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TMI Blog2024 (10) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... ing given by the tax authorities in denying the claim for deduction u/s 80P(2)(d) of the Act is that interest was received from banks has no legs to stand as a cooperative bank is principally a cooperative society and holds a banking license to operate on a larger scale under the guidelines of RBI. This issue was came to consider in CIT Vs Totagars Cooperative Sale Society , [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] wherein their lordships referring to the decision of Hon ble Apex Court in the case of Totgars Co-operative Sales Society Ltd [ 2010 (2) TMI 3 - SUPREME COURT] held that the ratio of decision of the Hon ble Supreme Court in the aforesaid case (supra) not to be applied in respect of interest income on investment as same falls u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment u/s 147 r.w.s. 144 r.w.s. 144B of the Act, the Ld. AO after vouching the source of interest as from various co-operative societies banks has denied the deduction u/s 80P(2)(a)(i) as well u/s 80P(2)(d) of the Act by pressing into service the decision of Hon ble High Court of Karnataka rendered in PCIT Vs Totagars Co-op. Sale Society reported in 83 taxmann.com 140 [Equi: 395 ITR 611 (Kar)] . 2.2 Aggrieved by denial of claim for deduction the assessee filed an appeal before first appellate authority. The submission of the assessee did partially make out its case on merits, in the event the Ld. NFAC partly allowed the appeal by restricting the disallowance by allowing deduction to the extent of interest received from societies ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to parties. 5. The solitary issue in these appeals hinges around allowability of deduction u/s 80P(2) of the Act. We see strong force in the first contention of the appellant that, during the conduct of its principal business of providing credit facilities to its members deposits therefrom are accepted and to service interest liability thereon it in turn generated interest by placing them either into investment with other financial institutions or by lending them to other members. The net positive interest generated out of such activities without a smoke of doubt partakes the character of business income as it possess all attributes of section 80P(2)(a)(i) of the Act, resultantly qualifies for deduction therein. Insofar as the deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety is that, interest income should have been earned by it from an investment made with any other cooperative society registered under the provisions of law, irrespective of its nomenclature. 7. In the present case, the reasoning given by the tax authorities in denying the claim for deduction u/s 80P(2)(d) of the Act is that interest was received from banks has no legs to stand as a cooperative bank is principally a cooperative society and holds a banking license to operate on a larger scale under the guidelines of RBI. This issue was came to consider by Hon ble Karnataka High Court in CIT Vs Totagars Cooperative Sale Society , finds reported in 392 ITR 74 wherein their lordships referring to the decision of Hon ble Apex Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon'ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s. 80P on interest income earned from banks. Both the Hon'ble High Courts took into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. (2010) 322 ITR 283 (SC). There being no direct judgment from the Hon'ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revisional power anent to interest income of Rs. 22,34,270/- earned on investments made with cooperative banks. (Emphasis supplied) 8. Without multiplying judicial precedents on the aforestated issue, maintaining same parity we adopt equi reasoning and hold that, the interest income earned by the appellant society from its investment held with other cooperative banks since being a registered co-operative society under respective state laws, qualifies for deductions u/s 80P(2) of the Act. Resultantly, we vacate the balance disallowance retained by first appellate authority and direct the Ld. AO delete the disallowance in its entirety. The grounds accordingly stand adjudicated. 9. In result, the appeal of the assessee stands ALLOWED. In te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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