VEERASAIVA VIDYA VARDHAKA SANGHA EMPLOYEES CREDIT CO-OP SOCIETY LTD., ,BALLARI vs. INCOME TAX OFFICER, WARD-2, BELLARI
Income Tax Appellate Tribunal, ‘A’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI PRAKASH CHAND YADAVAssessment Years: 2017-18
PER WASEE M AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC,
Delhi dated
05/10/2024
vide
DIN
No.
ITBA/APL/S/250/2024-25/1069473196(1) for the assessment year 2017-
18. 2. The interconnected issue raised by the assessee pertains to the disallowance of deduction claimed under section 80P(2)(i) of the Act for Rs. 9,44,990/- only.
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3. The facts in brief are that the assessee is a cooperative society and engaged in the business of providing credit facilities to its members.
The assessee for the year under consideration claimed deduction of Rs.
40,86945 only under section 80P(2)(a)(i) of the Act. However, the AO during the assessment proceedings found that the assessee has shown the interest income of Rs. 9,44,990 which was not eligible for deduction under section under section 80P(2)(a)(i) of the Act. The detail of such interest income stands as under:
As per the AO, the above income to the assessee was not arising from the financing activities with the members. Accordingly, the AO disallowed the same and added to the total income of the assessee.
The aggrieved assessee preferred an appeal before the learned CIT(A) who disallowed the deduction of impugned interest income earned from surplus funds invested in banks.
Being aggrieved by the finding of the learned CIT(A), the assessee is in appeal before us. Page 3 of 8
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7. The learned AR for the assessee before us among other arguments submitted that the deposits made with the BDDC Bank are out of statutory obligation as per the Karnataka State Co-operative
Societies Act, 1959, and not voluntary investments intended to earn income. As per Section 57(2) of the Karnataka State Co-operative
Societies Act, 1959, co-operative societies are required to set aside 25%
of their net profit every year as a reserve, which must be mandatorily invested as per section 58 of the same Act. The learned AR argued that since these deposits are not freely available for the daily business of the society and cannot be withdrawn without prior approval from the