2020 (5) TMI 15 - AT - Income Tax

Deduction u/s 80P(2) - Assessee is a Co-operative Milk Producers society registered under The Karnataka Souharda Sahakari Act 1997 and provides credit facilities to its members - Assessee claimed deduction u/s 80P on the interest received from Co-operative Bank on fixed deposit for the years under consideration which was disallowed by Ld. AO observing that section 80 P (2) (d) does not contain the word bank - HELD THAT - As facts in present case are not readily available on record and there is no finding of authorities below on this factual aspect regarding the source of funds deposited on bank on which interest income was earned the issue should go back to the file of CIT(A) for fresh decision. The Bench also proposed that regarding the applicability of Hon ble Apex Court rendered in the case of The Citizen Co Operative Society Ltd. vs. ACIT 2017 (8) TMI 536 - SUPREME COURT also the Ld. CIT(A) should pass speaking and reasoned order after comparing facts of present case with that of The Citizen Co Operative Society Ltd. vs. ACIT (supra) under co operative society Act applicable in State of Karnataka. Set aside order of CIT(A) and restore the matter back to his file for fresh decision in light of above discussion by way of a speaking and reasoned order after providing adequate opportunity of being heard to both sides. He is also directed to examine the facts of present case in the light of these two judgments of Tumkur Merchants Souharda Credit Co Operative Ltd. vs. ITO 2015 (2) TMI 995 - KARNATAKA HIGH COURT and PCIT and Another vs. Totagars Co Operative Sale Society 2017 (7) TMI 1049 - KARNATAKA HIGH and pass necessary order - Appeal filed by the assessee is allowed for statistical purpose.

Summary

Issues:
Assessment of deduction under section 80P(2) of the Income Tax Act for a Co-operative Milk Producers society providing credit facilities to its members.

Analysis:
The appellant, a Co-operative Milk Producers society registered under The Karnataka Souharda Sahakari Act, 1997, appealed against the order of the Ld. CIT(A) disallowing the deduction under section 80P(2) of the Income Tax Act for the assessment years 2015-16 and 2016-17. The Ld. AO disallowed the deduction, stating that section 80P(2)(d) does not include the word "bank," and the scope of the section is limited to co-operative societies. The Ld. CIT(A) confirmed this view, leading to the appeal before the ITAT.

The appellant argued that the authorities did not compare the facts of the present case with relevant judgments, including the decision of the Hon'ble Karnataka High Court in the case of PCIT and Another Vs. Totagtarts Co-Operative Sale Society. The appellant contended that the judgment in the case of Tumkur Merchants Souharda Credit Co-Operative Ltd., vs. ITO was more applicable. The senior DR opposed granting the deduction under section 80P(2), citing the observations of the Hon'ble Karnataka High Court in a recent judgment.

The ITAT, after examining the submissions, decided to set aside the order of the CIT(A) and remand the matter for a fresh decision. The ITAT emphasized the need to determine whether the funds deposited in the bank, on which interest income was earned, were from the society's own funds or liabilities. The ITAT directed the CIT(A) to pass a reasoned order after comparing the facts with relevant judgments, including The Citizen Co-Operative Society Ltd., vs. ACIT. The ITAT allowed the appeal for statistical purposes, providing both parties with an opportunity to be heard.

In conclusion, the ITAT's decision highlighted the importance of analyzing the source of funds deposited in the bank to determine the eligibility for deduction under section 80P(2) of the Income Tax Act. The case was remanded for a fresh decision, emphasizing the need for a detailed examination of facts and a comparison with relevant legal precedents.