TaxTMI 
TaxTMI 
2026 (7) TMI 1595
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....r section 143(3) read with section 144B of the Act. Aggrieved by these orders, the assessee is in appeal before us. 2. The Assessee has raised the following grounds of appeal: ITA 1909/BANG/2025: 1. The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A]/NFAC is not justified in upholding the order of the learned A. O, denying the deduction claimed by the appellant under the provision of section 80P[2][a][i] of the Act in respect of the interest of Rs. 10,13,923/- under the facts and in the circumstances of the appellant's case. 3. The learned CIT[A]/NFAC is not justified in making a separate disallowance of Rs. 1,28,311/- u/s 80P[2][a][i] of the Act in respect of interest income earned, which amounts to a double disallowance, under the facts and in the circumstances of the appellant's case. 4. The learned CIT[A]/NFAC failed to appreciate that the interest income earned by the appellant on deposits in banks was part of the business of providing credit facilities to the members of th....
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..... 8,97,00,924/- and Rs. 64,50,872/- in respect of deposits received from members and interest paid on such deposits holding that the same was imaginary loan under the facts and in the circumstances of the appellant's case. 4. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 3. The SSC is an agricultural credit cooperative society registered under the Karnataka cooperative societies act, 1959. It is providing credit facilities to its member and formed on 27th of March 1957 and claiming the deduction under section 80 P of the Income Tax Act from year to year. 4. For assessment year 2015-16, the assessee filed its return of income on 28 September 2015, declaring total income of Rs.1,77,980 after claiming deduction of Rs.10,63,019 under section 80P of the Act. The case was selected for scrutiny to verify the deduction claimed. By assessment order dated 19 December 2017 passed under section 143(3), the total inco....
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....ing judgments of the Hon'ble Karnataka High Court, including Pr. Commissioner of Income Tax v. The Totagars Co-operative Sale Society, 2017 (1) TMI 1100 (Karnataka High Court), and Tumkur Merchants Souharda Credit Cooperative Ltd. v. Income Tax Officer, Ward-1, Tumkur, [2015] 55 taxmann.com 447 (Karnataka), to contend that such interest income is attributable to the assessee's business of providing credit facilities to members and is deductible under section 80P(2)(a)(i). He further submitted that the disallowance of audit fees and leave encashment was not sustainable in law, and that the learned Assessing Officer could not have disallowed the deduction of Rs.50,000 under section 80P(2)(c). 8. The learned CIT-DR, Shri N. S. Shashidhara, strongly supported the orders of the lower authorities. He submitted that the Hon'ble Karnataka High Court has held that interest income earned by such co-operative societies is taxable as "income from other sources" and that deduction under section 80P(2)(d) is not available where the income is received from co-operative banks. Relying extensively on the latest decision of the Hon'ble Karnataka High Court in M/s. The Totgars Co-operative Sale So....
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....t eligible for deduction under section 80P(2)(d) of the Act. 12. After hearing both parties, we find that the issue is squarely covered in favour of the assessee by the decisions of the Hon'ble Karnataka High Court in Pr. Commissioner of Income Tax v. The Totagars Co-operative Sale Society, 2017 (1) TMI 1100 (Karnataka High Court), and Tumkur Merchants Souharda Credit Cooperative Ltd. v. Income Tax Officer, Ward-1, Tumkur, [2015] 55 taxmann.com 447 (Karnataka). These decisions hold that income attributable to the business of a co-operative society providing credit facilities to its members is eligible for deduction under section 80P(2)(a)(i) of the Act to the full extent of the profits and gains attributable to such activity. There is no dispute that the assessee carries on an activity covered by section 80P(2)(a)(i). Therefore, once the activity is eligible for deduction, the profits arising therefrom must be allowed as deduction in full under that provision. We also find that the learned Assessing Officer has not recorded any finding explaining why the impugned interest income should be taxed as income from other sources. Further, the decisions relied upon by the learned Depar....
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.... relates to the provision for leave encashment of Rs.1,32,013 made by the assessee in respect of earned leave of its staff. The assessee contends that the amount was paid before the due date for filing the return of income. However, as no documentary evidence of such payment was furnished, and as the tax audit report also did not indicate that the amount had been paid before the due date, the learned Assessing Officer disallowed the claim. In these circumstances, we direct the assessee to demonstrate before the learned Assessing Officer that the provision for leave encashment of Rs.1,32,013 was actually paid to the employees before the due date for filing the return of income under section 139 of the Act. Since the claim is governed by section 43B of the Act, the learned Assessing Officer shall verify the evidence and delete the addition if the payment is found to have been made within the prescribed time. Accordingly, ground No. 8 of the appeal is allowed for statistical purposes. 17. In the result, the appeal filed by the assessee for assessment year 2015-16 is partly allowed. 18. For assessment year 2020-21, the assessee filed its return of income on 22 December 2020, decl....
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....ent findings. The appeal was dismissed by order dated 18 June 2025. 21. Aggrieved by the appellate order, the assessee is in appeal before us. The learned Authorised Representative submitted that the assessee had been denied deduction of Rs.58,23,631 under section 80P of the Act on the ground that it was engaged in the retail business of controlled commodities such as rice, wheat, kerosene, sugar, jowar seeds, and cement, and was also carrying on banking business. He contended that the assessee was not granted proper opportunity of being heard before the lower authorities. He further submitted that the assessee is an agricultural credit co-operative society and, therefore, deduction under section 80P of the Act could not be denied on the basis adopted by the authorities below. He also submitted that additions of Rs.8,97,00,924 towards deposits received from members and Rs.64,50,872 towards interest paid on such deposits were wrongly made by treating the deposits as imaginary loans. Consequently, the interest paid to depositors was disallowed along with the addition of the deposits themselves. 22. The learned Departmental Representative supported the orders of the lower author....