TMI Blog2021 (7) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... ile of A.O. The A.O. is directed to examine the deduction u/s 80P(2)(a)(i) of the I.T.Act in the light of the dictum laid down in the case of Mavilayi Service Cooperative Bank Ltd. v. CIT (supra) - Appeal filed by the assessee allowed for statistical purposes. - ITA No.568/Bang/2020 - - - Dated:- 14-7-2021 - Shri Chandra Poojari, AM And Shri George George K, JM For the Appellant : Shri Mahesh R.Uppin, Advocate For the Respondent : Shri Muzaffar Hussain, CIT-DR ORDER PER GEORGE GEORGE K, JM This appeal at the instance of the assessee is directed against CIT s order dated 19.03.2020, passed u/s 263 of the I.T.Act. The relevant assessment year is 2015-2016. 2. The grounds raised read as follow:- 1. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derabad in W.P. No. 12727 and 12767/2016 The Vaweru Co-op. Rural Bank Ltd. and Anr. Vs. The Chief C.I.T. and anr. involving identical issue. The interest earned on investments made out of the own funds of the appellant (capital or interest earned from Loans Advances as are not required for immediate use in business) being S.B. interest, Reserve Fund interest, F.D. interest - are all incidental to the business of the appellant and qualifies for deduction a per the decision of the Hon'ble Apex Court in - C.I.T. Vs. Karnataka State Co-op. Apex Bank Ltd. and ITA 307/2014-Tumkur Merchants Souharda Credit Co-op. Ltd. Vs. I.T.O. Tumkur. Further, the Loan Deposit interest of ₹ 70,299/- was nothing but the interest earned from Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to deduction u/s 80P(2)(d) of the I.T.Act since the interest income was not received from investments with other co-operative societies. 5. Aggrieved by the order passed u/s 263 of the I.T.Act, the assessee has preferred this appeal before the Tribunal. The learned Counsel for the assessee submitted that an identical issue was considered by the ITAT in ITA No.569/Bang/2020 in the case of M/s.Ugane Primary Agricultural Credit Cooperative Society Ltd. v. Pri.CIT (order dated 15.04.2021). The learned AR submitted that the Tribunal in above cited case, directed the A.O. to consider the dictum laid down by the Hon ble Apex Court in the case of Mavilayi Service Cooperative Bank Ltd. v. CIT 431 ITR 1, de horse the observation of CIT u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to nonmembers, profits attributable to such loans obviously cannot be deducted. 46. It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or power or have no such liability or duty; Considering the definition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i). 47. Further, unlike the facts in Citizen Cooperative Society Ltd. (supra), the Kerala Act expressly permits loans to nonmembers under section 59(2) and (3), which reads as follows: 59. Restrictions on loans.- (1) A society shall not make a loan to any person or a society other than a member: Provided that the above restriction shall not be applicable to the Kerala State Co-operative Bank. Provided further that, with the general or special sanction of the Registrar, a society may make loans to another ..... X X X X Extracts X X X X X X X X Extracts X X X X
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