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2024 (1) TMI 1061 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - interest income received on investments made with District Co-operative Bank - as per AO interest income received from Kanara District Co-operative Bank was not entitled to deduction - HELD THAT:- On identical factual situation, the Bangalore Bench of the Tribunal in the case of Canara Bank Staff Credit Co-operative Societies Ltd [2023 (10) TMI 1350 - ITAT BANGALORE] had restored the matter to the AO to examine whether the amounts invested with the Co-operative Banks are out of compulsion under the Karnataka Co-operative Societies Act and the relevant Rules. It was further held by the Tribunal that if the investments are out of compulsion under the Act and the relevant Rules, the interest income received out of the investment made under such compulsion would be liable to be taxed as ‘income from business’ which would entail the benefit of deduction under section 80P(2)(a)(i) of the Act. In the event it is found that assessee is not entitled to get the benefit under section 80P(2)(a)(i) of the Act, the AO shall also examine whether it is entitled to deduction u/s 80P(2)(d) in light of the recent judgment of Kerala State Co-operative Agricultural Rural Development [2023 (9) TMI 761 - SUPREME COURT] If the assessee is not entitled to benefit of deduction either under section 80P(2)(a)(i) or under section 80P(2)(d) of the Act, the AO shall consider the claim of deduction under section 57 of the Act in respect of the cost of funds for earning such interest income which is assessed as income under the head ‘income from other sources’. For the direction to grant deduction for the cost of funds, we rely on the judgment of Totgar’s Co-operative Sales Society Ltd [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] Appeal filed by the assessee is allowed for statistical purposes.
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