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TMI Blog2024 (11) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... . DR ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee society is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 27.05.2024, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s. 143(3A) 143(3B) of the Income-tax Act, 1961 (in short the Act ) dated 27.01.2021 for the assessment year 2018-19. The assessee, a co-operative society, has assailed the impugned order on the following grounds of appeal before us: 1. That the Ld. CIT(A) has erred in sustaining the disallowance of deduction u/s. 80P(2)(a)(i) made by the Ld Assessing-Officer at Rs 8,97,362/-. 2. That the Ld. CIT(A) had erred in law as well as on facts, in sustain the disallowance of the deduction claimed u/s80P(2)(a)(i) of Rs. 8,97,362/- being income from interest earned on bank deposits treated the income from banking activities as income from other source instead of its true nature of business income. 3. The appellant reserves the right to addition, after or omit all or any of the grounds of appeal in the interest of justice. 2. Shri Yogesh Sethia, Ld. Authorized Representative (for short AR ) for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank and other banks. I have considered the submission of the appellant and facts of the case. I fi that as per para 11 of the decision of Hon ble Supreme Court of India in the case Totgars Co-operative sale society Ltd (322 ITR 283(SC)(2010), it has been clear held that the deduction u/s 80P(2)(a)(i) is admissible on operational income and n( on other income. The para 11 of the decision of Hon ble Supreme Court of India ii the case of Totgars Cooperative sale society Ltd ( 322 ITR 283(SC)(2010) is re. produced as under- To say that the source of income is not relevant for deciding the applicability of section 80P would not be correct because one needs to give weightage to the words the whole of the amount of profits and gains of business' attributable to one of the activities specified in section 80P(2)(a). The words the whole of the amount of profits and gains of business emphasize that the income. in respect of which deduction is sought. must constitute the operational income and not the other income which accrues to the society. In the instant case, the evidence showed that the assessee-society earned interest on funds which were not required for business purposes at the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings submitted before the A.O that as the interest income earned on its surplus funds, i.e. funds for which there were no takers at the relevant point of time, being inextricably interlinked or in fact interwoven with its business activities, thus, was eligible for deduction u/s. 80(2)(a)(i) of the Act. However, the aforesaid claim of the assessee society was rejected by the A.O. 12. We find that the issue involved in the present appeal, i.e. as to whether or not the interest income on the surplus funds of a co-operative society, i.e. the funds for which there were no takers would be eligible for deduction u/s. 80P(2)(a)(i) of the Act, had been deliberated upon and is squarely covered by the order passed by the ITAT, Raipur in the case of Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(3), Raipur, 2022(3) TMI 75-ITAT Raipur. The Tribunal after exhaustive deliberation on the aforesaid issue had held as under: 13. We shall first advert to the assessee s grievance that the lower authorities had erred in declining its claim for deduction u/s. 80P(2)(a)(i) of the Act, i.e, as regards the interest income that was earned on the surplus funds which were deposited by it with Jila Sahaka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricably interlinked; or in fact interwoven with its said stream of its business activity, therefore, the interest income received on such short-term deposits was duly eligible for deduction under the aforesaid statutory provision, i.e., Sec. 80P(2)(a)(i) of the Act. We may herein observe, that though the assessee-society in addition to its business of providing credit facilities to its members was also engaged in other multiple activities for its members, viz. business of paddy procurement, sale of fertilizers, seeds, manures and pesticides and sale of controlled items under Public Distribution System (PDS), however, it is neither the case of the revenue nor a fact discernible from the record that the funds deposited by the assessee-society with the bank, viz. Jila Sahakari Kendriya Bank (supra) were the amounts that were payable by the society to its members, and the same having being retained were for the time being invested as a short-term deposit/security with the bank. If that would have been so, then, the interest income earned on such short-term deposit/security with the bank would not have been eligible for deduction u/s. 80P(2)(a)(i) of the Act. But then, as the amount dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law i.e. section 80P(2)(a)(i): Deduction in respect of income of cooperative societies: 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely: (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) xxx (iii) xxx (iv) xxx (v) xxx (vi) xxx (vii) xxx the whole of the amount of profits and gains of business attributable to any one or more of such activities. 7. The word attributable used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word attributable as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under section 80P of the Act. 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd, on which reliance is placed, the Supreme Court was dealing with a case where the assessee co-operative society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee-society was a liability and it was shown in the balance sheet on the liability side. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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