2021 (8) TMI 1 - AT - Income Tax

Deduction u/s 80P - AO denied the deduction u/s 80P(2)(a)(i) on income from lending of credit facility to Members and u/s 80P(2)(d) towards interest earned on Term Deposits with SCDCC Bank / Other Co Op Societies and Dividend Income from Investment in Shares with SCDCC Bank / Other Co Op Societies - HELD THAT - Since 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, we are of the view that the issue of deduction u/s 80P(2)(a)(i) of the Act requires fresh examination at the end of the A.O. Accordingly, we set aside the order passed by Ld. CIT(A) for the year under consideration and restore them to the file of the A.O. for examining it afresh Deduction u/s 80P(2)(d) - In the case of Karkala Co-op. S. Bank Ltd. 2021 (2) TMI 854 - ITAT BANGALORE the Bangalore bench of Tribunal has considered issue of eligibility of the assessee to claim deduction u/s 80P(2)(d) and it was held that the assessee is eligible for deduction of expenses incurred for earning the interest income. Thus we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to allow deduction of proportionate cost, administrative and other expenses, if the A.O. proposes to assess the interest income earned from bank deposits as income under the head -other sources. Appeal by the assessee is treated as allowed for statistical purposes.

Summary

Issues:
1. Deduction under section 80P(2)(a)(i) of the Income Tax Act for a Primary Agricultural Co-operative Society.
2. Denial of deduction under section 80P(2)(d) for interest income and dividend income.
3. Rejection of expenses incurred for earning interest income and dividend income.
4. Disallowance of deduction under section 80P due to admission of Nominal Members.
5. Appeal against CIT(A) order based on Supreme Court judgments.
6. Eligibility of the assessee for deduction under section 80P(2)(d) for interest income.

Analysis:
1. The appellant, a Primary Agricultural Co-operative Society, filed an appeal against the order of the CIT(A) regarding the deduction under section 80P(2)(a)(i) for the Assessment Year 2016-17. The AO initially denied the deduction amounting to a specific sum, leading to an addition to the total income. The appellant argued that the bye laws and the Karnataka Co-operative Societies Act permit the admission of Nominal Members, and hence, the deduction should be allowed. The Tribunal set aside the CIT(A)'s order and directed a fresh examination by the AO in light of relevant Supreme Court judgments.

2. The AO also denied the deduction under section 80P(2)(d) for interest earned on Term Deposits and Dividend Income. The AO disallowed the claim of expenses incurred for earning this income and allowed only an ad hoc deduction without a basis. The Tribunal, referring to a relevant Tribunal decision, directed the AO to allow deduction of proportionate costs, administrative, and other expenses if assessing the interest income earned from bank deposits under the head "other sources."

3. The Tribunal emphasized the need to consider the eligibility of the assessee for deduction under section 80P(2)(d) for interest income. Referring to a specific Tribunal decision, the Tribunal directed the AO to allow deduction of proportionate costs and expenses if assessing the interest income earned from bank deposits under the head "other sources."

4. The Tribunal's decision highlights the importance of considering relevant legal precedents and judgments, especially those from the Supreme Court and High Court, in determining the eligibility of Primary Agricultural Co-operative Societies for deductions under the Income Tax Act. The Tribunal's detailed analysis and reliance on legal interpretations ensure a fair and just examination of the issues raised by the appellant.