TaxTMI 
TaxTMI 
2025 (12) TMI 797
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing Officer on the basis of the decision of the Hon'ble Karnataka High Court in case of Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140 (Karnataka)/[2017] 395 ITR 611 (Karnataka)/[2017] 297 CTR 158 (Karnataka)[16-06-2017]) and thereby making an addition of Rs. 10,20,139/-. The Ld. CIT (A) also confirms the same. 3. The brief facts of the case show that, that the Assessee is a primary credit society engaged in business of providing credit facilities to its members. It filed its return of income on 28.01.2021 at a gross total income of Rs. 10,20,139/- and claimed the same as deduction u/s. 80P of the Act determining total income at Rs. Nil/-. The return of income was picked up for scrutiny for exemption of claim of deduction u/s. 80P. The notice u/s. 143 (2) of the Act and 142 (1) of the Act were issued. Subsequently, the show cause notice was also issued. The Ld. Assessing Officer found that society is a primary credit cooperative society extending loans to its members by obtaining loans from district central co-operative bank and loans to its members out of its own funds. The Assessee is not a bank. Therefore, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble President on 22.08.2025 for constitution of a special bench. Subsequently, when the Hon'ble President asked the recommendation of the bench by instruction dated 28.08.2025, during hearing, the Assessee withdrew the application for constitution of the special bench. Accordingly, during hearing on 04.11.2025, the reference was withdrawn by the Assessee and based on that the Hon'ble President vide order dated 20.11.2025 passed an order holding that the application seeking reference was disposed as withdrawn. Based on the same, the appeal was listed for hearing at the consent of both the parties and heard on the merits of the case. 8. The Ld. Authorized Representative stated the fact that Assessee is not a bank, but it is a primary credit co-operative society. It filed its return of income claiming deduction u/s. 80P(2)(a)(i) of the Act. The Ld. Assessing Officer disallowed the claim of deduction u/s. 80P(2)(a)(i) as well as u/s.80P(2)(d) of the Act to the extent of interest income earned from cooperative societies relying on the decision of Hon'ble Karnataka High Court in case of Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society [2017] 83 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....017] 78 taxmann.com 169 (Karnataka)/ [2017] 392 ITR 74 (Karnataka) [05-01-2017] does not apply to the facts of the case. He further referred to the latest decision of the Hon'ble Karnataka High Court in ITA No. 392/2024 in case of Judicial Employees House Building Co-operative Society Limited dated 16.09.2025 wherein the Hon'ble Karnataka High Court has once again followed the decision of the Hon'ble Supreme Court in case of 78 taxmann.com 169 has confirmed its disallowance of deduction u/s. 80P(2)(d) of the Act. He further relied upon the decision of the Hon'ble Supreme Court in case of Maviyali Service Co-operative Bank Limited and others (2021) 7 SC case 90 and specifically referring to paragraph no. 31 and 32 stated that the deduction is not allowable to the Assessee. He further referred to paragraph no. 35 stating that burden is on the Assessee to show that it is entitled to claim deduction u/s. 80P of the Act. 10. In rejoinder, the Ld. Authorized Representative vehemently referred to the decision of the Hon'ble Karnataka High Court in case of Tumkur Merchants Souhadra Credit Co-operative Society Limited in ITA No. 307/2014 dated 28.10.2024 Tumkur Merchants Souharda Credit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n seeds, fertilizer etc., supplying to members only. The name of the Assessee though includes bank, but it is not so. But it is a primary agricultural credit society. At the time of filing of the return of income, the Assessee has claimed deduction u/s. 80P(2)(a)(i) of the act on the total income of the Assessee. The Assessee has received bank interest from cooperative banks amounting to Rs. 20,64,423/-. The consolidated profit and loss account placed before us shows that Assessee has received interest on deposits with cooperative banks of Rs. 20,64,423/- which is included in the profit and loss account on the credit side and the profit earned by the Assessee of Rs. 10,20,139/- was claimed as deduction u/s. 80P(2)(a)(i) of the Act. Thus, the evidence shows that infact the interest on deposit with the co-operative bank received by the Assessee is Rs. 20,64,423/-. The claim for deduction of the Assessee is Rs. 10,20,139/- out of the net profit earned by the Assessee for the year. Thus, the return of income was filed by the Assessee at Rs. Nil/-. The Ld. Assessing Officer disallowed the deduction of Rs. 10,20,139/-, though the interest income earned by the Assessee on deposits with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... eligible for deduction u/s. 80P of the Act. The Hon'ble Karnataka High Court considered the decision of the Hon'ble Supreme Court. In Paragraph no. 10 also, the identical findings were given. The above decision of the Hon'ble High Court was neither challenged before the Hon'ble Supreme Court nor referred to the larger bench. This decision was also pressed into service by the Assessee before the Hon'ble Karnataka High Court in 395 ITR 611 at Paragraph no. 22. The Hon'ble High Court considered the same. The Hon'ble High Court held that if it is established upon remand that Assessee is carrying on the business of banking, the result may be different. In the present case, the Assessee is carrying on the primary business of lending to its members. Thus, the tumkur case was distinguished by the Hon'ble high Court in subsequent decision. Further, the decision of the Hon'ble High Court in case of Totgars Co-operative Sale Society Limited [392 ITR74]was also held to be distinguishable as held in paragraph no. 19. Therefore, there are three decisions, of which two are in favour of the Assessee and one is against the Assessee. The subsequent decision of the Hon'ble Karnataka High Court in ca....