TaxTMI 
TaxTMI 
2024 (2) TMI 1611
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....has raised eleven grounds and one additional ground. However, during the course of hearing, the learned AR argued only the issues pertaining to claim of deduction under section 80P(2)(a)(i) of the Act (grounds 3, 5 and 7) and deduction under section 80P(2)(d) of the Act (grounds 4 and 8). 3. Brief facts of the case are as follows: Assessee is a primary agricultural co-operative society registered under the Karnataka Co-operative Societies Act, 1959. It is engaged in the business of accepting deposits from the Members, lending loans to the Members and providing public distribution services. For the Assessment Year 2017-18, assessee society had filed return of income on 18.10.2018 declaring total income of Rs. 1,22,070/-, after claiming....
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.... that assessee is not entitled to deduction under section 80P(2)(d) of the Act. 4. Aggrieved by the order of the AO, assessee filed appeal before the CIT(A). The CIT(A) partly allowed appeal of the assessee. The CIT(A) confirmed the view that assessee is not entitled to deduction under section 80P(2)(a)(i) of the Act nor under section 80P(2)(d) of the Act. However, with regard to the alternative claim of the assessee that it is entitled to deduction of proportionate expenditure for earning interest income, the CIT(A) restored the matter to the AO (Refer para 6 of the CIT(A) order, page 17). 5. Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal. Assessee has filed a Paper Book enclosing ther....
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.... deduction under section 80P of the Act was denied by the AO primarily for the reason that assessee was dealing with non-members and had violated the principles of mutuality. In this context, the AO and the CIT(A) had relied on the judgment of the Hon'ble Apex Court in the case of Citizen Cooperative Society Ltd., (supra). We notice that the judgment of the Hon'ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd., & Ors. Vs. CIT (supra) was relied on by the assessee before the CIT(A). However, there is no mention of the same in the order of the AO as well as before the CIT(A). The Hon'ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd., & Ors. Vs. CIT (supra) had held that assessee is entitled to proportio....
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.... 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 Apex Co-operative Bank. It is the case of the assessee that the investments are made out of compulsions as per the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. The Hon'ble Apex Court in the case of CIT Vs. Karnataka State Co-operative Apex Bank (supra) had held that when amounts are invested by the Co-operative Societies as per the statutory ....
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.... District Co-operative Central Bank Ltd.'s case (supra) that the decision in the case of M.P. Co-operative Bank Ltd. (supra) was rendered on its own facts. The latter decision was clearly a reasoned decision. 6. The question is whether we agree with the reasoning in M.P. Cooperative Bank Ltd.'s case (supra). There is no doubt, and it is not disputed, that the assessee-co-operative bank is required to place a part of its funds with the State Bank or the Reserve Bank of India to enable it to carry on its banking business. This being so, any 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 ....
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....earned out of investments made with Cooperative Banks and is in compliance with the requirement under the Karnataka Co-operative Societies Act and Rules. If the amounts are invested in compliance with the Karnataka Co-operative Societies Act, necessarily, the same is to be assessed as income from business, which entails the benefit of deduction u/s 80P(2)(a)(i) of the I.T. Act. Insofar as deduction u/s 80P(2)(d) of the I.T. Act is concerned, we make it clear that interest income received out of investments with cooperative societies is to be allowed as deduction." 11. In light of the aforesaid reasoning and the judicial pronouncements cited supra, we restore this issue to the files of the AO. The AO is directed to examine whether t....