PRIMARY AGRICULTURAL CREDIT SOCIETY LIMITED ,GOUSE NAGAR vs INCOME TAX OFFICERS ,WARD-1, SURYAPET

Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad

Before: Shri S.S. Godara & Shri Laxmi Prasad Sahu

For Appellant: Shri E.S. Ranganath

For Respondent: Shri T. Sunil Goutam

Hearing: 13.04.2022Pronounced: 13.04.2022

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Shri S.S. Godara, Judicial Member AND Shri Laxmi Prasad Sahu, Accountant Member

ITA No.488/Hyd/2021 Assessment Year: 2016-17 Primary Agricultural Vs. The Income Tax Officer, Credit Society Limited, Ward – 1, Gousenagar, Suryapet. Nalgonda. PAN : AACAP0382R. (Appellant) (Respondent) Assessee by: Shri E.S. Ranganath. Revenue by: Shri T. Sunil Goutam. Date of hearing: 13.04.2022 Date of pronouncement: 13.04.2022 O R D E R Per S. S. Godara, J.M. This assessee’s appeal for A.Y. 2016-17 arises from the Commissioner of Income Tax (Appeals) – 3, Hyderabad’s order dated 24.02.2020 in case No.10333/2018-19/A3/CIT(A)-3 involving proceedings u/s. 143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

ITA No.488/Hyd/2021

It transpires at the outset that the assessee’s instant appeal referred against the CIT(A)’s order dt.24.02.2020 suffers from 580 days delay in filing. There is hardly any dispute that all the intervening period from the said date has witnessed outbreak of Covid-19 pandemic and therefore, the same stands condoned. The case is now taken up for adjournment on merits.

The assessee’s sole substantive grievance raised in the instant lis challenges correctness of both the learned lower authorities’ action disallowing its interest income on short term deposits with State Bank of Hyderabad, Bhongir (now State Bank of India), interest on term deposits with Nalgonda District Co-operative Central Bank Branch, Bhongir and interest on savings deposits with SBH Branch, Bhongir of Rs.48,94,150.46, Rs.66,177/- and Rs.6,34,707.08; respectively aggregating to Rs.55,95,034.54 for the purpose of claiming section 80P deduction. The CIT(A) detailed discussion to affirming the Assessing Officer’s action to this affect reads as under :

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ITA No.488/Hyd/2021

4 We have given our thoughtful consideration to rival pleadings and find no merit in the Revenue’s stand. Hon’ble jurisdictional high court’s decision in The Vavveru Co-operative Rural Bank Limited Vs. CCIT, Vijayawada (2017) 396 ITR 371 (T & AP) has already decided the very issue of section 80P deduction on such interest income derived from deposits made in nationalized banks in assessee’s faovur as under :

“32. In simple terms, the position can be summarized like this. If there is a Co-operative Society, which is carrying on several activities including those activities listed in sub- Clauses (i) to (vii) of Clause (a), the benefit under Clause (a) will be limited only to the profits and gains of business attributable to anyone or more of such activities. But, in case the same Co-operative Society has an income not attributable to anyone or more of the 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 Co-operative Society may claim the benefit of Clause (d) or (e) either by investing the income in another Co-operative Society or investing the income in the construction of a godown or warehouse and letting out the same. 33. In other words, the benefit conferred by Clause (d) upon all types of Co-operative Societies is restricted only to the investments made in other Co-operative Societies. Such a restriction cannot be read into Clause (a), as the temporary parking of the profits and gains of business in nationalised Banks and the earning of interest income therefrom is only one of the methods of multiplying the same income. To accept the stand of the Department would mean

ITA No.488/Hyd/2021

that Co-operative Societies carrying on the activities listed in Clauses (i) to (vii), which invest their profits and gains of business either in other Co-operative Societies or in the construction of godowns and warehouses, may benefit in terms of Clause (d) or (e), but the very same Societies will not be entitled to any benefit, if they invest the very same funds in Banks. Such an understanding of section 80P(2) is impermissible for one simple reason. The benefits under Clauses (d) and (e) are available in general to all Co- operative Societies, including Societies engaged in the activities listed in Clause (a). Section 80P(2) is not intended to place all types of co-operative societies on the same pedestal. The section confers different types of benefits to different types of societies. Special types of societies are conferred a special benefit. 34. The case before the Supreme Court in Totgars was in respect of a Co-operative Credit Society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the Society. It is also found from Paragraph-3 of the decision of the Karnataka High Court in Totgars that the business activity other than marketing of the agricultural produce actually resulted in net loss to the Society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in Clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgars struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised 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 anyone of the two expressions, namely, derived from or directly attributable to.

ITA No.488/Hyd/2021

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, insofar as it relates to treating the interest income as something not allowable as a deduction under Section 80P (2) (a), is set aside.”

We adopt the foregoing detailed reasoning mutatis mutandis to delete the impugned section 80P deduction disallowance. Ordered accordingly.

This assessee’s appeal is allowed in very terms.

Order pronounced in the Open Court on 13th April, 2022.

Sd/- Sd/- (LAXMI PRASAD SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, dated 13th April, 2022. TYNM/sps Copy to: S.No Addresses 1 Primary Agricultural Credit Society Limited, Gousenagar, Chandupatla, Bhongiri, Nalgonda – 508216. 2 The Income Tax Officer, Ward – 1, Suryapet. 3 The CIT (Appeals) -3 , Hyderabad. 4 PCIT – 3, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order

PRIMARY AGRICULTURAL CREDIT SOCIETY LIMITED ,GOUSE NAGAR vs. INCOME TAX OFFICERS ,WARD-1, SURYAPET