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2019 (12) TMI 1481 - AT - Income TaxDeduction u/s 80P in respect of interest from members - HELD THAT:- CIT (A) is not justified in holding that the assessee is not eligible for deduction u/s 80P in respect of interest earned from associate members because as per Karnataka Co Operative Societies Act, associate members are also members and restriction on no. of associate members up to 15% of total members is by way of a subsequent amendment which is not applicable in the present year. Hence, on this issue, the order of CIT (A) is set aside and hold that for allowing deduction u/s 80P in respect of interest from members, regular members and associate members are to be considered at par in the present year which is before amendment in Karnataka Co Operative Societies Act, In respect of interest from regular members, learned CIT (A) has directed the AO to allow deduction u/s 80P. I modify this direction and direct the AO to allow deduction u/s 80P as per law in respect of interest income from regular members as well as associate members. Deduction u/s 80P in respect of Bank Interest - We find that the claim of the assessee for deduction u/s 80P in respect of bank interest income was disallowed by AO and CIT (A) by following the judgment of Hon’ble Apex Court rendered in the case of Totgars Co – Operative Sale Society Limited vs. ITO [2010 (2) TMI 3 - SUPREME COURT] There is one judgment of Hon’ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT] in which this judgment of Hon’ble apex court rendered in the case of Totgars Co – Operative Sale Society Limited vs. ITO (Supra) was considered but still, the issue was decided in favour of the assessee because in that case, money used to earn bank interest was out of own funds and not of out of liability. To examine the applicability of these two judgments, the facts are to be examined as to whether in the present case, the money advanced to earn interest income from various banks is out of liability or own funds of the assessee because if such advances are out of liability, then this judgment of Hon’ble apex court rendered in the case of Totgars Co – Operative Sale Society Limited vs. ITO (Supra) will be applicable and the assessee will not be entitled to deduction u/s 80P with regard to interest from banks but if such advances are not out of liability but are out of own funds of the assessee than the judgment of Hon’ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. Vs. ITO [2015 (2) TMI 995 - KARNATAKA HIGH COURT] will be applicable. Hence, set aside the order of CIT (A) on this issue and restore this aspect of the matter back to his file for fresh decision with the direction that he should examine the facts of the present case in the light of these two judgments of Hon’ble apex court rendered in the case of Totgars Co – Operative Sale Society Limited vs. ITO (Supra) and of Hon’ble Karnataka High Court rendered in the case of Tumkur Merchants Souhadra Credit Cooperative Ltd. Vs. ITO (Supra) to find out which judgment is applicable in the facts of the present case. Appeal of the assessee is allowed for statistical purposes.
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