ALVAS SAHAKARA SANGHA,MOODBIDRI vs. INCOME TAX OFFICER, WARD-2(1), MANGALORE

The facts involved in the Assessment Year 2018-19 are similar to the facts relating to Assessment Year 2022-23. Hence, the decision arrived in the said Assessment Year 2018-19 shall apply mutatis mutandis to the appeal relating to Assessment Year 2022-23.

Brief facts of the case are that the assessee is a Co-operative Society registered under the provisions of Karnataka Co-operative Societies Act. The assessee is dealing with the members by giving credit facilities to them. The assessee filed its return of income on 25.09.2018. The said return was processed under section 143(1) of the Act and subsequently the case was selected for limited scrutiny under the CASS. The return was taken up for scrutiny only for examining the substantial increase in investment / loans / advances and large deduction claimed under Chapter VI A of the Act. Notices under sections 143(2) of the Act as well as under section 142(1) of the Act were issued. The assessee also furnished all the requisite documents in support of its claim. Thereafter, the assessment has been completed under section 143(3) of the Act in which the AO had disallowed a sum of Rs.3,63,750/- being the deduction claimed under section 80P of the Act and added the said sum under the head income from other sources. The AO had denied the deduction on the ground that the assessee had received interest from 2 Co-operative Banks and 3 Co- operative Societies. The AO allowed proportionately the interest income earned from the Co-operative Societies while disallowing the balance as the interest income earned from the Co-operative Banks. As against the said assessment, the assessee filed an appeal before the learned CIT(A). The assessee submitted before the learned CIT(A) that it is statutorily required to deposit the amounts in any of the modes prescribed under section 58 of the Karnataka Co-operative Societies Act which prescribes that the deposit should be made in the Co-operative Banks and therefore these are statutory deposits eligible for deduction under section 80P(2)(a)(i) of the Act. Alternatively, assessee submitted that the Co-operative Banks are also Co- operative Societies registered under the Karnataka Co-operative Societies and therefore the interest income earned from the said Co-operative Banks

At the time of hearing, the learned AR submitted that the sections 57 and 58 of the Karnataka Co-operative Societies Act statutorily requires Co- operative Societies to invest their funds in Co-operative Banks and therefore the deposit kept in the SCDCC Bank and Karkala Agricultural Bank is statutory obligation and therefore the interest income earned through such deposits are attributable to the business activities of the assessee and therefore the same is a business income eligible for deduction under section 80P(2)(a)(i) of the Act. The learned AR further submitted that, alternatively, the above said banks are also initially registered under the provisions of Karnataka Co-operative Societies Act and therefore the interest income earned from the said banks are to be treated as income from the Co-operative Societies and therefore eligible for deduction under section 80P(2) of the Act.

The learned DR submitted that the lower authorities had relied on the judgment of the Hon’ble Supreme Court reported in (2010) 322 ITR 283 (SC) in the case of Totgars Sales Co-operative Society Ltd., Vs. ITO and another judgment in the case of Citizen Co-operative Society Ltd., Vs. ACIT reported in (2017) 397 ITR 1 and therefore the order does not require any interference from this Tribunal.

We have considered the rivals arguments and perused the material available on record. From the facts available before us and also on the grounds raised by the assessee before the learned CIT(A), we understand

In the result, appeals filed by the assessee are allowed for statistical purposes.