2021 (3) TMI 944

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.... I.T.Act; and (ii) whether the Income Tax Authorities has erred in holding that the interest earned by the assessee from deposit made with Co-operative Banks is chargeable to tax u/s 56 of the I.T.Act. 3. The brief facts of the case are as follow: The assessee is a Co-operative Society, registered under the Karnataka Co-operative Societies Act. It is providing credit facilities to its members. For the assessment year 2016-2017, the return of income was filed declaring income of Rs. 32,800 after claiming deduction u/s 80P of the I.T.Act amounting to Rs. 39,95,146. The return was selected for scrutiny and assessment was completed u/s 143(3) of the I.T.Act vide order dated 19.12.2018. The Assessing Officer treated the interest received f....

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....earned from deposits made with Co-operative Banks, it was submitted that the same is attributable to carrying on the business activity of the assessee, and therefore, is eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. 6. The learned Standing Counsel relied on the assessment order and the CIT(A)'s order. 7. I have heard rival submission and perused the material on record. The Hon'ble Apex Court in the case of The Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT (supra) had held that the expression "members" is not defined under the Income-tax Act. Hence, it is necessary to construe the expression "members" in section 80P(2)(a)(i) of the I.T.Act as it is contained in the respective State Co-operative Act. The Hon'ble Apex C....

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....rda Credit Co-operative Society Ltd. v. ITO 230 taxman 309 (Kar.), wherein the Hon'ble Karnataka High Court considered the decision of the Hon'ble Apex Court in the case of The Totagar's Co-operative Sales Society (supra) and held that interest income in respect of temporary parking of own surplus funds not immediately required is eligible for deduction u/s 80P(2)(a)(i) of the Act. The learned DR relied on a subsequent decision of the Hon'ble Karnataka High Court in the case of Pr.CIT v. Totagars Co-operative Sale Society Ltd. (supra). I notice that on identical facts the co-ordinate bench of the Tribunal in the case of M/s.Raithara Seva Sahakara Sangh v. ITO in ITA No.1992 & 2596/Bang/2018 (order dated 02.01.2019) had restored the matter t....

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....deduction under Section 80P(2) of the Act is claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under section 80P(2)(a) of the Act which was the claim in AY 1991-92 to 1999-2000. The reason given by the Assessee was that in AY 2007-08 to 2011-12 investments and deposits after the Supreme Court's decision against the assessee Totgar's Cooperative Sale Society Ltd. (supra), were shifted from Schedule Banks to Co-operative Bank. U/s.80P(2)(d) of the Act, income by way of interest or dividends derived by a Co-operative Society from its investments with any other Co-operative Society is entitled to deduction of the whole of such interest or dividend income. The claim of the Assessee was that Co-operative Bank i....