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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI JASON P BOAZ & SHRI PAVAN KUMAR GADALE
Per Jason P Boaz, Accountant Member
This appeal is filed by the Revenue against the order dated 11.04.2016 of CIT(A), Hubballi relating to Assessment Year 2013-14.
The assessee is a Co-operative Society engaged in the business of processing and marketing of agricultural produce grown by the members. The assessee also provides the credit facility to its members besides running a kirana Store and earning interest on deposits. The assessee claimed deduction u/s 80P(2)(d) of the Act. The assessee claimed deduction on a sum of Rs.4,20,93,663/- which was interest and dividend received from Co-operative Societies. The AO denied the benefit of Page 2 of 7 deduction on the ground that the interest received by the assessee from Co-operative Societies which are engaged in business of banking and, therefore, regarded as Co- operative Banks. Since as per section 80P(4) of the Act to provision of section 80P(2)(d) are not applicable to Co-operative Banks, hence the AO denied the benefit of deduction u/s 80P(2)(d) of the Act.
On appeal by the assessee, the CIT(A) deleted the addition made by the AO by observing as under at paras 8 to 17 of the impugned order:
“8. I find that, during the year, the assessee has earned a total interest income of Rs.4,20,70,913/- from Co-operative banks, the details are as under:
Out of the total interest earned from co-operative banks of Rs.4,20,70,913/-, a sum of Rs.2,85,86,294/- was shown as income in the Income & Expenditure account of the appellant society and the balance of Rs.1,34,84,619/- which was earned on the reserve fund and statutory funds, was directly credited to such funds. As such. the appellant society claimed deduction u/s.80P(2)(d) of the Act to the extent of Rs.2,86,09,044/- (interest of Rs.2,85,86,294/- and dividend of Rs.22,750/-). As regards the interest income of Rs.1.34.84.619/-. the appellant society did not claim deduction u/s.80P(2)(d) as it was not offered as income.
The assessing officer was of the view that the appellant is not entitled to deduction u/s.80P(2)(d) as the interest was earned from co-