TaxTMI 
TaxTMI 
2025 (9) TMI 1844
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....a to allow proportionate cost under section 57 of the Act. 3. The facts in brief are that the assessee is a primary agricultural cooperative society and filed return of income for A.Y. 2018-19 declaring total income at Rs. 37,800/- after claiming deduction under section 80P(2)(a)(i) of the Act for Rs. 25,68,706/- only. The assessee was selected for scrutiny under CASS. 4. The AO noticed that the assessee during the year has made deposit/investment with cooperative bank and scheduled bank on which earned interest income of Rs. 22,74,519/- and earned dividend income of Rs. 5,79,500/- only. The impugned interest and dividend income aggregated to Rs. 28,54019/- were included in the profit for the purpose of deduction under section 80P(2)(a)(i) of the Act. The AO proposed to treat the same as income from other sources and tax the same as per section 56 of the Act. 5. The assessee in response submitted that interest income of Rs.22,74,519/- was earned from investments made in bank and cooperative banks. These investments were from the society's own funds, including capital & reserves and balance from fluid resources which was compulsory to maintain under rule 28 of the Karnataka....
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....all be treated as business income and deduction under section 80P(2)(a)(i) of the Act shall be allowed. 6.2 The assessee also submitted that the South Canara District Central Cooperative Bank Ltd (SCDCCB) is registered as cooperative society under Karnataka Cooperative Societies Act. Therefore, the interest income earned from SCDCCB shall be eligible for deduction under section 80P(2)(d) of the Act. 6.3 Alternatively, the assessee submitted that if deduction under section 80P(2)(a)(i) or 80P(2)(d) are not allowed then gross receipt of interest and dividend income cannot be taxed without providing corresponding cost. 6.4 However, the learned CIT-A concurred with view of the AO and confirmed the addition made by him by placing reliance on the judgment of Hon'ble Supreme Court in the case of Totgars Cooperative Sales Society (supra) and other judgment referred by the AO. 7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 8. The learned AR before us submitted that the deposits in the cooperative bank were made under the guidelines issued by the Karnataka cooperative societies act which represents the statutory deposits and therefo....
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....anking business. This being so, any income derived from funds so placed arises from the business carried on by it and the assessee has not, by reason of section 80P(2)(a)(i), to pay income-tax thereon. The placement of such funds being imperative for the purposes of carrying on the banking business, the income derived therefrom would be income from the assessee's business. We are unable to take the view that found favour with the Bench that decided the case of M.P. Co-operative Bank Ltd. (supra) that only income derived from circulating or working capital would fall within section 80P(2)(a)(i). There is nothing in the phraseology of that provision which makes it applicable only to income derived from working or circulating capital. 10.3 However, we are also conscious to the fact that the detail of quantum of amount necessary to be deposited to comply with the Karnataka Cooperative Society Act is not provided by the assessee neither looked into by the lower authorities. In the identical facts and circumstances, the coordinate bench of this tribunal in case of Kalika Parameswari Co-operative Society Ltd vs. ITO reported in 159 taxmann.com 1466 has set aside the issue to the fi....
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....Banks and is in compliance with the requirement under the Karnataka Co-operative Societies Act and Rules. If the amounts are invested in compliance with the Karnataka Co-operative Societies Act, necessarily, the same is to be assessed as income from business, which entails the benefit of deduction u/s 80P(2)(a)(i) of the I.T. Act. Insofar as deduction u/s 80P(2)(d) of the I.T. Act is concerned, we make it clear that interest income received out of investments with cooperative societies is to be allowed as deduction." 9. In view of the above order of the Tribunal, I restore the issue to the files of the AO to examine whether interest income received amounting to Rs.5,07,822/- from South Canara District Central Co-operative Bank Ltd., is out of compulsions and in compliance with the Karnataka State Cooperative Societies Act, 1959 and the relevant Rules. If it is so, the same interest income is to be assessed as income from business which would entail the benefit of deduction under section 80P(2)(a)(i) of the Act. With the aforesaid observation, I restore the matter to the AO. It is ordered accordingly." 11. In light of the above orders of the Tribunal, we direct the....