TaxTMI 
TaxTMI 
2026 (7) TMI 1314
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.... was not passed when there was change in the jurisdiction. 3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the appellant is registered under the Karnataka Souhardha Act, 1997 therefore, not a Cooperative society and not eligible for deduction u/s 80P(2)(a)(i) of the Act. 4. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing the deduction of business income of Rs. 8,77,808/- claimed u/s. 80P(2)(a)(i) on the ground that the appellant is not a Co-operative Society. 5. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not considering the facts that the appellant is entitled for deduction u/s. 57 of the Act towards interest. 6. That the learned lower authorities erred in law and on facts in holding that the cash deposits in specified bank notes is Rs. 1,34,77,010 against the cash deposits of Rs. 37,26,000 made in SBNs by the appellant. 7. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in invoking section 68 of the Act for cash deposits made during demonetisation period even though th....
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....e Act, and thus is not the "co-operative society" as contemplated under section 2(19) of the Act. Accordingly, the AO held that the assessee is not eligible for a deduction under section 80P of the Act. Thus, the income from business/profession claimed at INR 13,70,090 was brought to tax in the hands of the assessee after reducing the income from other sources of INR 4,92,282. As the AO denied the deduction under section 80P of the Act, the interest received by the assessee from the deposits or investments of funds with the banks was held to be in the nature of income from other sources chargeable under section 56 of the Act. As regards the cash deposited by the assessee during the demonetisation period, the AO noted that after 08/11/2016, the assessee co-operative society does not fall under any of the exemption categories, and therefore, there are no good reasons for the assessee accepting the demonetised currency notes from its members, the value of which is Nil in the hands of the assessee. Accordingly, the AO held that the cash of INR 1,34,77,000, deposited by the assessee in its bank accounts, in demonetised currency notes, is nothing but the assessee's unexplained money. Acc....
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....sion of the Hon'ble Jurisdictional High Court, we are of the considered view that the provisions of section 80P of the Act are applicable in the case of the assessee, being a Souharda Co-Operative Society. Thus, the deduction claimed by the assessee under section 80P of the Act in respect of its income earned from the business of extending credit facilities/loans to its members is allowed. 10. Insofar as the interest income earned by the assessee from deposits in Banks, there is no dispute regarding the fact that the interest income on which deduction under section 80P(2)(a)(i) of the Act was claimed by the assessee was from deposits in the nationalised banks. As per the assessee, the interest income is attributable to its business of providing credit facilities to its members, and therefore, it is eligible for deduction under section 80P(2)(a)(i) of the Act. As per the assessee the amount which was invested in the banks to earn interest was not an amount due to any members and the same was not liability in its account, and instead the said amount was in the nature of profits and gains and since the same were not immediately required by the assessee for lending money to the memb....
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.... 7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) as under: 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature, has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity.....
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....whom produce was bought, was invested 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 which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest incom....
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....BN was received and provide their complete KYC details. Therefore, for the limited purpose of granting the assessee an opportunity to provide the KYC details of the members from whom the SBN was received during the demonetization period, the matter is restored to the file of the jurisdictional AO. We further direct the AO to delete the addition made under section 68 of the Act in respect of SBN received from all those members in respect of whom the assessee provides the details. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned order on this issue is set aside, and the grounds pertaining to this issue are allowed for statistical purposes. 15. As regards the ground pertaining to the applicability of the amended provisions of section 115-BBE of the Act to the year under consideration, we find that the Hon'ble Kerala High Court in Maruthi Babu Rao Jadav v/s ACIT, reported in [2025] 171 taxmann.com 463 (Kerala), held that the provisions of section 115-BBE, as amended by the Taxation Laws (Second Amendment) Act, 2016, with effect from 01/04/2017, increasing the rate o....