ITAT Bangalore: Appeal Allowed for Deductions

The Appellate Tribunal ITAT Bangalore allowed the appeal of the assessee for statistical purposes on April 21, 2021. The Tribunal set aside the orders of the lower authorities regarding the rejection of deductions claimed under sections 80P(2)(a)(i) and 80P(2)(d) of the Income-tax Act, 1961. The issues were remanded back to the Assessing Officer for fresh examination in light of relevant legal precedents, directing the AO to reevaluate the deductions claimed by the Primary Agricultural Co-operative Society.

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Issues:
1. Rejection of deduction claimed u/s 80P(2)(a)(i) of the Income-tax Act,1961.
2. Rejection of deduction u/s 80P(2)(d) of the Act in respect of interest income earned on fixed deposits.

Analysis:
1. Issue 1 - Deduction u/s 80P(2)(a)(i) of the Act:
The assessee, a Primary Agricultural Co-operative Society, claimed deduction u/s 80P for the assessment year 2016-17. The AO rejected the claim based on the mutuality principle due to dealing with nominal/associate members. The Ld A.R argued that the issue is covered by a co-ordinate bench decision citing the case of Karkala Co-op S. Bank Ltd. The Tribunal agreed with the Ld D.R. that the issue requires fresh examination in light of the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. Consequently, the order passed by Ld CIT(A) was set aside, and the issue was restored to the AO for reevaluation.

2. Issue 2 - Deduction u/s 80P(2)(d) of the Act - Interest Income:
The AO assessed interest income from bank deposits as 'Income from other sources' and denied deduction u/s 80P(2)(d) of the Act. The Ld A.R. argued for deduction based on the proportionate cost of funds and expenses, citing the case of Totgars Co-operative Sale Society Ltd. The Tribunal found merit in the argument and directed the AO to allow deduction of proportionate costs and expenses. The decision was based on the High Court's ruling in the Totgars case. As the assessee earned both interest and dividend income, the Tribunal set aside the Ld CIT(A)'s order and restored the issue to the AO with similar directions.

In conclusion, the appeal of the assessee was treated as allowed for statistical purposes, and the order was pronounced on 21st April 2021 by the Appellate Tribunal ITAT Bangalore, comprising SHRI B. R. BASKARAN, ACCOUNTANT MEMBER, and SMT. BEENA PILLAI, JUDICIAL MEMBER.

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