AI Drafter 
TaxTMI 
TaxTMI 
2021 (8) TMI 505
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....ties Act, 1959. For Assessment Year 2016-17, the assessee filed return of income and claimed deduction of a sum of Rs. 1,70,31,095/- under section 80P(2)(1)(i) of the Income Tax Act, 1961 (hereinafter called 'the Act'). 3. In the course of assessment proceedings, the AO noticed that the assessee had claimed a sum of Rs. 1,00,93,101/- being interest received from investment of surplus funds in deposits and securities with nationalized banks (Punjab National Bank and Syndicate Bank), Cooperative Banks and others. According to the assessee, the aforesaid interest income is also eligible for deduction under section 80P(2)(a)(i) of the Act. The AO held that since the interest income was earned from non-members, the deduction claimed cannot be....
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....Character and nature of income viz. interest on investment remains same as in case of 3221TR283(SC). • 80P section applies only when the income is from business or operational income and not assessable under some other head. • Section 80P(4) excludes the applicability of section 80P of IT Act altogether to any co-operative Bank and the term used is "relation to". • 194A(3)(v) of IT Act also amended to make TDS provisions applicable to Cooperative Banks, thus it made the legislative intent very clear that Co-operative bank is not a specie of Cooperative society. • Deduction provision needs to be strictly construed. • Merely because the investments have been shifted to Cooperati....
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....e appreciated that the appellant had earned the interest income of Rs. 1,00,93,101/- from investments statutorily required to be maintained under the Karnataka Co-operative Societies Act from out of the profits besides 25% of the total deposits as SLR with co-operative banks and 3% of the total deposits towards CRR and thus, the income earned therefrom ought to have been assessed as part of the business of the providing credit facilities to its members and not under the head 'Other Sources" under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the above, the learned CIT[A] ought to have appreciated that the investment made by the appellant in co-operative banks would qualify for deduction....
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....l has decided identical issue that arises for consideration in this appeal and has remanded the issue for consideration with the following observation: "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....
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.... of the principles enunciated by Hon'ble Supreme Court in the above said case, we are of the view that the issue of deduction u/s 80P(2)(a)(i) of the Act requires 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 learned DR relied on the order of the CIT(A). We have considered the rival submissions. 7. As the issues involved in the present appeal are ident....