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TMI Blog2023 (12) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this appeal. Assessee has filed a petition for condonation of delay and also an affidavit of the General Manager of the assessee society stating there in the reasons for the belated filing of this appeal. We have perused the reasons stated in the affidavit of the General Manager of the assessee society and we are of the view that there is reasonable cause for the delay in filing this appeal and no latches can be attributed to the assessee. Hence, we condone the delay of four days in filing this appeal and proceed to dispose off the appeal on merits. 3. The solitary issue raised is whether the CIT(A) is justified in confirming the part of the disallowance made by the AO under section 80P of the Act. 4. Brief facts of the case are as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks, the CIT(A) confirmed the disallowance made by the AO. The CIT(A) also denied the deduction claimed under section 80P(2)(d) of the Act. 6. Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal. Assessee has filed multiple Paper Books enclosing there in the case laws relied on, the additional evidence to prove its case that investments are made with Central Co-operative Banks on account of compulsion under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules, etc. The learned AR's limited submission is that interest income that is received out of investments with Central Co-operative Banks are mainly on account of compulsion under the Karnataka Co-operative Societies Act, 1959, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alore Bench of the Tribunal had followed its earlier orders. The relevant finding of the Bangalore Bench of the Tribunal reads as follows: "8. I have heard the rival submissions and perused the material on record. The solitary issue for adjudication is whether a sum of Rs. 5,07,822/- can be allowed as a deduction under sections 80P(2)(a)(i) of the Act. Admittedly, the amount of Rs. 5,07,822/- has been received by the assessee from South Canara District Central Co-operative Bank Ltd. It is the claim of the assessee that the amounts are invested in compliance with the relevant Acts and Rules. On identical facts, the Bangalore Bench of the Tribunal in the case of Bharat Co-operative Credit Society Vs. ITO (supra) by following the Co-ordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1959 and the relevant Rules. If it is so, the same interest income is to be assessed as income from business which would entail the benefit of deduction under section 80P(2)(a)(i) of the Act. With the aforesaid observation, I restore the matter to the AO. It is ordered accordingly." 10. In light of the above orders of the Tribunal, we direct the AO to examine whether the interest income received on investment with Central Co-operative Bank is out of compulsions under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. If it is so, the same may be considered as 'business income' and entitled to deduction under section 80P(2)(a)(i) of the Act. In other words, if assessee society does not comply with the relevant prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 57 of the Act for earning interest income which is to be assessed under the head 'income from other sources'. The Hon'ble Karnataka High Court in the case of Totgars Co-operative Sale Society Ltd., Vs. ITO reported in (2015) 58 taxmann.com 35 (Karnataka) had categorically held that where an assessee, a co-operative society, earns interest on deposits kept with scheduled banks; only the net interest income can be taxed under section 56 of the Act (i.e., the interest income reduced by the administrative expenses and other proportionate expenses to earn the said income). 7. The relevant find of the Hon'ble jurisdictional High Court reads as follows: "11. It is no doubt true that the appellant did initially claim deduction under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions urged by the parties are kept open. (iv) Matter is remanded to the adjudicating authority for quantification of the cost incurred by the appellant and deduction thereof under Section 57(3) of the Act and to pass orders in accordance with law. (v)Ordered accordingly." 8. In view of the aforesaid judgment of the Hon'ble High Court, we restore the matter to the AO. The AO is directed to calculate the cost of funds for earning the interest income which has to be assessed under section 56 of the Act and allow the same as deduction under section 57 of the Act. It is ordered accordingly." 12. In light of the aforesaid reasoning and the judicial pronouncements cited supra, we restore the matter to the AO. The AO is directed to follow the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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