2026 (4) TMI 267

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....rder passed by the learned income tax officer Ward - 1, Davanagere (the learned AO) was partly allowed. 2. The assessee is in appeal before us stating that the learned AO and the learned CIT - A are not correct in not allowing the assessee a deduction of Rs. 5,04,996/- under section 80P(2)(a)(i) of the Income Tax Act, 1961. Instead of that both the lower authorities have treated the interest earned from banks such as Davanageredistrict cooperative bank Ltd and savings bank account with Axis Bank totaling to Rs. 5,04,996 as income from other sources and further denied the deduction under section 80P(2)(d) of the act. 3. The brief fact of the case shows that the assessee is a member's credit cooperative society. It claimed the deduction....

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....are not discussed. 6. Aggrieved with the assessment order dated 16 December 2019 assessee preferred an appeal before the learned CIT - A who passed an appellate order on 31stJuly 2025 wherein the action of the learned assessing officer was upheld. Thus, the assessee is aggrieved with that appellate order wherein the assessee has not been allowed the deduction of the bank interest under section 80P(2)(a)(i) of the act 7. The learned Authorized Representative submitted paper book containing 71 pages and relied upon the several judicial precedents of the coordinate benches where the identical issue is decided. His main contention is that the issue in this case is squarely covered by the decision of the Honourable Karnataka High Court in ....

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....n under section 80P(2)(d) of the act also. 9. We have carefully considered the rival contention and perused the orders of the learned lower authorities. The facts clearly show that the assessee is a member's credit cooperative society and has earned interest of Rs. 5,04,996 from its deployment of funds in the bank account of the assessee. In return for income the assessee has claimed as part of business of providing credit to its members. In the return of income, the assessee has offered this income as business income and claimed deduction under section 80P(2)(a)(i) of the act. For this proposition the assessee has placed before us the return of income as well as the computation of total income along with the annual accounts of the asses....

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....t in Tumkur Merchants Souharda Credit Cooperative Ltd. vs. Income-tax officer Word-V, Tumkur [2015] 55 taxmann.com 447 (Karnataka)/ [2015] 230 Taxman 309 (Karnataka) [28-10-2014] on identical facts and circumstances. No doubt there is a subsequent decision of the Honourable Karnataka High Court in 395 ITR 611 in case of Totagars Co-operative Sales Society Ltd. wherein it has been held that interest income earned from the cooperative banks is chargeable to tax under section 56 of the act and further as the interest is not earned from cooperative societies but from cooperative banks, the assessee is also not entitled to deduction under section 80P(2)(d) of the act. However, on careful perusal we find that the facts of the present case are nea....