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2023 (10) TMI 1350 - AT - Income TaxDeduction u/s. 80P(2)(a)(i) - amounts invested with Apex Co-operative Bank and other banks - AO noticed that interest income received by the assessee was out of investments made with banks and consequently he held that assessee is not entitled to deduction u/s 80P(2)(a)(i) - HELD THAT:- 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 as per the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. As decided in the case of CIT Vs. Karnataka State Co-operative Apex Bank [2001 (8) TMI 9 - SUPREME COURT] had held that when amounts are invested by the Co-operative Societies as per the statutory requirements, the same would be entitled to deduction under section 80P(2)(a)(i) of the Act. The Bangalore Bench of the Tribunal in the case of M/s. The Bharathi Co- operative Credit Society [2022 (12) TMI 30 - ITAT BANGALORE] held that 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. We restore this issue to the files of the AO. AO is directed to examine whether the amounts invested with Apex Co-operative Bank and other banks, are out of compulsions under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. If it is found that the investments are made out of compulsions under the Act and the relevant Rules, the interest income received out of the investments made under such compulsions would be liable to be taxed as "business income" which would entail the benefit of deduction u/s 80P(2)(a)(i) of the Act. With the aforesaid observation, we restore the matter to the AO - Appeal filed by the assessee is allowed for statistical purposes.
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