2023 (2) TMI 267 - AT - Income Tax

Deduction u/s 80P - interest earned from investments made in any bank, not being a co-operative society - HELD THAT:- Tribunal in the case of M/s. Krishnarajapet Taluk Agri Pro Coop Marketing Society Ltd. [2022 (2) TMI 489 - ITAT BANGALORE] held that the ratio laid down by the Hon’ble Karnataka High Court in the case of Totagars Cooperative Sales Society [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] is that in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a cooperative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co-operative society, is not deductible under section 80P(2)(d) of the Act. The Assessee would therefore be not entitled to deduction u/s.80P(2)(a)(i) or Sec.80P(2)(d) of the Act on the interest income in question.

Assessee would not be entitled to deduction under section 80P(2)(d) of the Act in respect of interest received from another Co-operative Bank. The assessee would also not be entitled to deduction under section 80P(2)(a)(i) of the Act.

Deduction of expenses earned in earning interest income - In so far as deduction u/s 57 of the Act is concerned, in terms of paragraph 16 of the Tribunal’s order referred to above, the assessee will be entitled to deduction on account of expenses. The issue with regard to deduction u/s.57 of the Act is accordingly restored to the file of the AO to decide the same afresh in accordance with law after affording the assessee opportunity of being heard and in the light of the decisions referred to above.

Appeal of the assessee is treated as partly allowed for statistical purposes.