TaxTMI 
TaxTMI 
2024 (1) TMI 1061
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....i] of the Act. 2.1 The learned CIT[A] ought to have appreciated that the interest income earned by the appellant was from out of investments required to be statutorily maintained by the appellant and thus, the appellant was entitled to the deduction u/s 80P[2][a][i] of the Act towards the same under the facts and in the circumstances of the appellant's case. 3. Without prejudice to the above, the learned CIT[A] ought to have appreciated that the interest income earned by the appellant to the tune of Rs. 6,82,017/- qualified for deduction uls.80P[2][d] of the Act since the aforesaid interest was earned from co-operative banks/societies under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234-B of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded cos....
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....Court in the case of M/s Totagar Co-operative Sales Society Ltd. vs. ITO 322 ITR 2023 (SC) and Bangalore Club vs CIT 29 Taxmann.com 29 (SC) whereas the appellant has relied upon the cases of Hon'ble Supreme Court in the case of CIT vs. Karnataka State Co-operative Apex Bank 251 ITR 194 (SC) and Bagalkot District Central Co-operative Bank vs. Joint Commissioner, Bijapur Range 48 Taxmann.com 117 (Bangalore-Tribunal) and PCIT Hubbali vs. Totagar Co-operative Sales Society 392 ITR 74. 6.1 The primary issue in this case is whether such interest income is eligible for the deduction u/s 80P(2)(a)(i) or u/s 80P(2)(d). The Hon'ble Karnataka High Court in a recent decision of PCIT Hubbali vs. Totagar Co- operative Sales Society 83 Taxmann.com 140 (Karnataka) had an occasion to examine this issue and held that where the assessee is a Cooperative society engaged in marketing of agriculture produce grown by its members and providing credit facilities to those members and has deposited its surplus funds in Co-operative Bank, the claim of deduction u/s 80P(2)(d) and 80P(2)(a)(i), both will be denied. Further, in the recent decisions of Hon'ble ITAT Bangalore in the cases of M/s Kri....
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....of the assessee that investments in District Co-operative Bank are in compliance with the requirement under the Karnataka Co-operative Societies Act and the relevant Rules. Therefore, the interest income is entitled to deduction under section 80P(2)(a)(i) of the Act. On identical factual situation, the Bangalore Bench of the Tribunal in the case of Canara Bank Staff Credit Co-operative Societies Ltd., in ITA No.517/Bang/2023 (order dated 03.10.2023) had restored the matter to the AO to examine whether the amounts invested with the Co-operative Banks are out of compulsion under the Karnataka Co-operative Societies Act and the relevant Rules. It was further held by the Tribunal that if the investments are out of compulsion under the Act and the relevant Rules, the interest income received out of the investment made under such compulsion would be liable to be taxed as 'income from business' which would entail the benefit of deduction under section 80P(2)(a)(i) of the Act. The relevant finding of the Bangalore Bench of the Tribunal reads as follows: "7. I have heard the rival submissions and perused the material on record. The interest income is received out of investments made with ....
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.... income derived from funds so placed arises from the business carried on by it and the assessee has not, by reason of section 80P(2)(a)(i), to pay income-tax thereon. The placement of such funds being imperative for the purposes of carrying the banking business, the income derived therefrom would be income from the assessee's business. We are unable to take the view that found favour with the Bench that decided the case M.P. Co-operative Bank Ltd. (supra) that only income derived from circulating or working capital would fall within section 80P(2)(a)(i). There is nothing in the phraseology of that provision which makes it applicable only to income derived from working or circulating capital. 7. In the premises, we take the view that the decision of this Court in the case of M.P. Co-operative Bank Ltd. (supra) does not set down the correct law and that the law is as we have put it above. The question, accordingly, is answered in the affirmative and in favour of the assessee." 9. A similar view that has been held by the Hon'ble Andhra Pradesh High Court in the case of CIT-II, Hyderabad Vs. Andhra Pradesh State Cooperative Bank Ltd., reported in 336 ITR 516 (AP). 10. The Bang....