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2024 (6) TMI 1022 - AT - Income TaxIssues Involved: 1. Disallowance of claim u/s 80P(2)(a)(i) for interest earned from credit facilities. 2. Disallowance of interest earned from staff loans u/s 80P(2)(a)(i). 3. Disallowance of interest/dividend earned from investments u/s 80P(2)(a)(i)/(d). 4. Disallowance of guarantee commission u/s 43B. 5. Disallowance of business loss. 6. Addition of e-stamping income. 7. Incorrect quantification of total income. Summary: 1. Disallowance of Claim u/s 80P(2)(a)(i) for Interest Earned from Credit Facilities: The assessee, a state-level non-banking co-operative credit society, claimed deductions u/s 80P(2)(a)(i) for interest income earned from loans to its members. The AO disallowed the claim, asserting that the assessee was engaged in banking and thus hit by section 80P(4). The Tribunal held that the assessee is not a bank as per the Banking Regulation Act and the principle of mutuality applies to transactions with nominal/associate members as defined under the Karnataka Co-operative Societies Act. Hence, the interest earned from credit facilities extended to members, including nominal/associate members, is allowable u/s 80P(2)(a)(i). 2. Disallowance of Interest Earned from Staff Loans u/s 80P(2)(a)(i): The AO disallowed the deduction for interest earned on staff loans, considering it as income from non-members. The Tribunal held that interest from staff loans is not attributable to the business of providing credit facilities to members and should be treated as income from other sources, not eligible for deduction u/s 80P(2)(a)(i). 3. Disallowance of Interest/Dividend Earned from Investments u/s 80P(2)(a)(i)/(d): The assessee claimed deductions for interest/dividend earned from investments in co-operative banks and societies. The Tribunal directed the AO to verify if the interest/dividend is from investments with co-operative societies, which would be eligible for deduction u/s 80P(2)(d). If the interest is earned from banks, it should be considered under "Income from other sources" and necessary relief granted u/s 57 for cost of funds and expenses. 4. Disallowance of Guarantee Commission u/s 43B: The AO disallowed the guarantee commission paid to the Government of Karnataka, treating it as a levy under section 43B. The Tribunal held that guarantee commission is a contractual payment, not a levy, and does not fall under section 43B. The issue was remanded to the AO for verification and to consider it as an admissible deduction under section 37(1). 5. Disallowance of Business Loss: The AO ignored the business loss of Rs. 29,48,007 declared by the assessee. The Tribunal remanded the issue to the AO for verification while giving effect to the order. 6. Addition of E-Stamping Income: The AO observed that income from e-stamping services to non-members affects the deduction u/s 80P(2)(a)(i). The Tribunal held that income from e-stamping cannot be considered for deduction under section 80P(2). However, the AO was directed to consider the alternate claim for expenditure incurred on e-stamping. 7. Incorrect Quantification of Total Income: The Tribunal directed the AO to correctly quantify the total income of the assessee in accordance with the law and evidences provided. Ex-Parte Orders: For AYs 2012-13, 2018-19, and 2020-21, the Tribunal remanded the cases to the AO for analysis based on the principles established in this judgment. Conclusion: The appeals were partly allowed, with directions for remand and verification on specific issues. The Tribunal emphasized the need for proper verification and adherence to legal principles in determining the eligibility of deductions claimed by the assessee.
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