Gramin Sewa Sahakari Samiti Maryadit, Pacheda, Abhanpur, Raipur V. Income Tax Officer, Ward-1(1), Raipur

ITA 114/RPR/2022

AI Insights

The case involves Gramin Sewa Sahakari Samiti Maryadit, a cooperative society engaged in various activities including banking and paddy procurement, which appealed against the order of the Commissioner of Income-Tax (Appeals) that upheld certain disallowances made by the Assessing Officer under Section 143(3) of the Income-tax Act, 1961. The main issues revolved around the eligibility of deductions under Section 80P for interest income on deposits with cooperative banks and profits from paddy procurement. The Tribunal examined whether the interest income from deposits was part of the 'profits and gains of business or profession' and whether the society's activities qualified for deductions under Section 80P(2)(a)(i) and 80P(2)(a)(iii). The Tribunal's decision was influenced by precedents and interpretations of Section 80P, particularly focusing on the nature of the society's business and the specific activities it undertook.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 128062 (ITAT-RAIPUR)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-09-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 15-06-2022
• Other Referred Cases: National Thermal Power Company Ltd. Vs. CIT, M/s. Totgars Co-operative Sale Society Ltd. Vs. ITO, Karnataka, Tumkur Merchants Souharda Cooperative Ltd. Vs. ITO, Tumkur, Land and Cooperative Housing Society Ltd. Vs. ITO, M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai, Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range-20(2)(2), Mumbai, Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai, Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society, State Bank Of India Vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Question of law; Set aside
• Section: 56; 263; 143(3); 80P; 2(19)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायप ु र मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी रवीश स ू द, ÛयाǓयक सदèय के सम¢ BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER आयकर अपील सं./ ITA No.114/RPR/2022 Ǔनधा[रण वष[ / Assessment Year : 2013-14 Gramin Sewa Sahakari Samiti Maryadit Village- Pacheda, Block-Abhanpur, Chhatisgarh-493 661 PAN : AAAAG9886H .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer-1(1), Raipur (C.G.) ......Ĥ×यथȸ / Respondent Assessee by : Shri G.S. Agrawal, CA Revenue by : Shri G.N Singh, Sr. DR स ु नवाई कȧ तारȣख / Date of Hearing : 20.09.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 16.12.2022 2 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 आदेश / ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 31.03.2022, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 19.03.2016 for the assessment year 2013-14. The assessee has assailed the impugned order on the following grounds of appeal: “1. That under the facts and law, the Ld. Commissioner of the Income Tax (Appeals), National Faceless Center (NFAC), New Delhi erred in the passing order u/s.250 ex-parte without allowing opportunity to the applicant. Prayed that notice issued by the Ld. CIT(A) did not come to the knowledge of the appellant. The appellant is doing business in the remote village named Pacheda, Abhanpur in the district of Raipur, Chhattisgarh, not well versed with electronic medium. Also, the assesee has raised additional grounds of appeal which reads as under: “1. That under the facts and the law, the CIT(Appeals), NFAC (Delhi) erred in confirming the order of the Ld. AO in not allowing deduction of interest from Central Coop., Bank earned by the Appellant at Rs.2,24,894/-. Prayed that sum of Rs.2,24,894/- is deductible u/s.80P(1)(a)(i) U/s.80P(2)(d). 2. That under the facts and the law, the CIT(Appeals), NFAC (Delhi) erred in enhancing the income without allowing opportunity to the Appellant as required u/s.251(2). Prayed that direction of Ld. CIT(Appeals) be deleted. 3 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 3. That under the facts and the law, the Ld. CIT (Appeals), NFAC, Delhi further erred in directing the Ld. AO to tax the gross income from paddy procurement business i.e., Rs. 7,79,913/- without deducting proportionate income earned from its members which the Ld. AO considered at 65% i.e., 100% - 35%. Prayed that the Ld.CIT (Appeals) did not appreciate the acts as the Order is passed ex-parte, income earned from its members is deductible. 4. That under the facts and the law, Ld. CIT (Appeals), NFAC (Delhi) further erred in not considering that Paddy procured from non-members was only 7% and not 35%, therefore, at the most 7% of Rs.8,85,290/- i.e., gross profit in paddy procurement business may be disallowed instead of Rs. 2,21,323/-. 5. That under the facts and the law, Ld. CIT (Appeals), NFAC (Delhi) further erred in not allowing deduction of Rs. 50,000/- u/s 80P(2)(c)(ii) which kindly be allowed. 6. That under the facts and the law, Ld. CIT (Appeals), NFAC (Delhi) further erred in confirming the Order of the Ld. AO by not allowing deduction of dividend income at Rs.80,732/- which is deductible u/s 80P(2)(d). Prayed to allow the same.” 2. As the present appeal is time barred by 17 days, therefore, the Ld. Authorized Representative (for short ‘AR’) for the assessee has taken me through an application a/w. affidavit filed by the assessee explaining the reasons leading to the same. It was submitted by the assessee-society that inadvertently as the order of the CIT(Appeals) dated 31.03.2022 which was uploaded on the portal could not be noticed by it, therefore, for the said reason there was a delay in filing of the present appeal. Apart from that it was stated by the assessee appellant that though the aforesaid impugned order had come to the notice of the assessee in the last week of April, 2022 and at the 4 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 relevant point of time the persons concerned were involved in procurement of paddy from farmers as per the policy of the state government, therefore, the appeal could only be filed as on 10.06.2022. The Ld. Departmental Representative (for short ‘DR’) did not raise any objection with regard to seeking of the condonation of delay involved in preferring the present appeal by the assessee appellant. As the assessee appellant had very fairly come forth with the reasons leading to the delay involved in filing of the present appeal, therefore, I am of the considered view that the same having occasioned on account of bonafide reasons merits to be condoned. 3. As the assessee by raising the aforesaid additional grounds of appeal has sought adjudication of issues involving purely legal issues which would not require looking any further beyond the facts available on record, therefore, I have no hesitation in admitting the same. My aforesaid view that where an additional ground of appeal involving purely a question of law requiring no further verification of facts is raised before the Tribunal, though for the first time, then, the same merits admission is supported by the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC). 5 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 4. Succinctly stated, the assessee which is a Primary Agricultural Co-operative Society engaged in carrying out the business of banking, paddy procurement, sale of fertilizers, seeds, manures and pesticides and sale of controlled items under Public Distribution System (PDS) had e-filed its return of income for the A.Y.2013-14 on 31.02.2015, declaring an income of Rs. Nil (after claiming deduction u/s.80P of Rs.13,37,560/-). Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. Assessment was, thereafter, framed by the A.O vide order passed u/s.143(3), dated 19.03.2016 wherein, after scaling down the assessee’s multi-facet claim of deduction u/s.80P of the Act, its income was determined at Rs.3,47,190/-, inter alia, on the basis of following grounds: Sr. No. Particulars Amount Reasons 1. Rejection of the assessee’s claim for deduction of interest income on deposits with Co-operative banks under sec.80P(2)(a)(i) a/w. Section 80P(2)(d) of the Act Rs.2,24,894/-. (i) The A.O was of the view that as the interest income earned by the assessee society the funds which were not immediately required for business purposes could not be brought within the meaning of “profits and gains of business or profession” and was thus, not attributable to its activities of carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members, therefore, the same was not eligible for deduction u/s.80P(2)(a)(i) of the Act. (ii) The interest income on the deposits of the surplus funds of 6 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 the assessee with the Co- operative banks as per Section 80(4) would also not be applicable for deduction u/s.80(2)(d) of the Act. 2. Part disallowance of the assessee’s claim for deduction u/s.80P(2)(a)(iii) on paddy procurement business Rs.2,21,323/- (35% of Rs.8,85,290/- i.e. gross profit of paddy procurement business) (i) The A.O was of the view that as the deduction u/s. 80P(2)(a)(iii) of the Act was available to the society only for marketing of agricultural produce grown by its members, therefore, as the assessee which as per the policy of the state government was admittedly purchasing paddy from each and every farmer, whether member or non member, could not identify on the basis of its record the profit attributable to its paddy procurement business qua its members, thus, on an ad-hoc basis 35% of its gross profit from the said stream of business of Rs.8,85290/- (i.e. nearly 1/3 rd ) was to be disallowed. 3. Disallowance of the assessee’s claim for deduction u/s.80P(2)(d) of dividend income on the shares of Zilla Sahakari Bank, a co- operative bank. Rs.80,732/- (i) The A.O was of the view that as the Co-operative bank is not a Co-operative society, therefore, as per Section 80P(4), the assessee’s claim for deduction of dividend income received on shares of Co- operative bank i.e, Zilla Sahakari Bank u/s. 80P(2)(d) was liable to be disallowed. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) who not only upheld the aforesaid disallowances made by the A.O, but was also of the view that as the assessee society was only acting as an commission agent for the marketing federation and 7 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 was not engaged in marketing activities, therefore, the A.O ought to have disallowed the entire claim of deduction u/s.80P(2)(a)(iii) on the profit arising from its paddy procurement business, thus, enhanced the said disallowance to Rs.7,79,913/- ( net income). 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before me. 7. I have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. A.R to drive home his contentions. 8. Although, it is the claim of the Ld. AR that the CIT(Appeals) had grossly erred in disposing off the appeal without validly putting the assessee to notice, but I am unable to persuade myself to subscribe to the said claim. I, say so, for the reason that the CIT(Appeals) had not only put the assessee to notice about the hearing of the appeal, but in fact the assessee in compliance thereto had uploaded his written submissions on the e-filing portal. Accordingly, on the basis of my aforesaid observations the Ground of appeal No.1 raised by the assessee is dismissed as being devoid and bereft of any merit. 8 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 9. As the assessee has assailed the disallowance of its multi-facet claim for deduction u/s.80P of the Act, therefore, I shall deal with the same in a chronological manner, as under: (A) Disallowance of assessee’s claim for deduction of interest on deposit with the Co-operative Bank u/s.80P(2)(a)(i) of the Act : Rs.2,24,894/-: 10. Apropos the declining of the assessee’s claim for deduction of interest income of Rs.2,24,894/- that was earned on the surplus funds which were deposited by it with a co-operative bank u/s. 80P(2)(a)(i) of the Act, I find that the aforesaid claim of the assessee hinges around the aspect that as to whether or not the interest income earned by it on its surplus funds which were parked as deposits in the normal course of its business of providing credit facilities to its members, i.e., at a point of time when there were no takers for the said funds was eligible for deduction u/s.80P(2)(a)(i) of the Act. I have given a thoughtful consideration to the contentions advanced by the Ld. Authorized representatives for both the parties. Before proceeding any further, I deem it fit to cull out the provisions of section 80P(2)(a)(i) of the Act the scope and gamut of which is the primary bone of contention before me, which reads as under : “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 9 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 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) to (iii)....................................................................................” (Emphasis by underlining supplied by me) On a perusal of the aforesaid statutory provision, I find that the same contemplates that the income of a co-operative society from its business of banking or providing credit facilities to its members is eligible for deduction u/s. 80P(2)(a)(i) of the Act. I indulgence in the present appeal is sought on a limited aspect, i.e, as to whether or not the interest income earned by the assessee-society by depositing its surplus funds with a bank can be brought within the meaning of “income from carrying on the business of banking or providing credit facilities to its members”, and thus, would fall within the realm of the deduction contemplated in Section 80P(2)(a)(i) of the Act. At this stage, I may herein observe, that it is the claim of the assessee that as in the course of its business of providing credit facilities to its members depositing of its surplus funds for which there were no takers at the relevant point of time is inextricably interlinked or in fact interwoven with its said stream of business activity, therefore, the interest income received on such short-term deposits was duly 10 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 eligible for deduction under Sec. 80P(2)(a)(i) of the Act. I 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 record that the funds deposited by the assessee-society with the Co-operative bank 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. On the contrary, the A.O had at Para 2.1 of his order observed that “......In the present case, as stated above, assessee-society regularly invests funds not immediately required for business purpose.” Accordingly, as the amount deposited by the assessee-society with the Co-operative bank was in the nature of a simpliciter surplus or idle funds for which there were no takers for the time being in course of its business of providing credit facilities to its members, therefore, depositing of the same by way of short-term deposits with the aforesaid bank, as 11 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 stated by the ld. A.R, and, rightly so, would clearly be inextricably interlinked or in fact interwoven with its aforesaid primary business activity, i.e., providing of credit facilities to its members. At this stage, I may herein observe that the Hon’ble Supreme Court in the case of M/s. Totgars Co-operative Sale Society Ltd. Vs. ITO, Karnataka, 322 ITR 283 (SC), had held, that in a case where the assessee-cooperative society apart from providing credit facilities to its members was also in the business of marketing of agricultural produce grown by its members, and the sale consideration of the agricultural produce due towards its members was thereafter retained and invested as a short- term deposit/security with the bank, then, the interest income therein earned to the said extent could not be said to be attributable to its activity of providing credit facilities to its members. As is discernible from the aforesaid judicial pronouncement of the Hon’ble Supreme Court, I find the Hon’ble Apex Court had clarified beyond doubt that they have confined the judgment to the facts of the case before them and the same was not to be considered as laying down of any law. Be that as it may, the aforesaid judgment of the Hon’ble Supreme Court in the case of M/s. Totgars Co-operative Sale Society Ltd. (supra) had thereafter been considered by the Hon’ble High Court of Karnataka in the case of Tumkur Merchants Souharda Cooperative Ltd. Vs. ITO, Tumkur, ITA No.307/2014, dated 12 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 28.10.2014, wherein the Hon’ble High Court had after exhaustive deliberations held as under : “6. From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the sum of Rs.1,77,305/- represents the interest earned from short term deposits and from savings bank account. The assessee is a cooperative society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks 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 13 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 the meaning of the word ‘attributable’ as supposed to derive from its use in various other provisions of the statute in the case of CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX, GUJARAT-II reported in ITR Vol.113 (1978) Page 842 at Page 93 as under: As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of" the specified industry (here generation and distribution of electricity) on which the learned Solicitor General relied, it will be pertinent to observe that the Legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General it has used the expression "derived from", as for instance in s. 80J. In our view since the expression of wider import, namely, "attributable to” has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. 8. Therefore, the word “attributable to” is certainly wider in import than the expression “derived from”. Whenever the legislature wanted to give a restricted meaning, they have used the expression “derived from”. The expression “attributable to” being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A cooperative society which is carrying on the business providing credit facilities to its members, earns profit and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this 14 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business 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. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in section 80P(2)(a)(i) of the Act or under section 80P(2)(a)(iii) of the Act. Therefore, in the facts of the said case, the Apex Court held the assessing Officer was right in taxing the interest income indicated above under section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore, it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on 15 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 the business of banking and therefore, it is liable to be deducted in terms of section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME TAX III HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD. Reported in (2011) 200 TAXMAN 220/12. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly, it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order: Appeal is allowed. The impugned order is hereby set aside. Parties to bear their own cost.” In the backdrop of the aforesaid observations of the Hon’ble High Court, I am of the considered view, that as in the case of the assessee before me the surplus/idle funds parked by way of short-term deposit with the co-operative bank are inextricably interlinked or in fact interwoven with its business of providing credit facilities to its members, therefore, the same as claimed by the Ld. AR, and, rightly so, would duly be eligible for deduction u/s. 80P(2)(a)(i) of the Act. I thus, in terms of my aforesaid observations direct the Assessing Officer to allow the assessee’s claim for deduction of the interest income on its deposits with the Co-operative bank of Rs.2,24,894/- u/s. 80P(2)(a)(i) of the Act. Thus, the Additional Ground of appeal No.1 raised before me is allowed in terms of my aforesaid observations. 16 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 (B) Part disallowance of assessee’s claim for deduction on profit from paddy procurement business, which, thereafter, was enhanced by the CIT(Appeals) to an amount of Rs.7,79,913/-: 11. As observed by me hereinabove, the A.O was of the view that the assessee’s claim for deduction u/s.80P(2)(a)(iii) of the profit from paddy procurement business was to be restricted only qua that as was attributable to marketing of agriculture produce grown by the members of the society. Accordingly, the A.O observing that the assessee society as per policy of the government was purchasing paddy from each and every farmer, whether member or non-member, therefore, in absence of specific identification of the profit that was attributable to the services which were rendered to its members on an ad-hoc basis held 35%(sic) of the profit from paddy procurement business of Rs.8,85,290/- as ineligible for deduction under u/s. 80P(2)(a)(iii) of the Act. 12. On appeal, the CIT(Appeals) was of the view that as the assessee was acting as an agent for the marketing federation and was not engaged in marketing activities, therefore, the A.O ought to have disallowed its entire claim u/s.80P(2)(a)(iii) of the Act. Accordingly, the CIT(Appeals) after putting the assessee to notice enhanced the said disallowance to an amount of Rs.7,79,913/- (net income). 17 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 13. The assessee has assailed the disallowance of its aforesaid claim for deduction u/s.80P(2)(a)(iii) on profit from paddy procurement business on three counts:- (a) that the CIT(Appeals) had carried out enhancement without validly putting the assessee to notice as required u/s.251(1) of the Act; (b) that the CIT(Appeals) had wrongly directed the A.O to disallow the gross income from paddy procurement business of Rs.7,79,913/- without considering the income that was earned by the assessee society from its members which was taken by the A.O at 65%; (c) that both the lower authorities had wrongly observed that the assessee had procured paddy from non-members to the extant of 35%, which in fact, was only to the extent of 7%. Apropos, the observation of the CIT(Appeals) that as the assessee was a commission agent for the marketing federation and was not engaged in marketing activities, therefore, it was not entitled for claim of deduction of the profit from paddy procurement business u/s.80P(2)(a)(iii) of the Act, I am unable to concur with the same. I find that a Division Bench of the Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit & Ors Vs. the ITO, Ward-1(3), Raipur in ITA No.114/RPR/2016 & Ors., dated 23.02.2022, while dealing with the assessee’s claim for deduction of the income from paddy procurement business u/s.80P(2)(a)(iii) of the Act, had held that the said claim for deduction was liable to be restricted qua the profits that were attributable to its members and had remanded the issue to the file of the A.O by observing as under: 18 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 “16. Admittedly, the assessee as an ‘agent’ of Chhattisgarh Marketing Federation (CMF) had facilitated the procurement of paddy from the agriculturists, and for the said service was paid a fixed commission as per the rates prescribed by the Government. The gross profit of Rs.16,21,218/- that was earned by the assessee from its aforesaid stream of business activity, i.e., paddy procurement business was claimed by it as a deduction u/s. 80P(2)(a)(iii) of the Act. However, as per the mandate of Sec. 80P(2)(a)(iii) the deduction therein contemplated was only available qua the marketing of the agricultural produce grown by members of the society, therefore, the Assessing Officer in the course of assessment proceedings had called upon the assessee society to produce the register maintained in respect of its paddy procurement for the year under consideration. As the register produced by the assessee society did not reveal the requisite details which were required to identify the members and non-members, therefore, the Assessing Officer in the backdrop of the said fact had restricted the assessee’s claim for deduction u/s.80P(2)(a)(iii) of the Act on an ad-hoc basis to 35% (i.e. nearly 1/3 rd of the aforesaid gross profit) of the profit that was earned by it from paddy procurement business, and had disallowed assessee’s claim for deduction as regards the balance amount of profit. Assailing the restriction of the assessee’s claim for deduction u/s 80P(2)(a)(iii) to 35% of its income of Rs. 16,21,218/-, it is the claim of the ld. A.R before us that the same is highly exorbitant, for the reason, that the assessee had mainly procured paddy from its members only. It was submitted by the Ld. AR that though as per the policy of the Government the assessee-society is obligated to purchase paddy from each and every farmer, whether member or non-member, i.e whosoever approaches it, but transactions with the non- members during the year under consideration was minimal and by no means exceeded 25% of the total transactions. In order to buttress his aforesaid claim the Ld. AR had taken us through the compilation of paddy purchase by the assessee- society, Page 1 to 55 of additional documentary evidence that was placed on our record. By drawing support from compilation of paddy purchase from its members, i.e. Page 1A to 255 of the additional documentary evidences filed before us, it was submitted by the ld. A.R that only a small fraction of the paddy procurement was carried out by the assessee society from non-members. In the backdrop of his aforesaid contentions, the Ld. AR had claimed that the restriction of its claim for deduction u/s 80P(2)(a)(iii) to 35% of the profit from paddy procurement business so made by the Assessing Officer 19 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 was not only on the higher side, but in fact exorbitant and unrealistic. 17. After giving a thoughtful consideration to the aforesaid issue, we find substantial force in the claim of the Ld. AR that now when only a small fraction of the procurement of paddy was made by the assessee-society in the course of its paddy procurement business from non-members, therefore, restricting of its claim for deduction u/s. 80P(2)(a)(iii) of the Act to 35% of the profits earned from the said business activity was not justified. Be that as it may, we are of the considered view that as the compilation of the paddy procurement by the assessee-society has been filed before us as additional documentary evidence, and the same was not there before the lower authorities, therefore, the matter in all fairness requires to be re-visited by the Assessing Officer. We, thus, in terms of the aforesaid observation set-aside the matter to the file of the Assessing Officer, with a direction to re-adjudicate the same after considering the additional documentary evidence that had been filed by the asssessee before us. The A.O shall after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, therein, restrict the assessee’s claim for deduction u/s. 80P(2)(a)(iii) of the Act only to the extent of the profit relatable thereto. Needless to say, the assessee shall in the course of the set-aside proceedings furnish the requisite details/documents that are called for by the A.O. The Ground of appeal No.2 is allowed for statistical purposes in terms of our aforesaid observations.” Accordingly, respectfully following the aforesaid view of the Tribunal, I am unable to concur with the observation of the CIT(Appeals) that as the assessee was acting as an agent for the marketing federation and was not engaged in marketing activities, therefore, the A.O ought to have disallowed the assessee’s entire claim for deduction of the profit from paddy procurement business u/s.80P(2)(a)(iii) of the Act. 20 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 14. Admittedly, the assessee as an ‘agent’ of Chhattisgarh Marketing Federation (CMF) had facilitated the procurement of paddy from the agriculturists, and for the said service was paid a fixed commission as per the rates prescribed by the Government. The gross profit of Rs.8,85,290/- that was earned by the assessee from its aforesaid stream of business activity, i.e., paddy procurement business was claimed by it as a deduction u/s. 80P(2)(a)(iii) of the Act. However, as per the mandate of Sec. 80P(2)(a)(iii) the deduction therein contemplated was only available qua the marketing of the agricultural produce grown by members of the society, therefore, the Assessing Officer in the course of assessment proceedings had called upon the assessee society to produce the register maintained in respect of its paddy procurement for the year under consideration. As the register produced by the assessee society did not reveal the requisite details which were required to identify the members and non-members, therefore, the Assessing Officer in the backdrop of the said fact had on an ad-hoc basisheld that the assessee’s claim for deduction u/s.80P(2)(a)(iii) of the Act to the extent of 35% (sic) i.e. nearly 1/3 rd of the aforesaid gross profit that was earned by it from paddy procurement business as ineligible for deduction under the said statutory provision. Assailing the declining of the assessee’s claim for deduction u/s 80P(2)(a)(iii) to the extent of 35%(sic) of its 21 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 income of Rs.8,85,290/- (supra), it is the claim of the ld. A.R before us that the same is highly exorbitant. It was submitted by the Ld. AR that though as per the policy of the Government the assessee-society is obligated to purchase paddy from each and every farmer, whether member or non-member, i.e, whosoever approaches it, but transactions with the non-members during the year under consideration were minimal and by no means exceeded 7% of the total transactions. In the backdrop of his aforesaid contention, the Ld. AR had claimed that the declining of its claim for deduction u/s 80P(2)(a)(iii) to the extent of 35%(sic) of the profit from paddy procurement business by the Assessing Officer was not only on the higher side but in fact exorbitant and unrealistic. 15. After giving a thoughtful consideration to the aforesaid issue, I find substantial force in the claim of the Ld. AR that now when only a small fraction of the procurement of paddy was made by the assessee-society in the course of its paddy procurement business from non-members, therefore, declining of its claim for deduction u/s. 80P(2)(a)(iii) of the Act to the extent of 35%(sic) of the profits earned from the said business activity was not justified. Although, it is the claim of the Ld. AR that the paddy procurement from non- members constituted only 7% of its total procurement, however, the said fact is not borne out from the orders of the lower authorities. I, 22 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 thus, in all fairness restore the issue to the file of the A.O with a direction to re-adjudicate the same and restrict the disallowance of the assessee’s claim for deduction of profit from paddy procurement business u/s.80P(2)(a)(iii) of the Act only to the extent the same is attributable to the non-members. The assessee society shall in the course of set-aside proceedings produce the relevant details/records before the A.O to support its aforesaid claim. I, thus, in terms of the aforesaid observation set-aside the matter to the file of the Assessing Officer The A.O shall after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by non-members, therein, decline the assessee’s claim for deduction u/s. 80P(2)(a)(iii) of the Act only to the extent of the profit relatable thereto. Needless to say, the assessee shall in the course of the set-aside proceedings furnish the requisite details/documents that are called for by the A.O. The Additional Grounds of appeal Nos.3 & 4 are allowed for statistical purposes in terms of my aforesaid observations. (C) Disallowance of the assessee’s claim for dividend income received on shares of Jila Sahakari Bank u/s.80P(2)(d) of the Act : Rs.80,732/- 16. I have given a thoughtful consideration to the aforesaid issue in hand. Admittedly, in the case of Gramin Sewa Sahakari Samiti Maryadit & Ors. Vs. the ITO, Ward-1(3), Raipur in ITA 23 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 No.114/RPR/2016 & Ors, the Tribunal had observed that the dividend income received by a co-operative society on the shares of a co-operative bank held by it would be eligible for deduction under Sec. 80P(2)(d) of the Act. It was observed by the Tribunal as under: “22. After having given a thoughtful consideration to the aforesaid issue in hand, we are unable to concur with the view taken by the lower authorities. In our considered view, as a Co-operative bank falls within the realm of the definition of “Co-operative Society” as contemplated in Section 2(19) of the Act, therefore, the view taken by the lower authorities that dividend income received by the assessee from Jila Sahakari Kendriya Bank, Raipur, i.e a Co-operative Bank, would not eligible for deduction u/s. 80P(2)(d) of the Act cannot be sustained. Our aforesaid view is fortified by the order of the ITAT, Mumbai in the case of M/s Solitaire CHS Ltd Vs. Principal Commissioner of Income Tax-26, ITA No.3155/Mum/2019, dated 29.11.2019 (wherein one of us, i.e, the JM was a party), had after exhaustive deliberations held as under: “6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with co-operative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co- operative banks from where the assessee was in receipt of interest 24 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 income were not co-operative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by the Pr. CIT. Before proceeding any further, we may herein reproduce the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. “80P(2)(d) (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)............................................................................................ (b)............................................................................................ (c)............................................................................................ (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co- operative society, the whole of such income;” On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on 25 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term „cooperative society‟ had been defined under Sec. 2(19) of the Act, as under:- “(19) “Co-operative society” means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;” We are of the considered view, that though the co-operative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We shall now advert to the judicial pronouncements that have been relied upon by the ld. A.R. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its investments held with a co-operative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO- 21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. (iv). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 26 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co- operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon’ble Supreme Court in the case of Totgars Co- operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the same being distinguishable on facts had wrongly been relied upon by him. The adjudication by the Hon‟ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co- operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments/deposits parked with a co- operative bank. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). At the same time, we find, that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a co- operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. We find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial pronouncement of the Hon‟ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a cooperative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 27 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 9. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we „set aside‟ his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016. 10. Resultantly, the appeal filed by the assessee is allowed.” Backed by our aforesaid observations, we not being able to persuade ourselves to subscribe to the view taken by the lower authorities, therein vacate the disallowance of the assessee’s claim for deduction of Rs.1,16,224/- u/s. 80P(2)(d) of the Act. The Ground of appeal No.4 is allowed in terms of the aforesaid observations.” I find that as stated by the Ld. AR, and, rightly so, as the aforesaid issue in hand, i.e, entitlement of a co-operative society for claim of deduction under Sec. 80P(2)(d) qua the dividend received on shares of a co-operative bank is squarely covered by the aforesaid decision of the Tribunal in ITA No.114/RPR/2016 & Ors (supra.), dated 23.02.2022, therefore, principally concurring with the claim of the ld. AR I vacate the disallowance of the assessee’s claim for deduction u/s.80P(2)(d) of the dividend received on shares of a co-operative bank, viz. Jila Sahakari Bank. Thus, the Ground of appeal No.6 28 Gramin Sewa Sahakari Samiti Maryadit Vs. ITO-1(1) ITA No.114/RPR/2022 raised by the assessee is allowed in terms of my aforesaid observations. 17. It is submitted by the Ld. AR that he is not pressing Additional ground of appeal No.5. In view of the concession of the Ld. AR the additional ground of appeal No.5 is dismissed as not pressed. 18. I, thus, in terms of my aforesaid observations set-aside the order of the CIT(Appeal) and allow/allow for statistical purposes the appeal of the assessee in terms of my aforesaid observations. Order pronounced in open court on 16 th day of December, 2022. Sd/- (रवीश स ू द /RAVISH SOOD) ÛयाǓयक सदèय/JUDICIAL MEMBER रायप ु र / Raipur; Ǒदनांक / Dated : 16 th December, 2022 SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals), Raipur (C.G.) 4. The Pr. CIT-1, Raipur (C.G.) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, “एक-सदèय” बɅच, रायप ु र / DR, ITAT, “SMC” Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव /Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur