Cooperative society gets deduction under Section 80P(2)(a)(i) for interest on reserve funds and other income sources

I.T.O., Ward-32 (2), Kolkata Versus M/s. National Coal Development Corporation Staff Co-operative Credit Society Ltd.

I.T.O., Ward-32 (2), Kolkata Versus M/s. National Coal Development Corporation Staff Co-operative Credit Society Ltd. - TMI Issues:
- Disallowance of deduction under section 80P(2)(a)(i) by AO for interest on various receipts.
- Appeal by assessee before CIT(A) against AO's orders.
- Tribunal's decision in assessee's favor for assessment year 2008-09.
- Disallowance of interest on bank fixed deposits.
- Distinction in judgments by Supreme Court and Karnataka High Court.
- Restoration of issue to AO for fresh decision.

Analysis:
1. The Revenue appealed against three orders by CIT(A) disallowing deduction under section 80P(2)(a)(i) for interest on various receipts. The AO disallowed the deduction based on a Supreme Court decision but allowed it for earlier years. The Tribunal upheld CIT(A)'s decision for all three years, relying on its own judgment for assessment year 2008-09 in favor of the assessee.

2. The Tribunal confirmed the disallowance for interest on bank fixed deposits but allowed deductions for other income. It cited the Supreme Court's decision that interest income must be operational income to qualify for deduction under section 80P(2)(a)(i). The Tribunal found that income from reserve funds, bad debt funds, PF loan, subsidy, and guest house was related to the main activity of the assessee, thus eligible for deduction.

3. The assessee's Cross Objections related to interest on bank fixed deposits were allowed for reconsideration by the AO based on a High Court's distinction from the Supreme Court's decision. The Tribunal directed the AO to verify if the investment was made from surplus funds or liabilities to determine the taxability of interest income.

4. Following the decision in a similar case, the Tribunal restored the issue of interest on bank fixed deposits to the AO for fresh consideration. The Revenue's appeals were dismissed, and the assessee's Cross Objections were allowed for statistical purposes. The matter was to be decided afresh by the AO in line with the Tribunal's directions.

This detailed analysis covers the issues, decisions, and legal principles involved in the judgment, providing a comprehensive understanding of the case and its implications.