M/S. MAYURA CREDIT CO-OPERATIVE SOCIETY LIMITED,BENGALURU vs. THE INCOME TAX OFFICER, WARD-6(2)(2), BENGALURU

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ITA 741/BANG/2021Status: DisposedITAT Bangalore24 May 2022AY 2016-174 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that interest income earned from investments made in compliance with the Karnataka Co-operative Societies Act should be considered business income eligible for deduction under Section 80P(2)(a)(i). The matter was restored to the AO for re-adjudication.

What were the facts?

The assessee, a co-operative society, claimed deduction under Section 80P(2)(a)(i) for interest income earned on deposits with banks. The AO and CIT(A) disallowed this deduction, relying on Supreme Court and High Court decisions in the Totgar's case.

What were the issues?

Whether interest income earned by a co-operative society on its deposits with banks, made in compliance with statutory requirements, is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 80P(2)(d)

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Income Tax Appellate Tribunal, “SMC - A” BENCH : BANGALORE

Before: SHRI B. R. BASKARAN

For Appellant: Shri. Shivaprasad Reddy, AR
For Respondent: Shri. Ganesh R Ghale, Standing Counsel for Department
Hearing: 24.05.2022Pronounced: 24.05.2022

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC - A” BENCH : BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER Assessment Year : 2016-17 M/s. Mayura Credit Co-operative ITO, Vs. Society Ltd., Ward – 6(2)(2), No.188/39, 5th Cross, Kurubarahalli, Bengaluru. Mahalakshmipura, Bengaluru – 560 086. PAN : AADAM 0708 N APPELLANT RESPONDENT Assessee by : Shri. Shivaprasad Reddy, AR Revenue by : Shri. Ganesh R Ghale, Standing Counsel for Department. Date of hearing : 24.05.2022 Date of Pronouncement : 24.05.2022 O R D E R

The assessee has filed this appeal challenging the order dated 28-10- 2019 passed by Ld CIT(A)-6, Bengaluru and it relates to the assessment year 2016-17. The only issue urged by the assessee relates to the denial of deduction u/s 80P(2)(a)(i) of the Act in respect of interest income earned from the deposits held by the assessee.

2.

I heard the parties and perused the record. The AO disallowed the claim for deduction u/s 80P of the Act in respect of interest income of Rs.10,85,442/- earned on deposits kept with Apex Bank, BDCC Bank and other co-operative banks, by following the decision rendered by the Hon’ble Supreme Court in the case of Totgar’s Co-op Sale Society Ltd (2010)(322 ITR 283) and also the decision rendered by Hon’ble jurisdictional Karnataka High Court in the case of PCIT vs. Totgars Co-operative society (2017)(395 ITR 611)(Kar). The Ld CIT(A) also confirmed the same.

3.

The Ld A.R submitted that the Bangalore bench of Tribunal has rendered a decision in the case of M/s Prathamika Krushi Pattina Sahakari Niyamata vs. PCIT (ITA No.1725/Bang/2019 dated 22.11.2021), wherein the Tribunal held that the interest income earned from the investments made in compliance with the requirements of the Karnataka Co-operative Societies Act should be considered as income from business and it is eligible for deduction u/s 80P(2)(a)(i) of the Act. It was further held that the deduction u/s 80P(2)(d) shall be available in respect of interest income received out of investments made with co-operative societies. The Ld A.R submitted that the interest income earned from the investments made in compliance with the requirements of Karnataka Co-operative Societies Act should be allowed as deduction u/s 80P(2)(a)(i) of the Act.

4.

On the contrary, the Ld D.R supported the orders passed by the tax authorities.

5.

I heard rival contentions and perused the record. The Bangalore bench of Tribunal in the case of M/s Prathamika Krushi Pattina Sahakari Niyamata vs. PCIT (supra) has held as under:- “7.2 In the instant case, it was contended that majority of the interest income is earned out of investments made with Central Co-operative Banks and is in compliance with the requirement under the Karnataka Co-operative Societies Act and Rules. If the amounts are invested in compliance with the Karnataka Co-operative Societies Act, necessarily, the same is to be assessed as income from business,

which entails the benefit of deduction u/s 80P(2)(a)(i) of the I T Act. Insofar 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.”

Accordingly, there is merit in the prayer of the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to allow deduction u/s 80P(2)(a)(i) of the Act on the interest income earned from investments made with the banks in compliance with the requirements under the Karnataka Co-operative Societies Act and Rules. The assessee should be given adequate opportunity of being heard.

6.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

Pronounced in the open court on the date mentioned on the caption page.

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