AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 893
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....9;). The Assessing Officer, following the decisions of Hon'ble Karnataka High Court in the case of PCIT vs. The Totagars Co-operative Sale vide ITA Nos.100064, 100065, 100067, 100068 & 100051-100054 of 2016 and in the case of Guttigedarara Credit Cooperative Society Ltd. vs. ITO reported in (2015) 377 ITR 464 (Karn), rejected the claim of deduction u/s 80P of the Act on the ground that the assessee has earned interest by way of investment of funds in banks and societies out of the unutilized surplus fund. According to him apparently the amount of interest received on investment is not by way of providing credit facilities to its members but by investing idle fund with other banks and societies. The assessee in the return has included and declared the interest income from investment of Rs. 22,52,959/-. The Assessing Officer, following the decision of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO reported in (2010) 188 Taxman 282 (SC) and the Hon'ble Karnataka High Court in the case of PCIT vs. Totagars Co-operative Sale Society (supra), brought to tax the amount of Rs. 22,52,959/- as 'Income from other sources'. 3. Before ....
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..../ NFAC, the assessee is in appeal before the Tribunal. 1. The learned CIT(A) erred in dismissing appeal without considering the submissions made by assessee and judgements relied upon. 2. The addition made by A.O. and upheld by CIT(A) at Rs. 22,52,959/- by denying benefit of deduction u/s 80P(2)(a)(i) of IT Act 1961 in respect to interest earned on deposits with Nationalized Bank and Co-operative Bank is illegal, invalid and bad in law. 3. The learned A.O and CIT(A) erred in not considering the settled position of law in respect to deduction allowable u/s 80P of IT Act 1961 in respect to interest earned on deposits with Nationalized Bank and Co-operative Bank and therefore orders passed are not in accordance with law. 4. The learned A.O. and CIT(A) ought to have held that entire income of assessee is eligible for deduction u/s 80P of IT Act 1961 5. The assessee denies liability to pay interest under section 234A, 234B and 234C of I.T. Act 1961. Without prejudice, levy of interest under section 234A, 234B and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive. 6. Any other ground that shall be prayed at the time of h....
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....ned on fixed deposits made with nationalized banks has observed as under: "10. We have heard the rival arguments made by both the sides and perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC. The only dispute before the Tribunal is regarding the allowability of deduction u/s 80P(2)(a)(i) on account of interest earned on fixed deposits made with nationalized banks. We find an identical issue had come up before the Tribunal in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit (supra). We find the Tribunal vide ITA No.2476/PUN/2016 for assessment year 2008-09 order dated 25.01.2019 has decided the issue in favour of the assessee by observing as under: "4. With regard to ground No.1, it relates to denial of deduction u/s.80[2] [a][i] of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') to the assessee in respect of interest income of Rs. 71,56,584.00 earned from fixed deposits kept by it with nationalized banks. The facts in this case are that the assessee is co-operative society engaged in the business of providing credit facilities to its members. It is claimed that the necessary registration and license has be....
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....nt, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view taken in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). In the absence of their being any change in the legal position prevailing on this issue after the passing of the order by the Pune Bench of the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) and host of other orders reiterating the similar view, respectfully following the precedent, we uphold the impugned order in allowing deduction u/s.80P on the interest income" Respectfully, following the aforesaid decision of the Co-ordinate Bench of the Tribunal, Pune, we set aside the order of the Ld. CIT(Appeals) and allow ground No.1 of the grounds of appeal of the assessee. 6. In the combined result, appeal of the assessee is partly allowed." 11. Respectfully following the decision of the Co-ordinate Bench of the Tribunal and in absence of any contradictory decision brought to our notice by the Ld. DR, we hold that the assessee is entitled to claim deduction u/s 80P(2)(a)(i) on i....
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....). 10. Similarly we find that similar issue was considered by this Tribunal on similar grounds raised by the Revenue in the case of MSEB Engineers Co-Op. Credit Society Ltd., wherein the ITAT, Nagpur Bench, vide order dated 05/05/2016 held as under : Upon hearing both the counsel and perusing the records, we find that the above issue is covered in favour of the assessee by the decision of this ITA, referred by the Ld. CIT(A) in his appellate order. The distinction mentioned in the grounds of appeal is not at all sustainable. We further find that this Tribunal again in the case of Chattisgarh Urban Sahakari Sanstha Maryadit Vs. ITO in ITA No. 371/Nag/2012 vide order dated 27.05.2015 has adjudicated similar issue as under: - "11. Upon careful consideration, we not that identical issue was the subject matter of consideration by ITAT, Ahmedabad Bench decision in the case of Dhanlaxmi Credit Cooperative Society Ltd (supra), in which one of us, learned Judicial Member, was a party. The concluding portion of the Tribunal's decision is as under: "4. With this brief background, we have heard both the sides. It was explained that the Co-operative Socie....
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.... was entitled to deduction under section 80P(2)(a)(i) of the Act. The argument was rejected by the assessing officer as also by the Tribunal and the High Court, hence these civil appeals have been filed by the assessee(s). 19.2 From the above, it emerges that (a) that assessee (issue before the Supreme Court) had admitted before the AO that it had invested surplus funds, which were not immediately required for the purpose of its business, in short term deposits; (b) that the surplus funds arose out of the amount retained from marketing the agricultural produce of the members; (c) that assessee carried on two activities, namely, (i) acceptance of deposit and lending by way of deposits to the members; and (ii)marketing the agricultural produce; and (d) that the surplus had arisen emphatically from marketing of agricultural produces. 19.3 In the present case under consideration, the entire funds were utilized for the purposes of business and there were no surplus funds. 19.4 While comparing the state of affairs of the present assessee with that assessee (before the Supreme Court), the following clinching dissimilarities em....
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....e also applies to the present case. As observed in the above case law, in this case also the submissions of the assessee's counsel is that the assessee society is maintaining operational funds and to meet any eventuality towards repayment of deposit the cooperative society is maintaining some liquidated funds as short term deposits with banks. Hence adhering to the doctrine stair desises, we hold that the assessee should be granted benefit of deduction under section 80P(2)(a)(i). Accordingly, the interest on deposits would qualify for deduction under the said section. Accordingly, we set aside the order of authorities below and decide the issue in favour of assessee." 4. We further find that batch of similar appeals decided by the ITAT in favour of the assessee has also been considered by the Jurisdictional High Court. The Hon'ble Jurisdictional High Court has duly affirmed of this Tribunal. Accordingly, in the background aforesaid discussion, we do not find infirmity in the order of Ld. CIT(A)." 11. In the background of aforesaid discussion and decisions, we find that CIT(A) has erred in upholding the assessment order. The Appellant Cooperative society is....