirmed of this Tribunal. Accordingly, in the background aforesaid discussion, we do not find infirmity in the order of Ld. CIT(A). 11. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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