TaxTMI 
TaxTMI 
2026 (7) TMI 208
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....nder the provisions of the Karnataka Souharda Sahakari Act. The society is providing credit facilities to its members and accept deposits from members. The assessee is not dealing with the non-members. The assessee filed his return of income on 14/01/2021 and claimed the deduction u/s. 80P(2)(a)(i) of the Act. The case was selected for scrutiny through CASS and disallowed the deduction claimed on the interest income earned from the deposits made with the co-operative banks and treated the said income as income from other sources. Similarly, the AO disallowed the miscellaneous operational income received. 3. As against the said proceedings, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had partly allowed the appeal. The....
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....ssee and eligible for deduction. The Ld.AR also filed a written submission and also enclosed the computation of income in which the claim was made u/s. 80P(2)(a)(i) of the Act. The Ld.AR also relied on the order of the Coordinated Bench in ITA No. 2313/Bang/2025 dated 25/03/2026 in the case of Shri Basaveshwara Pattina Souharda Sahakari Sangha Niyamitha and prayed to allow the appeal. 6. The Ld.DR relied on the judgment of the Hon'ble Karnataka High Court reported in 395 ITR 611 in the case of Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society and submitted the interest earned from the co-operative banks are not eligible for deduction u/s. 80P(2)(d) of the Act and prayed to dismiss the appeal. 7. We ....
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....uction. 10. In the present case, the facts are different. Therefore the Hon'ble Jurisdictional High Court judgment reported in (2015) 55 taxmann.com 447 (Karnataka) in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. vs. ITO would apply. The findings of the Hon'ble Jurisdictional High Court are as follows: "8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the busine....
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....ested in a short-term deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount whic....
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....er and it is not a liability but in fact it is in the nature of profits and gains which was not immediately required by the assessee for lending onwards to its members as there were no takers. Therefore, they deposited the money in bank to on the interest income said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of provisions of section 80P of the act 10. Decision relied upon by the learned revenue authorities of Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140 (Karnataka)/[2017] 395 ITR 611 (Karnataka)/[2017] 297 CTR 158 (Karnataka)[16-06-2017] is with respect to the interest income earned by t....