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TMI Blog2024 (2) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... )(d) of the Act in light of the recent judgment of Kerala State Co-operative Agricultural Rural Development [ 2023 (9) TMI 761 - SUPREME COURT] - Appeal filed by the assessee is allowed for statistical purposes. - Shri George George K, Vice President And Shri Chandra Poojari, Accountant Member For the Assessee : Shri. Mahesh R. Uppin, Advocate. For the Revenue : Shri. Ganesh R. Gale, Standing Counsel for Department. ORDER PER BENCH : These appeals at the instance of assessee are directed against two orders of CIT(A) dated 24.11.2024 and 30.11.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called the Act ). The relevant Assessment Years are 2017-18 and 2020-21. 2. Common issues are raised in these appeals; hence, they were heard together and are disposed off by this consolidated order. Identical grounds are raised for both the Assessment Years except for variation in figures. The grounds raised for Assessment Year 2017-18 reads as follows: 1. Was C.I.T. (A) justified in upholding the addition for interest on investments derived from S.C.D.C.C. Bank and P.L.D. Bank (Primary Co-op. Agriculture Rural Development Bank) as per Para 6.4 of the impugned order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80P of the Act, assessee filed appeals before the First Appellate Authority (FAA) for Assessment Years 2017-18 and 2020-21. Before the FAA, it was contended that assessee as per section 28 of the Karnataka Co-operative Societies Rules, was required mandatorily to keep 28% of deposit in statutory liquidity funds and hence these investments in the Co-operative Banks are integral part of its business activity of providing credit facilities to its members. Therefore, it was contended that assessee is eligible for deduction under section 80P(2)(a)(i) of the Act. Assessee also contended before CIT(A) that it is entitled to deduction under section 80P(2)(d) of the Act. In this context, learned AR relied on the judgment of the Hon ble jurisdictional High Court in the case of PCIT Vs. Totgars Sales Society Ltd., reported in 392 ITR 74. The CIT(A), however, followed the dictum laid down by the Hon ble jurisdictional High Court in the case of PCIT Vs. Totgars Sales Society reported in 395 ITR 611 (Karnataka). The relevant finding of the CIT(A) for Assessment Year 2017-18 reads as follows: 6.4 Though it is admitted that this issue has been subject matter of substantial litigation till date a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. Therefore, the interest income is entitled to deduction under section 80P(2)(a)(i) of the Act. On identical facts, the Bangalore Bench of the Tribunal in the case of Canara Bank Staff Credit Co-operative Societies Ltd., in ITA No.517/Bang/2023 (order dated 03.10.2023) had restored the matter to the AO to examine whether the amounts invested with the Co-operative Banks are out of compulsion under the Karnataka Co-operative Societies Act and the relevant Rules. It was further held by the Tribunal that if the investments are out of compulsion under the Act and the relevant Rules, the interest income received out of the investment made under such compulsion would be liable to be taxed as income from business which would entail the benefit of deduction under section 80P(2)(a)(i) of the Act. The relevant finding of the Bangalore Bench of the Tribunal reads as follows: 7. I have heard the rival submissions and perused the material on record. The interest income is received out of investments made with Apex Co-operative Bank. It is the case of the assessee that the investments are made out of compulsions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P(2)(a)(i), to pay income-tax thereon. The placement of such funds being imperative for the purposes of carrying the banking business, the income derived therefrom would be income from the assessee s business. We are unable to take the view that found favour with the Bench that decided the case M.P. Co-operative Bank Ltd. (supra) that only income derived from circulating or working capital would fall within section 80P(2)(a)( i). There is nothing in the phraseology of that provision which makes it applicable only to income derived from working or circulating capital. 7. In the premises, we take the view that the decision of this Court in the case of M.P. Co-operative Bank Ltd. (supra) does not set down the correct law and that the law is as we have put it above. The question, accordingly, is answered in the affirmative and in favour of the assessee. 9. A similar view that has been held by the Hon ble Andhra Pradesh High Court in the case of CIT-II, Hyderabad Vs. Andhra Pradesh State Cooperative Bank Ltd., reported in 336 ITR 516 (AP). 10. The Bangalore Bench of the Tribunal in the case of M/s. The Bharathi Co-operative Credit Society Vs. ITO in ITA No.793/Bang/2022 (order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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