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2022 (1) TMI 153 - ITAT BANGALORERevision u/s 263 by CIT - AO allowed the deduction u/s 80P(2)(a)(i) in respect of interest income from the Co-operative Bank and as such, the order was not `erroneous’ for the purpose of section 263 - HELD THAT:- On perusal of the assessment order passed u/s 143(3) of the I.T.Act dated 30.11.2016, it is clear that there is no discussion by the A.O. and deduction u/s 80P of the I.T.Act has been granted without much inquiry. The assessment order completed without making necessary inquiry rendered the assessment erroneous and prejudicial to the interest of revenue. Therefore, the CIT has correctly invoked the provisions of section 263 of the I.T.Act and we uphold the same. As regards whether the assessee is entitled to deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the I.T.Act, the recent order of the Tribunal in the case of M/s.Vasavamba Co-operative Society Ltd [2021 (8) TMI 706 - ITAT BANGALORE] after considering the judicial pronouncements on the issue held that interest income earned out of investments made from surplus funds would be taxable under the head `income from other sources’ and would not be eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. It was further held by the Tribunal insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, only those interest received from investments with co-operative societies alone would be entitled to deduction. As contended that majority of the interest income is earned out of investments made with Central Co-operative Banks and is in compliance with the requirement under the Karnataka Co-operative Societies Act and Rules. If the amounts are invested in compliance with the Karnataka Co-operative Societies Act, necessarily, the same is to be assessed as income from business, which entails the benefit of deduction u/s 80P(2)(a)(i) of the I.T.Act. Insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, we make it clear that interest income received out of investments with cooperative societies is to be allowed as deduction. Hon’ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. [2021 (1) TMI 488 - SUPREME COURT] had settled various issues for claiming deduction u/s 80P(2)(a)(i) Thus the matter needs to be examined afresh by the A.O. de hors the observations of the CIT. The A.O. is directed to follow the dictum laid down by the Hon’ble Apex Court in framing the fresh assessment. It is ordered accordingly.
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