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2019 (1) TMI 650 - AT - Income TaxBenefit of deduction u/s 80P - assessee contended that the income earned by it was primarily from other co-operative societies and co-operative banks only which is claimed as deduction u/s 80P(2)(d) of the Act and that it is not a bank as concluded by the AO - Held that - The issue should be restored back to the AO for a fresh decision after examining the facts in the light of these judgment of the Hon ble Apex Court rendered in the case of The Totgars Co-operative Sale Society Ltd. (2010 (2) TMI 3 - SUPREME COURT) and case of Tumukur Merchants Souharda Co-operative Ltd. (2015 (2) TMI 995 - KARNATAKA HIGH COURT). We also make it clear that the examination of claim for deduction in respect of interest income of ₹ 2,14,13,128/- received on deposits from other Co-operative Societies and with Co-operative banks will be made only u/s.80P(2)(a)(i) and in so far as deduction u/s.80P(2)(d) of the Act is concerned, the same becomes not allowable in view of the decision of Karnataka High Court in the case of PCIT Vs. Totgars Cooperative Sale Society Ltd. (2017 (7) TMI 1049 - KARNATAKA HIGH COURT). - Appeal by the Revenue treated as allowed for statistical purposes.
Issues:
1. Denial of deduction u/s 80P(2)(d) of the Income Tax Act, 1961. 2. Interpretation of the nature of income earned by the assessee. 3. Applicability of section 80P(4) in relation to the assessee's activities. Analysis: Issue 1: Denial of deduction u/s 80P(2)(d) of the Income Tax Act, 1961 The assessee, a co-operative society, filed its return of income for Assessment Year 2014-15 claiming deduction u/s 80P(2)(d) of the Act. The Assessing Officer (AO) rejected this claim, stating that the assessee functioned similarly to commercial banks, which were not eligible for this deduction due to the insertion of subsection (4) to section 80P. The CIT(A) allowed the deduction based on precedents from the Hon’ble Karnataka High Court and the Tribunal. The Tribunal, after considering various judgments, directed the AO to re-examine the claim for deduction in light of the specific provisions of the Act and the decisions cited. Issue 2: Interpretation of the nature of income earned by the assessee The main contention revolved around whether the income earned by the assessee, primarily from other co-operative societies and banks, qualified for deduction u/s 80P(2)(d) of the Act. The CIT(A) and the Tribunal analyzed precedents and held that the income derived from investments with other co-operative societies could be eligible for deduction. However, the Tribunal emphasized the need for a fresh examination by the AO to determine the applicability of the deduction based on the specific facts of the case. Issue 3: Applicability of section 80P(4) in relation to the assessee's activities The Revenue challenged the CIT(A)'s decision on the grounds that the assessee's activities, mainly extending credit facilities to its members, were akin to bank transactions falling under section 80P(4) from 01.04.2007. The Tribunal considered various judgments, including those from the Hon’ble Karnataka High Court, to clarify that the deduction u/s 80P(2)(d) would not be applicable to interest income received on deposits from co-operative societies and banks. The Tribunal directed the AO to re-evaluate the claim for deduction under the appropriate section after affording the assessee an opportunity to present relevant evidence. In conclusion, the Tribunal allowed the Revenue's appeal for Assessment Year 2014-15 solely for statistical purposes, emphasizing the need for a fresh examination by the AO to determine the eligibility of the assessee for deduction u/s 80P(2)(d) based on the specific facts and provisions of the Income Tax Act.
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