TaxTMI 
TaxTMI 
2025 (4) TMI 2186
X X X X Extracts X X X X
X X X X Extracts X X X X
....g credit facility to the members. The assessee in the year under consideration declared income at NIL after claiming deduction under section 80P(2)(a)(i) of the Act for Rs. 72,78,017/- only. 4. During the assessment proceedings, the AO found that the assessee has shown interest earned from FDR maintained with cooperative bank and SB account with Scheduled bank which are detailed as under: S. No. Name of the Bank Nature Interest Amt. (Rs.) 1. Vikash Souharda Cooperative Bank Ltd FDR 7,66,011/- 2. Raichur District Central Cooperative Bank FDR 6,87,470/- 3. Manvi Pattina Souharda Sahakari Bank FDR 7,90,192/- A Total 22,43,673/- 4. IDBI Bank SB 13,654/- 5. Kotak Mahindra Bank SB 2,62,424/- 6. Axis Bank SB 2352/- B Total 2,78,430/- Total (A +B) 25,22,103/- 5. On question by the AO, the assessee explained that as per Rule 28 of the Karnataka Cooperative Societies Rules, 1960 and the order passed by the Registrar of Societies, the cooperative societies are required to keep not less than 3% of deposit received from the members in saving b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld that the interest on deposit of idle fund with cooperative bank as well as scheduled bank is neither eligible for deduction under section 80P(2)(a)(i) nor under section 80P(2)(d) of the Act. 10. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before me. 11. The learned AR before me submitted that the deposits in the cooperative bank and other banks were made under the guidelines of Karnataka Cooperative Societies Act. Accordingly, without making such deposit, it was not possible for the assessee to carry on the business of financing with the members. Thus, such interest income should be allowed as deduction under section 80P(2)(a)(i) of the Act. 11.1 Without prejudice to the above, the learned AR alternatively requested to grant the benefit of deduction as per the provisions of section 57 of the Act if the impugned interest income is classified income under the head "Other Sources". For this purpose, the learned AR requested that the matter can be set aside to the AO for necessary calculation of the deduction under section 57 of the Act as per the provisions of law. 12. On the other hand, the learned DR vehemently supported the order of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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. 13.3 However, I am 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 neither provided by the assessee nor 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 file of the AO to compute the amount necessary to be deposited. The relevant find....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve 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 AO to examine whether the interest income received on investment with Central....