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2019 (11) TMI 1791 - AT - Income TaxDeduction u/s 80P(2)(a)(i) in respect of interest income earned - AO has denied the claim of the assessee that the interest income earned with investment of surplus funds, hence has to be assessed under ‘income from other sources’ and not under ‘business’ - HELD THAT:- As decided in case of The Jayanagar Co-operative Society Ltd [2019 (7) TMI 1219 - ITAT BANGALORE] claim of the Assessee was that Co-operative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2) of the Act. The Hon'ble Karnataka High Court [2008 (9) TMI 493 - KARNATAKA HIGH COURT] followed the decision of the supreme Court in The Totgars Co-operative Sales Society Ltd. [2010 (2) TMI 3 - SUPREME COURT] and held that interest earned from Schedule bank or cooperative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d)of the Act was not applicable to such interest income. The source of funds out of which investments were made remained the same in AY 2007-08 to 2011-12 and in AY 1991- 92 to 1999-2000 decided by the Hon'ble Supreme Court. Therefore whether the source of funds were Assessee's own funds or out of liability was not subject matter of the decision of the Hon'ble Karnataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Co-operative Ltd [2015 (2) TMI 995 - KARNATAKA HIGH COURT] still holds good. Hence, on this aspect, the issue should be restored back to the AO for a fresh decision after examining the facts in the light of these judgment of the Hon'ble Apex Court rendered in the case of The Totgars Co-operative Sale Society Ltd. (supra) and of Hon'ble Karnataka high Court rendered in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra). We follow the judicial precedence and restore the disputed issue to the file of the AO for fresh decision in light of the judicial decisions above. Appeal of the assessee is allowed for statistical purposes.
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