2021 (6) TMI 460

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....f deduction claimed u/s 80P(2)(a)(i) of the Income-tax Act,1961 ['the Act' for short]. (b) Rejection of deduction u/s 80P(2)(d) of the Act in respect of interest income earned on fixed deposits. 2. The Ld A.R submitted that the assessee is a co-operative society engaged in the business of accepting deposits from and lending loans to its members. The assessee filed its return of income claiming deduction u/s 80P of the Act. The AO rejected the claim on the reasoning that the assessee has dealt with nominal/associate members who do not have right to vote and to participate in the surplus, thus failing in mutuality principles. The assessee had earned interest income/dividend income of Rs. 38,62,790/- from deposits/investmen....

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....of both the issues. 4. We heard Ld D.R and perused the record. The first issue relates to the claim of deduction u/s 80P(2)(a)(i) of the Act. We notice that an identical issue has been considered by the co-ordinate bench in the case of Karkala Co-op S Bank Ltd (supra), wherein an identical issue has been restored to the file of AO for examining it afresh. For the sake of convenience, we extract below the relevant observations made by the co-ordinate bench:- "4. The Ld. A.R. submitted that the law on deduction of 80P(2)(a)(i) of the Act available to credit co-operative societies has since been settled by Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. Vs.CIT (2021) 123 taxmann.com 161 (SC). He submitt....

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....s fresh examination at the end of the A.O. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue in both the years under consideration and restore them to the file of the A.O. in both the years for examining it afresh as discussed above." 5. Since the facts are identical, following the decision rendered by the co-ordinate bench, we restore this issue to the file of the AO with similar directions. 6. The next issue relates to the deduction claimed by the assessee u/s 80P(2)(d) of the Act in respect of interest income. Identical issue has been considered by the co-ordinate bench in the case of Karkala Co-op S Bank Ltd (supra). For the sake of convenience, we extract below the relevant observations made by the co-ordinat....

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.... Karnataka. Consequent thereto, the Hon'ble High Court of Karnataka has passed the order in the case reported in 58 taxmann.com 35 and held that the Tribunal was not right in coming to the conclusion that the interest earned by the appellant is an income from other sources without allowing deduction in respect of proportionate cost, administrative expenses incurred in respect of such deposits. Accordingly, the Ld. A.R. prayed that the A.O. may be directed to allow deduction of proportionate cost, administrative and other expenses, if the A.O. proposes to assess the interest income earned from bank deposits as income under the head "other sources". 9. We heard Ld. D.R. on this issue. We find merit in the prayer of the assessee, sinc....