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Gonikoppal Primary Rural Agricultural Credit Co-op. Society Ltd.

3. The AO applying the ratio of the decision of Hon'ble Apex Court in Totagars Co- Operative Sale Society v. ACIT [2023] 188 taxmann.com 282 (SC) has held that the interest income earned by the assessee is not eligible for deduction u/s. 80P(2)(a)(i) of the Act. While holding so, the AO in para 5.17, of the order, has observed that depositing/investing funds in a co-operative bank/commercial bank is not a part of business of providing credit facilities to its members. The AO took a view that such income is not the operational income of the assessee society and hence not available for deduction u/s. 80P(2)(a)(i) of the Act (the order of the AO is silent on CRR point). Here it is pertinent to note that the AO has ignored that the submissions of the assessee stating that it has kept these deposits as per the mandate of government guidelines for carrying out its activities smoothly. AO also not pondered on the submission of the assessee that only 25% of the net profit has been compulsory deposited in the co-operative banks as the Mandate of the Co-operative Society Bye laws.