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Facts
The assessee, a credit co-operative society, filed its return claiming a deduction under section 80P. The AO observed that interest income from commercial banks should be taxed under "Other sources" and disallowed corresponding expenses. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal found that the CIT(A) had not properly considered all contentions and materials. Therefore, the matter was remitted back to the CIT(A) for a fresh examination in light of Supreme Court and High Court judgments.
Key Issues
Whether interest income from commercial banks is taxable under "Other Sources" and if the assessee is entitled to deduction of corresponding expenses and section 80P(2)(d) deduction on such interest.
Sections Cited
80P, 56
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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI PRAKASH CHAND YADAV
PER PRAKASH CHAND YADAV, JUDICIAL MEMBER:
Present appeal of the assessee is arising from the order of ld. CIT(A) dated 23.7.2024 and relates to assessment year 2018-19 having DIN number ITBA/NFAC/S/250/2024-25/1066924934(1).
Brief facts as coming out from the orders of authorities below are that the assessee is a credit co-operative society registered under the provisions of Karnataka Co-operative Society Act, 1959. The assessee is in the business of providing credit facilities to its members for their various financial needs. The assessee filed its return of income declaring a gross total income of Rs.1,47,79,120/-, after claiming deduction of Rs.1,47,77,664/- u/s 80P of the Income Tax Act, 1961 (in short “The Act”). During the course of assessment proceedings, the AO observed that interest income earned by the Udupi Taluk Protestant Christian Credit Co-operative Society Ltd., Udupi Page 2 of 3 assessee from commercial bank is liable to be segregated from the business income of the assessee and to be taxed u/s 56 of the Act. The ld. AO could not allow corresponding expenses to the assessee while taxing the income under the head “Other sources”. The ld. AO also took a view that the assessee is not entitled for deduction of section 80P(2)(d) of the Act in respect of the interest income earned from the co-operative banks.
Aggrieved with the order of AO, the assessee filed an appeal before the ld. CIT(A) and inter-alia contended that the assessee is entitled for deduction of section 80P(2)(d) of the Act in respect of the interest income or in the alternative the assessee would be granted deduction of corresponding expenses. The ld. CIT(A) overlooking submissions and facts of the case, dismissed the appeal of the assessee.
Ld. Counsel appearing on behalf of the assessee reiterated the submissions before the lower authorities and contended that both the authorities have failed to appreciate the facts of the case in proper manner.
4. Ld. D.R. appearing on behalf of the revenue fairly pointed out that the AO has erred in making a distinction between members and non-members while framing the assessment. The ld. D.R. averted that the AO has failed to take cognizance of the judgement of Hon’ble Supreme Court in the case of Mavilayi Co-operative Bank Ltd. reported in 431 ITR 1.
After considering the rival submissions, we are of the view that the issue involved in the present appeal requires fresh consideration at the end of ld. CIT(A) in as much as the ld. CIT(A) has not at all dealt with all the contentions and the material available on record in a judicious manner. Therefore, in the interest of justice, we remit Udupi Taluk Protestant Christian Credit Co-operative Society Ltd., Udupi Page 3 of 3 this matter back to the file of ld. CIT(A) for examining afresh in the light of judgement of Mavilayi Co-operative Bank Ltd. cited (supra) as well as in the light of judgement of jurisdictional High Court in the case of Totagars Co-operative Sale Society reported in 395 ITR 611. The Ld. CIT(A) also consider whether the assessee is entitled for corresponding expenses relatable to interest earned from Cooperative banks, in the light of the decisions of the Bangalore Benches of the ITAT, as referred to by the assessee. Needless to say that the CIT(A) would grant sufficient opportunities to the assessee before passing any order.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 9th Jan, 2025