2023 (12) TMI 1315 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - interest earned by the co-operative society - Assessee is a cooperative society engaged in the business of extending credit facility and accepting deposits from its members registered under Karnataka Cooperative Societies Act and has been assessed to Income-tax from year to yea r - HELD THAT - We have considered the judgment passed by the coordinate bench in the case of M/s Kammavari Credit Cooperative Society Ltd 2023 (9) TMI 1468 - ITAT BANGALORE fixed deposits were made out of the money not required by the society immediately for lending. Further that this was also not out of the money due to the members. In that view of the matter the interest earned from such investment was attributable to the carrying out of the business of the appellant society and the judgment mentioned hereinabove in case of M/s. Guttigedarara Credit Co-operative Ltd. 2015 (7) TMI 874 - KARNATAKA HIGH COURT squarely applies to the facts of the present case. The ultimate prayer was to allow the income earned by the assessee. Thus it appears that this issue is squarely covered in favour of the assessee and assessee is rightly allowed the deduction u/s 80P(2)(a)(i) of the Act by the ld.CIT(A). No reason to interfere with the orders passed by the ld.CIT(A) in granting relief to the assessee. Appeal of the Revenue is dismissed.

Summary

Issues Involved:
The appeal involves the disallowance of deduction u/s 80P(2)(a)(i) of the Act claimed by the assessee, the legality of keeping fixed deposits in credit State Cooperative Apex Ltd. and other banks, and the applicability of precedent judgments in similar cases.

Deduction u/s 80P(2)(a)(i) Disallowance:
The assessee, a cooperative society, was engaged in extending credit facilities and accepting deposits from members. The dispute arose when the deduction u/s 80P(2)(a)(i) of the Act claimed by the assessee was disallowed by the ld.AO for the assessment year 2017-18. The assessee had kept fixed deposits in credit State Cooperative Apex Ltd. and other banks out of its surplus funds, earning interest amounting to Rs.2,78,23,521/-. The assessee contended that the deduction had been allowed in previous years and relied on the decision of the CIT(A),NFAC, for the assessment years 2012-13 and 2014-15. The present CIT(A), NFAC, Delhi passed an order in favor of the assessee, allowing the deduction u/s 80P(2)(a)(i) of the Act.

Judgment and Precedent Application:
During the appeal, the assessee's counsel referenced a judgment by the coordinate Bench in the case of M/s Kammavari Credit Co-operative Society Ltd., which supported the assessee's position. The Co-ordinate Bench observed that the interest income earned by the cooperative society was attributable to its business activity, especially from investments with other cooperative societies, exempt under u/s 80P(2)(a)(i) of the Act. The assessee's argument was further supported by the judgment of the jurisdictional High Court in the case of M/s. Guttigedarara Credit Cooperative Ltd. The Ld.CIT(A) upheld the assessee's claim based on these precedents, leading to the dismissal of the appeal by the Revenue.

Conclusion:
The Tribunal found that the issue was squarely covered in favor of the assessee, and the deduction u/s 80P(2)(a)(i) of the Act was rightly allowed by the ld.CIT(A). Considering the legal precedents and the facts of the case, the Tribunal upheld the order passed by the ld.CIT(A) and dismissed the appeal of the Revenue. The appeal was deemed devoid of merit, and the decision was pronounced in the open court on 14th December 2023.