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2019 (6) TMI 1212 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - business income including the interest income earned on the deposits with the other banks and the Treasury - income from business V/S income from other sources - HELD THAT - Interest income earned by the assessee from other Banks and Treasury on which deduction u/s. 80P(2)(i)(a) is to be granted, there is no dispute that the assessee has made investments in the course of banking activities and such interest income was received on investments made with cooperative banks and other scheduled banks. The coordinate bench of the Tribunal in the case of Kizhathadiyoor Co-operative Bank Limited c 2016 (7) TMI 1405 - ITAT COCHIN had held that such interest income received by the assessee should be assessed as income from business instead of income from other sources . In view of the order of the co-ordinate bench, we hold that the CIT(A) is justified in holding that interest income received by the assessee should be assessed as income from business . Grant of deduction u/s. 80P(2)(i)(a) of the Act, the Assessing Officer shall follow the law laid down by the Larger Bench of the Jurisdictional High Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT 2019 (3) TMI 1580 - KERALA HIGH COURT and examine the actual activities of the assessee so as to grant deduction u/s. 80P(2)(i)(a). Accordingly, we remit this issue to the file of the Assessing Officer for fresh consideration in accordance with the above direction. Thus, this ground of appeal of the Revenue is partly allowed for statistical purposes for both the assessment years. - Appeal filed by the Revenue is partly allowed for statistical purposes.
Issues:
1. Eligibility for deduction under section 80P(2)(a)(i) of the Act. 2. Eligibility of interest income earned by the Appellant from other Banks and Treasury. Issue 1: The primary issue in this case pertains to the eligibility of the assessee for deduction under section 80P(2)(a)(i) of the Act. The Revenue contended that the appellant, a Co-operative Society engaged in banking business, was not eligible for the deduction as it was not a primary agricultural credit society. The CIT(A), however, relying on judgments, including one from the High Court of Kerala, held in favor of the assessee. The ITAT noted the conflicting judgments and remitted the issue to the Assessing Officer to conduct an inquiry into the actual activities of the assessee to determine eligibility for the deduction under section 80P. Issue 2: The second issue revolved around the eligibility of interest income earned by the appellant from other Banks and Treasury for deduction under section 80P(2)(a)(i) of the Act. The CIT(A) allowed the deduction based on a Tribunal order, stating that such income was part of the banking activity. The ITAT upheld the CIT(A)'s decision, emphasizing that the interest income should be assessed as "income from business" rather than "income from other sources." The ITAT directed the Assessing Officer to follow the law laid down by the Jurisdictional High Court and reevaluate the grant of deduction under section 80P(2)(a)(i) for both assessment years. In conclusion, the ITAT partially allowed the appeal filed by the Revenue for statistical purposes, remitting both issues back to the Assessing Officer for fresh consideration in accordance with the directions provided in the judgment. The decision was pronounced on June 18, 2019, by the ITAT Cochin.
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