2021 (7) TMI 491 - AT - Income Tax

Deduction claimed u/s 80P(2)(a)(i) - AO rejected the claim on the reasoning that the assessee is a bank, and hence provisions of 80 P are not applicable - HELD THAT - We notice that, an identical issue has been considered by the co-ordinate bench in the case of Karkala Co-op Bank Ltd 2021 (2) TMI 854 - ITAT BANGALORE wherein an identical issue has been restored to the file of Ld.AO for examining it afresh as held that the Hon ble Supreme Court has settled many issues in the decision rendered by it in the case of Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT and since the facts prevailing in the instant case needs to be examined afresh in the light of the principles enunciated by Hon ble Supreme Court in the above said case. Rejection of deduction u/s 80P(2)(d) - interest income earned on fixed deposits with other cooperative societies - HELD THAT - In the instant case, the assessee has earned interest income from fixed deposits with other banks. In view of the decision rendered in case Totgars Co-operative Sale Society Ltd. 2015 (4) TMI 829 - KARNATAKA HIGH COURT .the assessee is entitled for deduction of proportionate cost, administrative and other expenses. Accordingly, we set aside the order passed by Ld.CIT(A) on this issue and restore the same to the file of the AO with similar directions. Grounds raised by assessee stands allowed for statistical purposes

Summary

Issues:
1. Rejection of deduction claimed u/s 80P(2)(a)(i) of the Income-tax Act,1961.
2. Rejection of deduction u/s 80P(2)(d) of the Act in respect of interest income earned on fixed deposits with other cooperative societies.

Analysis:

Issue 1:
The assessee, a credit cooperative society, claimed deduction u/s 80P of the Act, which was rejected by the Ld. AO on the basis that the assessee is considered a bank, thus not eligible for the deductions. The Ld. CIT(A) dismissed the appeal challenging the additions. The co-ordinate bench's decision in a similar case directed the AO to apply the decision of the Supreme Court in a specific case. The Ld. A.R. argued for the deduction, citing the Supreme Court's interpretation of the term "Members" and the need to construe it in line with the concerned co-operative societies Act. The issue was restored to the AO for fresh examination based on the Supreme Court's principles.

Issue 2:
Regarding the deduction u/s 80P(2)(d) for interest income earned on fixed deposits with other cooperative societies, the AO denied the deduction, placing reliance on previous decisions. The Ld. A.R. contended that the assessee is entitled to claim deduction under section 57 of the Act for cost of funds and expenses. The co-ordinate bench's decision supported the assessee's claim, directing the AO to allow deduction of relevant expenses. The Tribunal, following the jurisdictional High Court's decision, set aside the CIT(A)'s order and restored the issue to the AO with similar directions.

In conclusion, the Tribunal allowed the appeal for statistical purposes based on the above analysis and directions provided by the co-ordinate bench and the jurisdictional High Court.