9911796707
TMI Blog2024 (8) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in confirming the disallowance of claim of deduction under section 80P of the Act, amounting to Rs. 50,93,751/-. 3. Brief facts of the case are as follows: Assessee is a primary agricultural co-operative society registered under the Karnataka Co-operative Societies Act, 1959. It is engaged in the business of accepting deposits from the Members, lending loans to the Members and providing public distribution services. For the Assessment Year 2020-21, the return of income was filed on 21.11.2020 declaring income of Rs. 2,63,550/-, after claiming deduction under section 80P of the Act. The assessment was selected for scrutiny and notice under section 143(2) of the Act, was issued. During the course of assessment proceedings, assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present appeal before the Tribunal. Assessee has filed a Paper Book enclosing therein the submissions made before the income tax authorities, the case laws relied on, the relevant provisions of the Karnataka Co-operative Societies Act, 1959 and the Rules, etc. The learned AR submitted that investments were made with Co- operative Bank in compliance with the requirement under the Karnataka Co- operative Societies Act, 1959 and the relevant Rules. Therefore, it was contended that the interest income earned out of investments with Co-operative Banks are entitled to deduction under section 80P(2)(a)(i) of the Act. The learned AR further relying on the judgment of the Hon'ble Apex Court in the case of Kerala State Co- operative Agricultural Rura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome is received out of investments made with Apex Co-operative Bank. It is the case of the assessee that the investments are made out of compulsions as per the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. The Hon'ble Apex Court in the case of CIT Vs. Karnataka State Co-operative Apex Bank (supra) had held that when amounts are invested by the Co-operative Societies as per the statutory requirements, the same would be entitled to deduction under section 80P(2)(a)(i) of the Act. The Hon'ble Apex Court considered the following question of law: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the interest income arising from the investment made out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted, that the assessee-co-operative bank is required to place a part of its funds with the State Bank or the Reserve Bank of India to enable it to carry on its banking business. This being so, any income derived from funds so placed arises from the business carried on by it and the assessee has not, by reason of section 80P(2)(a)(i), to pay income-tax thereon. The placement of such funds being imperative for the purposes of carrying the banking business, the income derived therefrom would be income from the assessee's business. We are unable to take the view that found favour with the Bench that decided the case M.P. Co-operative Bank Ltd. (supra) that only income derived from circulating or working capital would fall within section 80P(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deduction u/s 80P(2)(d) of the I.T. Act is concerned, we make it clear that interest income received out of investments with co- operative societies is to be allowed as deduction." 11. In light of the aforesaid reasoning and the judicial pronouncements cited supra, we restore this issue to the files of the AO. The AO is directed to examine whether the amounts invested with Apex Co-operative Bank and other banks, are out of compulsions under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. If it is found that the investments are made out of compulsions under the Act and the relevant Rules, the interest income received out of the investments made under such compulsions would be liable to be taxed as "business inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
