2026 (6) TMI 1190

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....(A)]. By that order, the appeal filed by the assessee against the assessment order passed by the Faceless Assessment Centre [the learned Assessing Officer] on 21 September 2022 under section 143(3) read with section 144B of the Income Tax Act, 1961 [the Act], was dismissed. 2. Aggrieved by the order, the assessee preferred this appeal, contending that interest income of Rs.31,25,550 earned from cooperative banks and cooperative societies was wrongly denied as a deduction under section 80P of the Act. 3. Briefly, the assessee is registered under the Karnataka Souharda Sahakari Act, 1997, and is primarily engaged in accepting deposits from, and providing credit facilities to, its members. It filed its return of income on 6 January 2021,....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....eld that the statutory requirement to maintain such funds does not alter their tax character, and the interest earned thereon remains taxable under the head "income from other sources". Accordingly, deduction under section 80P (2) of the Act was denied. The claim relating to interest in staff loans was also disallowed, and the assessee's appeal was dismissed. 5. Aggrieved by the said order, the assessee is in appeal before us. 6. We have heard the rival contentions and find that the assessee is a cooperative society primarily engaged in accepting deposits from, and providing credit facilities to, its members. The dispute relates to the treatment of interest income, namely Rs.11,161 received on staff loans, Rs.31,25,550 received from c....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....gaged in carrying on the business of banking or providing credit facilities to its members, the whole of the profits and gains attributable to such activity are deductible. The issue, therefore, is whether interest of Rs.11,161 received on staff loans and interest received from cooperative banks qualifies for deduction under section 80P(2)(a)(i) of the Act. The assessee contends that these receipts are taxable as business income and are attributable to its activity of providing credit facilities to members. We find that this issue is squarely covered in favour of the assessee by the decisions of the Hon'ble Karnataka High Court. 9. We also note that the learned Assessing Officer relied on another decision of the Hon'ble Karnataka High Co....