TaxTMI 
TaxTMI 
2023 (2) TMI 267
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....ssessee received interest on investments made in financial institutions other than cooperative Societies of a sum of Rs.18,07,490/-. The assessee claimed that the aforesaid interest income is originally for a deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 (hereinafter called 'the Act'). The claim of the assessee was rejected by the AO based on the decision of the Hon'ble Karnataka High Court in the case of PCIT, Hubli Vs. Totgars Co-operative Sale Society Ltd., (2017) 83 Taxmann 140 (Karnataka). The alternative claim of the assessee for deduction under section 80P(2)(d) of the Act was also rejected by the AO by relying on the decision of the Hon'ble Karnataka High Court in the case of Totgars Co-operative Sale Society Ltd.....
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....d proceed to decide the appeal on merits. 7. The Tribunal in the case of M/s. Krishnarajapet Taluk Agri Pro Coop Marketing Society Ltd., (supra) held that the ratio laid down by the Hon'ble Karnataka High Court in the case of Totalgars Cooperative Sales Society in 395 ITR 611 (Karn) is that in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent....
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.... of Karkala Co-op S Bank Ltd (supra). For the sake of convenience, we extract below the relevant observations made by the co-ordinate bench:- "7. The next common issue relates to rejection of deduction claimed u/s 80P(2)(d) of the Act in respect of interest income earned from fixed deposits kept with bank. We noticed earlier that the A.O. has observed in Assessment Year 2015-16 that the interest income received by the assessee from deposits kept with banks is not eligible for deduction u/s 80P(2)(c) & 80P(2)(d) of the Act since the assessee is not eligible for deduction u/s 80P(2)(a)(i) of the Act. In AY 2016-17, the AO assessed the interest income received on bank deposits under the head "Income from other sources" and denied dedu....
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....posits 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, since it is supported by the decision rendered by Hon'ble High Court of Karnataka in the case of Totgars Co-operative Sale Society Ltd. Vs. ITO (2015) 58 taxmann.com 35 (Karn). Accordingly, we direct the A.O. 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"." 7. In the instant case, the assessee has earned both interest income and dividend income. In view of the decision rendered by the jurisdictional Hon'ble High Court of Karnataka, the assess....