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2024 (6) TMI 1096 - AT - Income TaxIssues Involved: 1. Disallowance of deduction u/s 80P of the Income Tax Act. 2. Claim of deduction u/s 80P(2)(d) of the Act. Issue 1: Disallowance of deduction u/s 80P of the Income Tax Act: The appellant, an agricultural credit Cooperative Society, filed its return of income for the AY 2017-18, declaring total income and claiming deduction u/s 80P of the Act. During assessment, the AO found that the appellant earned interest income from deposits with a Cooperative bank and disallowed the deduction claimed. The AO held that the appellant did not follow the principle of mutuality due to different types of members and work culture, violating the Cooperative Societies Act. The CIT(A) upheld the AO's decision based on the lack of mutuality between the members. The appellant appealed, citing the decision of the Hon'ble Supreme Court in the case of Citizens Cooperative Society. However, the ITAT restored the issue to the AO for de novo consideration, following the principles laid down by the Hon'ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. Issue 2: Claim of deduction u/s 80P(2)(d) of the Act: The appellant earned interest income from funds invested in Co-operative banks other than Cooperative societies. The AO disallowed the deduction claimed u/s 80P of the Act, relying on a Karnataka High Court decision. The CIT(A) upheld the disallowance, stating that the interest income was not attributable to the main business of the appellant. The CIT(A) referred to the Hon'ble Supreme Court's decision in the case of M/s. Totagar's Cooperative Sale Society, emphasizing that the deduction u/s 80P is available only for income attributable to the business operation. The ITAT directed the AO to verify if the interest/dividend income was received from investments made with Cooperative Societies and restored the issue for de novo consideration. In conclusion, the ITAT partially allowed the appeal for statistical purposes, directing the AO to re-examine both issues in light of the relevant legal principles and judgments provided by the Hon'ble Supreme Court and High Courts.
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