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2020 (10) TMI 416 - AT - Income TaxEntitled to deduction u/s 80P(2)(a)(i) - interest income earned from bank - PCIT held that the assessee was not entitled to deduction u/s 80P(2)(a)(i) as relying on case of Totagars Co-operative Sale Society[2017 (7) TMI 1049 - KARNATAKA HIGH COURT] - assessee contended that surplus funds for which there was no immediate need were deposited with the banks and interest income earned on such investments was to be considered as “income from business” since these funds were relating to business of providing credit facilities to the members - PCIT accepted the assessee’s contentions that it is a primary agricultural credit society and it was entitled to claim deduction - HELD THAT:- Whether the source of funds were assessee's own funds or out of liability was not the subject matter of decision of the TOTAGARS CO-OPERATIVE SALE SOCIETY [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] relied on by the Id. PCIT. To this extent, the judgment of the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Society Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT] [relied on by the assessee] still holds good. Hence from this aspect, the issue should be considered by the AO after examining the facts in light of the judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sales Society [2010 (2) TMI 3 - SUPREME COURT] and the judgment of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Co-op. Society Ltd. (supra). Therefore, the directions of the PCIT to assess the interest income under the head "income from other sources" and grant permissible deduction u/s. 57 of the Act is quashed. The AO will afford adequate opportunity of being heard to the assessee for filing details/evidence to substantiate its case before deciding the issue. Assessee's appeal is partly allowed.
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