TaxTMI 
TaxTMI 
2026 (8) TMI 351
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....ka Souharda Sahakari Act, 1997 is eligible for the deduction u/s 80P(2)(a)(i) of the Act. (iii) In not appreciating that the activities of the assessee-society are limited to its members and therefore, the principle of mutuality is not breached. (iv) In not appreciating that the decisions relied upon by them are either distinguishable on facts or subsequently modified/reversed. (v) In completely misreading the judgment of the Hon'ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. [2021] 123 taxmann.com 161 (SC), which is in favour of the assessee. 2. The learned AO as well as the Learned CIT(A) erred in not following the binding judgment of the Hon'ble Supreme Court, Larger Bench in the case of Karnataka State Apex Co-operative Bank (2001) 251 ITR 194 (SC), which has settled the controversy holding that the interest income accruing on statutory reserves is eligible for the deduction u/s 80P(2)(a)(i) of the Act. 3. Without prejudice to any of the submissions and Grounds taken, the learned assessing office erred in not appreciating that the expenditure to be deducted proportionately against the gross interest r....
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.... (Karnataka) wherein it was held that the interest earned by the assessee from the deposits made with the cooperative banks and scheduled banks are attributable to the business of providing credit facilities to its members and therefore eligible for deduction u/s. 80P(2)(a)(i) of the Act. The AO had not accepted the said objections and relying on the Division Bench judgment of the Hon'ble Jurisdictional High Court in the case of PCIT, Hubballi vs. The Totagars Co-operative Society reported in (2017) 395 ITR 611 had denied the deduction claimed u/s. 80P(2)(a) of the Act on the interest income earned from the deposits made with the co-operative banks. The AO had also not accepted that the assessee would be eligible for claiming deduction u/s. 80P(2)(d) of the Act since the investments are made with the co-operative banks and not with the co-operative societies. The assessee challenged the said order before the Ld.CIT(A) and contended that the statutory deposits made by the assessee are eligible for deduction u/s. 80P(2)(a)(i) of the Act as business income. The Ld.CIT(A) had not accepted the claim of the assessee and confirmed the order of the AO. The Ld.CIT(A) had observed in his ord....
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....the principles laid down by the Division Bench of the Hon'ble Jurisdictional High Court reported in 395 ITR 611 and therefore prayed to dismiss the appeal filed by the assessee. 7. We have heard the arguments of both sides and perused the materials available on record. 8. We have perused the various notices issued by the AO as well as the replies filed by the assessee on various dates. In the reply dated 18/02/2022, the assessee had submitted that the assessee is a society registered under the Karnataka Souharda Sahakari Act, 1997 and therefore they are also to be treated as a society registered under the provisions of the Karnataka Co-operative Societies Act and therefore the interest income earned by them would be eligible for deduction u/s. 80P(2) of the Act. Subsequently, on 16/09/2022, to the show cause notice dated 12/09/2022, the assessee had explained that they had deposited the amounts based on the provisions contained in the said Act and therefore the said income is a business income and eligible for deduction u/s. 80P(2)(a)(i) of the Act. In the said objections, the assessee also relied on the judgment of the Hon'ble Supreme Court reported in 251 ITR 194 in the cas....
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....n similar issue came up for consideration and the Hon'ble Jurisdictional High Court had granted the deduction u/s. 80P(2) on the ground that the interest income were earned from the compulsory deposits made by the assessee with the co-operative banks / scheduled banks. 11. We have also perused the judgment of the Hon'ble Supreme Court reported in 251 ITR 194 in the case of CIT vs. Karnataka State Co-operative Apex Bank, wherein the Hon'ble Supreme Court had granted the deduction u/s. 80P(2)(a)(i) of the Act on the interest income received from the compulsory deposits made with the SBI / RBI. The above said judgment is a judgment rendered by the Constitutional Bench of the Hon'ble Supreme Court in view of the conflicting decision given by the different Benches. If we consider the principle laid down by the Constitutional Bench of the Hon'ble Supreme Court, in the present case, the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the Act since the interest income was earned out of the compulsory deposits made by the assessee with the co-operative banks. By applying the Hon'ble Supreme Court judgment as well as the Division Bench judgment of the Hon'ble Jurisdictional High C....
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.... with section 18 of the said Societies Act, mandates that 25% of the profits of the year is to be invested in one of the modes specified and one of the modes of investment specified is FD with any co-operative bank or a scheduled bank. 1.4. The said Clause (xxi) of sub-section (2) of section 10 of the Souharda Act is as under: "(xxi) appropriation of amount out of the net profit specifically for the following:- (a) Twenty five percent towards the reserve fund constituted by the co-operative; (b) two percent towards the cooperative education fund to the Karnataka State Souharda Federal cooperative. provided that no cooperative which has failed to contribute to the Cooperative Education Fund shall pay dividend to its members. (c) twenty percent towards the operational reserve to meet unforeseen losses or contingencies; (d) five percent towards the Common Good Fund whose purpose is approved by the general body; (e) constitution of or contribution to, such special funds as may be specified in the bye-laws. (f) bonus not exceeding two months pay to be paid to the employees; (g) dividend to the memb....