2026 (2) TMI 699

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....thina Sahakara Sangha Niyamitha (the Assessee/Appellant) against the Assessment Order passed u/s. 143(3) of the Act by the Assessment Unit, Income Tax Department was dismissed. 2. The solitary issue involved in the Appeal is not granting the deduction u/s. 80P(2)(a)(i) of the Act of Rs. 17,64,987/- to the Assessee on bank interest which is attributable to the profits and gains of business and profession of the Assessee. The Ld. lower authorities were also incorrect in holding that such interest income of the Assessee is chargeable to tax u/s. 56 of the Income Tax Act as income from other sources and further the Assessee is entitled to deduction u/s. 57 of the Act as cost of funds. 3. The brief facts of the case shows that Assessee is ....

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....(Karnataka)/[2015] 230 Taxman 309 (Karnataka)[28-10-2014] specifically covers the issue in favour of the Assessee. Further, decision of the Hon'ble Karnataka High Court in 404 ITR 45 in case of HP Global Software Limited was also pressed into service to submit that interest income earned on deposits is part of profits and gains that are derived from the export of goods. 5. The Ld. Assessing Officer rejected the claim of the Assessee holding that the Hon'ble Karnataka High Court in case of Principal Commissioner of Income-tax, Hubli vs. Totagars Co-operative Sale Society [2017] 78 taxmann.com 169 (Karnataka)/[2017] 392 ITR 74 (Karnataka)[05-01-2017] has categorically held that such income is chargeable to tax as income from other sources ....

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....ase of Totgars Co-Operative Sale Society Ltd. vs. Income-tax officer, Ward -1, Sirsi [2015] 58 taxmann.com 35 (Karnataka)/[2015] 231 Taxman 794 (Karnataka)[25-03-2015]. 9. The Ld. Departmental Representative referred to the decision of the Principal Commissioner of Income-tax, Hubli vs. Totagars Co-operative Sale Society [2017] 78 taxmann.com 169 (Karnataka)/[2017] 392 ITR 74 (Karnataka)[05-01-2017] as well as the RBI Employees Co-operative Housing decision by the Hon'ble Karnataka High Court. 10. I find that the claim of the Assessee is covered in favor of the Assessee for deduction u/s. 80P(2)(a)(i) of the Act by the decision of the Tumkur Merchants Souharda Credit Cooperative Ltd. vs. Income-tax officer Word-V, Tumkur [2015] 55 tax....