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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961, and the denial of deduction in respect of interest income under section 80P, required interference or fresh examination in light of the Supreme Court and jurisdictional High Court rulings, particularly where the assessee claimed that the deposits were made pursuant to statutory compulsion under the Karnataka co-operative law.
Analysis: The assessee had earned interest from deposits with a co-operative bank and claimed deduction under section 80P(2)(a)(i) and section 80P(2)(d) of the Income-tax Act, 1961. The revision was based on the view that interest from a co-operative bank was not eligible for deduction. The Tribunal noted the later judicial position that while interest from deposits with a co-operative bank is generally not deductible under section 80P(2)(d), a separate factual enquiry is necessary where the assessee asserts that the investment was made because of statutory requirements under the Karnataka Co-operative Societies Act, 1959 and the Karnataka Co-operative Societies Rules, 1960. In such a case, the interest may have a business nexus and the claim under section 80P(2)(a)(i) requires examination on facts. The Tribunal therefore applied the settled principle from the Supreme Court decision on section 80P and held that the factual claim raised by the assessee had not been examined at the earlier stage.
Conclusion: The matter was remitted to the Assessing Officer for fresh consideration of the assessee's claim; the revisional order was not sustained in full, and the appeals succeeded only for statistical purposes.
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