TaxTMI 
TaxTMI 
2025 (5) TMI 206
X X X X Extracts X X X X
X X X X Extracts X X X X
....from them. All the transactions of the society are restricted to members of society only. For AY 2020-21, the assessee filed its return of income on 08.12.2020 claiming deduction u/s 80P of the Income Tax Act, 1961 (the "Act") in respect of interest income received on its investments in the form of term deposits with banks. The case of the assessee was selected for complete scrutiny. Accordingly, statutory notice(s) u/s 143(2)/142(1) of the Act along with questionnaire were issued and served upon the assessee asking the assessee to furnish certain information in respect of the deduction claimed by the assessee, in response to which the assessee filed its detailed submissions before the Ld. Assessing Officer ("AO"). Before the Ld. AO, taking support from the catena of decisions pronounced by various judicial forums on the impugned issue, the assessee contended that the interest income earned by the assessee during the relevant AY from deposits with Co-operative Banks tantamount to business income of the assessee and is an allowable deduction u/s 80P(2)(a)(i) of the Act. Alternatively, the said income is also an allowable deduction u/s 80P(2)(d) of the Act. The details of the bank in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Reserve Bank Staff and Officers Vs. ITO in ITA No. 3114/Mum/2023, dated 22.01.2024. The Ld. CIT(A) restricted the deduction u/s 80P(2)(d) of the Act to the extent of net interest earned from investments with Co-operative Banks only which are registered under the Co-operative Societies Act and not from other Commercial Banks and Financial Institutions which were to be assessed under the head "Income from other sources" thereby partially allowing the assessee's claim for deduction u/s 80P(2)(d) of the Act and accordingly holding that the alternate claim of deduction u/s 80P(2)(c) and u/s 57 of the Act are rendered infructuous. The relevant findings and observations of the Ld. CIT(A) are reproduced below : "4.5 The facts in present appeal, are that the appellant is registered as a Cooperative Society under and further does not have any banking license issued by RBI to carry on the business of a banker. Thus, the appellant is out of the harm's way and is not hit by the provisions of Section 80P (4) of the Act. Once it is established that the appellant is out of the purview of Section 80P (4), then it becomes eligible for deduction u/s. 80P of the Act subject to the ful....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be eligible for deduction u/s. 80P(2)(a) of the Act. 4.10. In appellant's case, the impugned interest income has been earned not from its activity of any eligible business operation with members but only by way of an investment with non-member banks, who are rank outsider institutions that are not even nominal members of the appellant. The decisions relied on by the appellant do not over rule this binging interpretation of law laid down by the Hon'ble Supreme Court in the case of Mavilayi (supra). 4.11. Thus, the appellant's case is squarely hit by the specific directions of the Hon'ble Supreme Court in Mavilayi (supra) that "in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted". 4.12. Respectfully following the decision of the Hon'ble Supreme Court the impugned interest income has been rightly held as taxable under the head "Income from other sources" by the AO and hence the denial of deduction u/s. 80P(2)(a) does not warrant any interference. 4.13. However, regarding the alternate claim of the appellant that the interest income from ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AY 2015-16 vide order(s) dated 09.01.2020 (Pages 102 to 111 refers). Similarly, the CPC, Bangalore has also allowed deduction u/s 80P(2)(a)(i) of the Act for AY 2021-22, AY 2022-23 and 2023-24 to the assessee society, as well as many other Co-operative Credit Societies (Pages 163 to 167, 168 to 171 & 172 to 175 respectively refers). He further submitted that the impugned issue is squarely covered in favour of the assessee by catena of decisions pronounced by various Benches of the Tribunal including the Pune Tribunal. He further referred to the decision(s) of the Hon'ble Supreme Court and Jurisdictional High Court wherein the Hon'ble Courts have allowed the claim of deduction u/s 80P(2)(a)(i) of the Act under the similar set of facts as that of the assessee (Pages 112 to 133 of the paper book refers). He submitted that the Jurisdictional Tribunal has consistently allowed the claim of deduction in respect of interest income earned by the assessee from the Co-operative Banks/Co-operative Society u/s 80P(2)(a)(i)/80P(2)(d) of the Act (Pages 134 to 157 of the paper book refers). In support thereof, the Ld. AR submitted the compilation of the following cases : "I) The deductio....