ANANTAPUR DISTRICT CO-OPERATIVE STAFF CO-OPERATIVE SOCIETY LIMITED,ANANTAPUR vs. ITO., WARD-1, ANANTAPUR

4.1 The Ld. AR submitted that, the assessee is an employees co-operative society which is for the benefit of Anantapur District “co-operative staff”. The co-operative society has been formed with the object to accept deposits from the employee members and to advance loans to the employee members only. In the course of regular transactions of the society, the assessee received cash from its members and deposit the same in the bank account and whenever their members are in need of loans/advances, the society provides loans/advances to the members out of the amount deposited in the bank. Accordingly, during the year under consideration, the assessee has deposited cash of Rs.67,77,190/- in bank out of the money collected from its members during the year under consideration. During the assessment proceedings, the Ld. AO called for the details / evidences on account of such deposit of Rs.67,77,190/-. Due to voluminous details, the assessee only filed the details for the period from 01.04.2015 to 30.06.2015 for cash deposit of Rs.4,94,950/- as sample for verification and also submitted that, if the Ld. AO requires the details for the balance 9 months will also be submitted by the assessee for verification. However, without calling for the details / evidences for balance period of 9 months, the Ld. AO treated the cash deposit for balance period of 9 months amounting to Rs.62,82,240/- as unexplained money and added the same u/s.69A of the Act in the hands of the assessee. The Ld. CIT(A) also confirmed the addition made by the Ld. AO. The Ld. AR further submitted that, the assessee was not provided sufficient opportunity to file the necessary details / evidences towards cash deposit of Rs.62,82,240/- with regard to balance period of 9 months. However, the assessee is having all the details / evidences related to cash deposit of Rs.62,82,240/-. Therefore, the Ld. AR requested before the bench to provide one more opportunity to the assessee to produce all the relevant details before the Ld. AO in support of cash deposit of Rs.62,82,240/- so that the case of the assessee can be decided on merits. 4.2 Per contra, the Ld. DR submitted that the plea of Ld. AR be rejected in view of the sufficient opportunities provided to the assessee before deciding the matter by the authorities below. 4.3 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. It is seen from the record that the Ld. AO has not verified the details / evidences for balance period of 9 months. Now, the assessee is ready to furnish the necessary details / evidences in support of his case. However, the assessee is having all the details / evidences related to cash deposit of Rs.62,82,240/-. Be that as it may, now that the assessee is ready to produce the balance of 9 months all such documentary evidence in support of his contentions and get the matter disposed of on merits. The highest that would happen by allowing an opportunity to the assessee is that a cause would be decided on merits. In the interest of justice, we are of the view that fresh opportunity should be given to the assessee and, accordingly, we set aside the issue to the file of the Ld. AO for fresh adjudication on merits, after affording the opportunity of hearing to the assessee.

“6. I have gone through the record in the light of the submissions made on either side. Issue involved in this matter is no longer res integra and the Hon’ble jurisdictional High Court considered the same in extenso in the case of The Vavveru Co-operative Rural Bank Ltd. (supra). On a threadbare analysis of the provisions under section 80P of the Act in the light of various decisions including the decision of the Hon’ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO [2010] 188 Taxman 282 (SC) and the decision of jurisdictional High Court in the case of CIT vs. Andhra Pradesh State Co-operative Bank Ltd [2011] 12 taxmann.com 66 (Andhra Pradesh), the Hon’ble High Court reached a conclusion that if the investment is made in fixed deposits in nationalised banks from out of the own funds of the assessee, the interest derived from such investment would be from the activities listed in clause (i) to (vii) of section 80P(2)(a) of the Act and would be eligible for deduction.

8. In the case of Hilla Heights Co-operative Housing Society Limited (supra), since the disallowance was made under section 143(1) of the Act assessee filed a rectification application before Centralized Processing Centre, Bangalore, however, the same was denied without giving any proper reasons and assessee filed the appeal before the learned CIT(A) and learned CIT(A) did not decide the issue on merits, however, he proceeded to decide the issue on technical ground whether assessee should file the appeal under section 143(1) or 154 of the Act, the Tribunal proceeded to decide the issue on merits in the light of the decided case law.

9. Since the case on hand is squarely covered by the decision of the jurisdictional High Court in the case of The Vavveru Co-operative Rural Bank Ltd. vs. CCIT (supra), while following the decision of the Co-ordinate Bench of the Tribunal in the case of Hilla Heights Co-operative Housing Society Limited (supra), I am of the considered opinion that the assessee is entitled to claim deduction under section 80P(2)(d) of the Act, if the interest is earned on the deposits of its own funds in the nationalized banks. 10. With this view of the matter, I set aside the orders of the Revenue authorities and restore the issue to the file of learned Assessing Officer to cause verification as to whether the interest in question was earned by the assessee in respect of its own amounts deposited in the nationalized banks, and if it is so, to allow the deduction under section 80P(2)(d) of the Act. Assessee should produce all the relevant material before the learned Assessing Officer and get the matter disposed of on merits.”

“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 anyone of the two expressions, namely, derived from or directly attributable to.

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;

5.1 On perusal of above, we found that, the Tribunal has given the findings that, only interest or dividend received from co- operative society is eligible for deduction u/s.80P(2)(d) of the Act. Further, the Tribunal has given the findings that, if original source of fund invested in Nationalised bank is from the activity listed in sub-clauses (i) to (vii) of clause (a) of section 80P(2) of the Act, then only, the interest received from nationalized bank shall be treated as income attributable to the activity listed in sub-clauses (i) to (vii) of clause (a) of section 80P(2) of the Act and will be eligible for deduction u/s.80P(2)(a) of the Act. However, under the case before us, the interest of Rs.11,640/- received by the assessee is from nationalized bank and not from co-operative society, therefore, the deduction u/s.80P(2)(d) of the Act is not available to the assessee. Further, whether the same is available as deduction u/s.80P(2)(a) or not, the same is subject matter of verification, whether the original source of funds which is invested in nationalized bank is from the activity listed in clauses (i) to (vii) of clause (a) of section 80P(2) of the Act or not. Therefore, we set aside the issue to the file of Ld. AO to verify the original source of funds invested in nationalized bank and if after verification, the Ld. AO is found that the original source of fund which is invested in nationalized bank is from the activity listed in clauses (i) to (vii) of clause (a) of section 80P(2) of the Act, then allow the interest of Rs.11,640/- u/s.80P(2)(a) of the Act. Accordingly, this ground is allowed for statistical purposes.

of the assessee.