TaxTMI 
TaxTMI 
2026 (4) TMI 563
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....statutory requirements of KCS Act. 3. THAT the Appellant be allowed deduction of the cost of funds and proportionate administrative and other expenses against the interest income from the investment made in State Bank of India which is taxable under the head Income from other sources under section 57 of IT Act 1961. 4. THAT the appeal may be allowed on the above grounds and any other grounds that the Appellant may be permitted to adduce at the time of hearing. PRAYER For these amongst other grounds that may be urged at the time of arguments, the Appellant most respectfully prays to allow the appeal by allowing deduction under Section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act, 1961 and quash the impugned order dated 10-09-2025, passed by the Honorable CIT (A) for the Assessment year 2017-18 relevant to the financial year 2016-17 under section 250 of the Income Tax Act, 1961 and grant such other further relief as may be prayed at the time of arguments in the ends of justice." ITA No. 266/Bang/2026 (Assessment Year : 2018-19) "1. THAT Order of CIT (A) be set aside as it fails to distinguish the facts of the case of Citizen Co-oper....
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.... notices issued by the Ld.CIT(A) and therefore the Ld.CIT(A) had confirmed the disallowance of the deduction made u/s. 80P(2)(a)(i) of the Act on the ground that the assessee society is also dealing with the nominal members. The Ld.CIT(A) also confirmed the disallowance of deduction claimed u/s. 80P(2)(a)(i)) / 80P(2)(d) of the Act on the investments made with the co-operative banks. The Ld.CIT(A) had passed the ex-parte order based on the grounds and the documents available before him. 3. As against the said order, the assessee is in appeal before this Tribunal. 4. At the time of hearing, the Ld.AR submitted that the assessee was not able to respond to the hearing notices because of some technical communication difficulties under the faceless scheme. The Ld.AR further submitted that even otherwise the inclusion of nominal members would not entitle the assessee from claiming deduction u/s. 80P(2)(a)(i) of the Act as held by the Hon'ble Supreme Court reported in 431 ITR 1 in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT. The Ld.AR further submitted that the assessee had received interest income from the cooperative banks which are all registered as co-operative so....
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....e not from the members, therefore the assessee is not entitled for deduction u/s. 80P(2)(a)(i) of the Act. The AO had relied on the judgment of the Hon'ble Supreme Court in the case of Citizen Co-operative Credit Society Ltd. wherein the Hon'ble Supreme Court had held that the society dealing with the nominal members are not eligible for deduction u/s. 80P(2)(a)(i) of the Act. This judgment was considered by the Hon'ble Supreme Court in its subsequent judgment reported in 431 ITR 1 in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT wherein it was held that if the State Act permits the nominal members as members of the society, then there is nothing wrong in the assessee claiming the deduction u/s. 80P of the Act. In the judgment relied on by the AO as well as the Ld.CIT(A), in the case of Citizen Co-operative Credit Society Ltd., the said society was governed under the MACS Act, 1995 wherein the admission of nominal membership was not permitted and therefore the Hon'ble Supreme Court had held that the admission of nominal members would disentitle the assessee societies from claiming deduction u/s. 80P of the Act. In the present case on hand, we are dealing with the socie....
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.... to have an account with the State Bank of India and therefore the said interest income of Rs. 4,86,055/- are also eligible for deduction u/s. 80P(2)(a)(i) of the Act. 12. In respect of the interest income earned from the savings bank account maintained with the BDCC Bank, it is a co-operative bank. We were informed that the said bank is also a registered society under the provisions of the Karnataka Co-operative Societies Act and therefore the said interest income could be allowed as deduction u/s. 80P(2)(d) of the Act. 13. Insofar as the interest income earned from the fixed deposits made with the State Bank of India, the assessee himself had accepted in ground no. 3 that the said income can be assessed as income from other sources and in which event, the cost of funds and proportionate administrative and other expenses ought to be granted as per section 57 of the Act. We, therefore direct the AO to compute the income from other sources on the interest income received from the deposits made with the State Bank of India after granting the deduction towards the cost of funds and proportionate administrative and other expenses, if any. With the above directions, we partly allo....