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TMI Blog2021 (9) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act to the file of Ld.AO to examine the same de novo in the light of the above judgment. Accordingly grounds 2 stands allowed for statistical purposes Interest from investment in Cooperative banks, nationalised banks - HELD THAT:- This issue has been decided by coordinate bench of this Tribunal in case of Potters Cottage Industrial Co-Operative Society Ltd. [ 2021 (9) TMI 137 - ITAT BANGALORE ] - As relying on it we direct the Ld.AO to verify the interest earned on investment earned from co-operative societies and to consider the claim of assessee in accordance with law under section 80P(2)(d) - Grounds raised by assessee stands allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits collected from member: should be kept as deposits in other banks or co-operative societies. So it is legal obligation to maintain such deposits. Further it is also incidental activity or business to the main business of the society. 3) We humbly rely on decision laid down by the Honorable Apex Court in the case of CIT VS NAWANSHAHAR CENTRAL COOPERATIVE BANK LTD 2007/289 ITR 6 The appallent craves leave to add, to amend and/or alter any of the forgoing grounds and such other grounds as may be urged at the time of hearing, the appallent prayes for allowing the deduction under section 80P(2)(a)(i) & 80P(2)(d) Brief facts of the case are as under: 2. Assessee is a co-operative society providing credit facilities to its members. For years under consideration assessee filed its return of income after claiming deduction under section 80P of the Act. The return was selected for scrutiny under Cass and notice under section 143(2) was issued to assessee. In response to the statutory notices, representative of assessee appeared before the Ld.AO and filed requisite details as called for. 2.1 Ld.AO from the details filed observed that: (i) assessee has earned interest on inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the society is not eligible for deduction u/s.80P and as such ratio of the decision of Hon`ble Supreme Court decision in the case of Citizen Co-op Society Ltd, Hyderabad v. ACIT, C-9(1), Hyderabad in Civil Appeal No.10245 of 2017 dated 8.08.2017 is applicable to the facts of the assessee society. 2.7 The Ld.CIT(A) also held that, in the assessee's case, mutuality principles have failed as substantial business is being carried out with the general public or nominal members and also in view of the assessee being registered as Souharda Co-operative Society and not as Co-operative Society and taking into account the byelaws and the nature of business carried out by the assessee, the society is not eligible for deduction u/s 80P of the Income tax Act, 1961. 2.8 The Ld.CIT(A) thus upheld the order of Ld.AO, Aggrieved by the order of Ld.CIT(A) assessee is in appeal before us now. 3. We have considered the rival submissions of both sides in the light of records placed before us. 3.1 The issue that arises for consideration is: (i) whether the authorities below were justified in denying the claim of the assessee for reduction u/s 80P(2)(a)(i) of the Act. (ii) whether, interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative Ltd. vs. ITO reported in 230 Taxman 309, dealt with an issue where deduction u/s.80P(2)(a)(i) of the Act was claimed on interest from the deposits made in a nationalized bank which was used for providing credit facilities to its members. The Assessee therein claimed that the said interest amount is attributable to the credit facility provided by the assessee and forms part of profits and gains of business. Hon'ble Karnataka High Court after considering the decision by Hon'ble Supreme Court in case of Totgars(supra) held that, since the word income is qualified by the expression "attributable" to the business of Banking, is used in Sec.80P(2)(a)(i) of the Act, it has to receive a wider meaning and should be interpreted as covering receipts from sources other than the actual conduct of business. Hon'ble Karnataka Court held that a Cooperative Society that is carrying on with the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, cannot be kept idle. If they deposit this amount in bank so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka high Court held that decision by Hon'ble Supreme Court in case of Totgars (supra), was not on the deduction claimed u/s.80P(2)(d) of the Act, but was rendered in respect of deduction claimed under Section 80P(2)(a)(i) of the Act. Hon'ble Karnataka High Court in the case of Pr.CIT Anr. vs. Totgars Co- Operative Sale Society reported in 395 ITR 611 took a different view and held that interest income earned on deposits whether with any other bank will be in the nature of income from other sources and not income from business and therefore the deduction u/s.80P(2)(d) of the Act cannot be allowed to the Assessee. The Hon'ble Court followed decision of Hon'ble Gujarat High Court in the case of SBI Vs. CIT reported in 389 ITR 578, wherein Hon'ble Gujarat High Court dissented from the view taken by the Hon'ble Karnataka High Court in the case of Tumkur Merchants case (supra). It can thus be seen that the ratio laid down by the Hon'ble Karnataka High Court in the case of Totagars Cooperative Sales Society in 395 ITR 611 is that, in light of the principles enunciated by Hon'ble Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing cred ..... 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