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TMI Blog2024 (11) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 22/03/2024 arising out of the order passed u/s. 143(3) r.w.s 144C of the Income Tax Act, 1961 [ the Act ] for the AY 2020-21. 2. Briefly stated the facts of the case are that the assessee is a Primary Agricultural Cooperative Society engaged in the activity of providing credit facilities to its members. As per the information available with the Department, the Ld. AO observed that during the previous year under consideration, the assessee had earned an interest income of Rs. 1,28,27,351/- out of which Rs. 22,77,972/- is from the investment with banks including District Central Cooperative Banks as per the details given in Schedule-18 of the financials and has claimed the entire interest income as deduction u/s. 80P(2)(a)(i) / 80P(2)(d) of the Act. Further, the Ld. AO also observed that the aforesaid deposits / investments in cooperative banks / commercial banks are out of the surplus funds of the society. Further, the Ld. AO observed that any interest income arising from deposit / investment of funds in banks is in the nature of income from other sources taxable u/s. 56 of the Act and cannot be categorized as income from profits and gains of business of the assessee. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the appellant s differentiation of the case law relied on by the Ld. AO. 5. The appellant craves leave to add or amend any ground of appeal. 4. The only issue involved in this appeal relates to disallowance of deduction claimed u/s 80P of the Act. At the outset, the Learned Authorized Representative [Ld. AR] argued that the assessee is a Primary Agricultural Cooperative Credit Society Limited and claimed deduction u/s. 80P of the Act for the AY 2020-21. The Ld.AR further submitted that the assessee society, being a cooperative society, make deposits in its regular course of business and accordingly the deposits were made in the Krishna District Co-op. Central Bank Ltd., 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 Ltd (supra) it is clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed 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 Society Ltd (supra) while disallowing the claim made by the assessee u/s. 80P(2)(a)(i) of the Act. We have perused the ratio laid down by the Hon ble Apex Court in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) and found that in that case the society is engaged in marketing of the agricultural produce by its members as per section 80P(2)(a)(iii) while carrying on the business of banking or providing credit facilities to its members u/s. 80P(2)(a)(i) of the Act. In that case, the Society retained the sale proceeds which was otherwise payable to its members from whom the produce was bought which was invested in short term deposits / securities. It is also found that the amount payable to its members realized from sale proceeds of the agricultural produce of its members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows 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-clause (a) whereas the benefit of clauses (d) (e) are available to all cooperative societies without any restriction on the activities carried on by them. In simple terms, the benefit under clause (a) will be limited only to the profits gains of the business attributable to any one or more of such activities. But in case, if the cooperative society has an income not attributable to any one or more of such activities listed in sub-clauses (i) to (vii) of clause-(a), the same may go out of the purview of clause (a) but still the cooperative society may claim the benefit of clause (d) or (e) as per the conditions laid down therein. In the instant case, the original source of investments made by the assessee in Nationalized Banks is admittedly the income of the assessee derived from the activities listed in sub-claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived 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 other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression attributable to and not any one of the two expressions, namely, derived from or directly attributable to . 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates to treating the interest income as something not al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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