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TMI Blog2020 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... - Shri N V Vasudevan, Vice President And Shri G Manjunatha, Accountant Member For the Appellant : Shri C. Ramesh, CA For the Respondent : Shri Priyadarshi Mishra, Jt.CIT(DR)(ITAT), Bengaluru ORDER PER N.V. VASUDEVAN, VICE PRESIDENT This appeal by the assessee is against the order dated 30.8.2019 of the CIT(Appeals)-6, Bengaluru relating to assessment year 2016-17. 2. The only issue that arises for consideration in this appeal is as to whether a sum of ₹ 76,17,450 which was interest earned by the assessee on surplus funds available with it is eligible for deduction u/s. 80P(2)(a)(i) or 2(d) of the Act. 3. Under section 80P(2)(a)(i) of the Act, in the case of a co-operative society engaged in carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 2,83..0. 76,17,450 6. It can be seen from the aforesaid Chart that the interest received from the Assessee was from co-operative banks. The AO took the view that interest income earned by the assessee was in the nature of income from other sources and therefore deduction u/s. 80P(2)(a)(i) should not be allowed. According to him, the amount that is eligible for deduction u/s. 80P(2)(a)(i) should be the profits gains of business attributable to business of providing credit facilities to its members. In coming to the aforesaid conclusion, the AO placed reliance on the decision of the Hon ble Supreme Court in the case of Totgars Co-operative Sale So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard the rival submissions and we find that there are contrary judgments of Hon ble High Court of Karnataka on this issue. This aspect has been discussed by the ITAT A Bench in ITA No.3389 3390/Bang/2019 in the case of The Jayangar Co-operative Society Ltd. v. ITO, order dated 07.02.2020 wherein this Tribunal restored the issue to the AO for fresh consideration with the following observations :- 4. We have considered the rival submissions. First of all, we repro para 5 of the Tribunal order cited by learned AR of the assessee having been rendered in the case of M/s. The Jayanagar Co-operative Society Ltd., V. ITO (supra). This para reads as under:- 5. While learned AR relied on the decision of the Hon ble Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was that Co-operative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2) of the Act. The Hon'ble Karnataka High Court followed the decision of the supreme Court in The Totgars Co-operative Sales Society Ltd. (supra) and held that interest earned from Schedule bank or cooperative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d)of the Act was not applicable to such interest income. It is thus clear that the source of funds out of which investments were made remained the same in AY 2007-08 to 2011-12 and in AY 1991-92 to 1999- 2000 decided by the Hon'ble Supreme Court. Therefore whether the source of funds wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the order of Tribunal allowing deduction u/s. 80P(2)(d) of the Act on interest received from investments made in co-operative bank. This decision was, however, not followed in a subsequent DB judgment in the case of Pr. CIT v. Totgars Co-operative Sales Society, 395 ITR 611 [Karn]. In the later decision, the Hon ble High Court held that interest income earned on deposits will be assessed under the head income from other sources and therefore the entire deduction u/s. 80P(2)(a)(i) or 80P(2)(d) of the Act would not be available to the assessee. 12. The CIT(Appeals) has, however, in the impugned order proceeded under the assumption that in the later DB judgment of the Hon ble High Court of Karnataka it has been laid down th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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