Shree Venkatramana Credit Co-operative Society Limited, Sullia v. Income Tax Officer, Ward- 1, Puttur

ITA 1515/BANG/2019 | 2015-2016
Pronouncement Date: 31-08-2021 | Result: Allowed

Appeal Details

RSA Number 151521114 RSA 2019
Assessee PAN AAALS1315A
Bench Bangalore
Appeal Number ITA 1515/BANG/2019
Duration Of Justice 2 year(s) 2 month(s) 9 day(s)
Appellant Shree Venkatramana Credit Co-operative Society Limited, Sullia
Respondent Income Tax Officer, Ward- 1, Puttur
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-08-2021
Date Of Final Hearing 27-08-2021
Next Hearing Date 27-08-2021
Last Hearing Date 25-06-2020
First Hearing Date 26-11-2019
Assessment Year 2015-2016
Appeal Filed On 21-06-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. BEENA PILLAI JUDICIAL MEMBER ITA NO.1515/BANG/2019 ASSESSMENT YEAR : 2015-16 SHREE VENKATRAMMANA CREDIT CO-OPERATIVE SOCIETY LTD. MAIN ROAD MOGARPANE SULLIA D.K KARNATAKA-574239 PAN AAALS 1315 A VS. THE INCOME-TAX OFFICER WARD-1 PUTTUR. APPELLANT RESPONDENT ASSESSEE BY : SHRI RAVISH RAO CA REVENUE BY : SMT. H KABILA ADDL.CIT DATE OF HEARING : 27-08-2021 DATE OF PRONOUNCEMENT : 31-08-2021 ORDER PER BEENA PILLAI JUDICIAL MEMBER PRESENT APPEALS ARE FILED BY THE ASSESSEE AGAINST THE COMMON ORDER DATED 29/03/2019 PASSED BY THE LD.CIT(A) MANGALURU FOR ASSESSMENT YEAR 2015-16 ON THE FOLLOWING GROUNDS. I THE ORDER OF THE LEARNED FIRST APPELLATE AUTHORIT Y(FAA) IS ERRONEOUS OPPOSE TO THE LAW AND CONTRARY TO THE FACTS AND CIR CUMSTANCES OF THE CASE. THE LEARNED FIRST APPELLATE AUTHORITY ERRED I N LAW BY UPHOLDING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WITHOUT APPRECIATING THE GROUNDS OF APPEAL AND SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVES. PAGE 2 OF 10 ITA NO.1515/BANG/2019 2 THE LEARNED FAA RELIED ON THE RATIO LAID DOWN IN BY THE HON'BLE SUPREME COURT IN CIVIL APPEAL OF THE CITIZEN CO-OPE RATIVE SOCIETY LIMITED HYDERABAD V/S ACIT CIRCLE 9 CA NO. 10245 O F 2017 WERE CAN'T MADE APPLICABLE IN OUR CASE BECAUSE. A. IN THE CASE OF APPELLANT SOCIETY THE HON'BLE SUPRE ME COURT OBSERVED SITUATION IN THE CIVIL APPEAL OF THE CITIZEN CO-OPERATIVE SOCIETY LIMITED HYDERABAD V/S ACIT CIR CLE 9 CA NO. 10245 OF 2017 WERE COMPLETELY ABSENT. WE BEI NG A CO-OPERATIVE SOCIETY REGISTERED UNDER KARNATAKA CO- OPERATIVE SOCIETIES ACT AND SOCIETY MEANT ONLY FOR ITS MEMBERS AND PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. WE HAVE NOWHERE VIOLATED THE PRO ISIONS OF CO-OPERATIV E SOCIETIES ACT & BY-LAWS. SECTION 80(P) (4) IS ALSO NOT APPLICABLE TO US AS WE ARE NOT A 'CO-OPERATIVE BANK 'WITHIN THE MEANING ASSIGNED IN PART V OF THE BANKI NG REGULATION ACT. B. WE HAVE NOT VIOLATED THE PROVISIONS OF KCS ACT. AS PER OUR BY-LAWS APPROVED BY THE REGISTRAR OF CO-OP SOCIETIE S. C. WE HUMBLY RELY ON THE DECISION LAID DOWN BY THE HONORABLE APEX COURT IN THE MAVILAYI SERVICE CO- OPERATIVE BANK LTD. AND OTHERS V. COMMISSIONER OF INCOME TAX AND ANOTHER. [2021J/4314TR/1 3 THE LEARNED FAA/AO HAS RELIED ON THE RATIO LAID D OWN IN ORDER DATED 16.06.2017 OF DHARWAD BENCH OF HON'BLE HIGH COURT O F KARNATAKA IN THE CASE OF THE TOTAGARS CO-OP SALE SOCIETY SIRSI IN IT A NO 10066 OF 2016 IS APPLICABLE TO APPELLANT BECAUSE. AS PER THE DECISIO N INTEREST EARNED FROM DEPOSITSWITH COOPERATIVE BANKS ARE BUSINESS INCOME. IT IS ONLY THE INTEREST FROM OTHER THAN COOPERATIVE BANKS IS INCOM E FROM OTHER SOURCES. 1) THE NATURE OF BUSINESS ACTIVITY OF APPELLANT AND TSS SIRSI IS DIFFERENT. WE HAVE ENGAGED ONLY IN ADVANCING MONEY TO MEMBERS AND ACCEPTING DEPOSITS FROM MEMBERS. OUR MAIN OBJEC TIVE IS NOT EARNING INCOME BY INVESTING OUR FUNDS WITH OTHERS C O-OP BANKS OR SOCIETIES. WE COLLECT DEPOSITS FROM MEMBERS TO MOBI LIZE CAPITAL TO LEND OR ADVANCE MONEY TO MEMBERS FOR THEIR SPECIFIE D NEEDS. BUT AS PER SECTION 58 & RULE 28 OF KARNATAKA CO-OP SOCI ETIES ACT & RULES FRAMED THERE UNDER WE ARE LEGALLY BOUND TO M AINTAIN STATUTORY LIQUIDITY RATIO. 2) IT MEANS TIME DEPOSITS COLLECTED FROM MEMBER: SHOUL D BE KEPT AS DEPOSITS IN OTHER BANKS OR CO-OPERATIVE SOCIETIES. SO IT IS LEGAL OBLIGATION TO MAINTAIN SUCH DEPOSITS. FURTHER IT IS ALSO INCIDENTAL ACTIVITY OR BUSINESS TO THE MAIN BUSINESS OF THE SO CIETY. PAGE 3 OF 10 ITA NO.1515/BANG/2019 3) WE HUMBLY RELY ON DECISION LAID DOWN BY THE HONORAB LE APEX COURT IN THE CASE OF CIT VS NAWANSHAHAR CENTRAL CO- OPERATIVE BANK LTD 2007/289 ITR 6 THE APPALLENT CRAVES LEAVE TO ADD TO AMEND AND/OR ALTER ANY OF THE FORGOING GROUNDS AND SUCH OTHER GROUNDS AS MAY BE URGED AT T HE TIME OF HEARING THE APPALLENT PRAYES FOR ALLOWING THE DEDUCTION UNDER S ECTION 80P(2)(A)(I) & 80P(2)(D) BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A CO-OPERATIVE SOCIETY PROVIDING CRE DIT FACILITIES TO ITS MEMBERS. FOR YEARS UNDER CONSIDERATION ASSESSEE FILED ITS RETURN OF INCOME AFTER CLAIMING DEDUCTION UNDER SEC TION 80P OF THE ACT. THE RETURN WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO ASSESSEE. IN RESPONSE TO THE STATUTORY NOTICES REPRESENTATIVE OF ASSESSE E APPEARED BEFORE THE LD.AO AND FILED REQUISITE DETAILS AS CAL LED FOR. 2.1 LD.AO FROM THE DETAILS FILED OBSERVED THAT: (I) ASSESSEE HAS EARNED INTEREST ON INVESTMENT IN C O-OPERATIVE BANKS NATIONALISED BANKS; (II) ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 8 0P(2)(A) OF THE ACT IN RESPECT OF AMOUNT OF PROFIT ATTRIBUTABLE TO THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 2.2 IN THE INSTANT CASE IT WAS NOTICED BY THE LD.A O DURING ASSESSMENT PROCEEDINGS THAT THE ASSESSEE SOCIETY W AS EARNING INCOME NOT ONLY FROM THE MEMBERS BUT MAJORITY OF TH E INCOME FROM THE NOMINAL/ ASSOCIATE MEMBERS. TAKING INTO CO GNIZANCE THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CITIZEN CO-OP SOCIETY LTD HYDERABAD V. ACIT C-9(1 ) HYDERABAD IN CIVIL APPEAL NO.10245 OF 2017 DATED 8.08.2017 THE LD.AO DENIED DEDUCTION CLAIMED U/S.80P BY HOLDING THAT TH E ASESSEE PAGE 4 OF 10 ITA NO.1515/BANG/2019 PROVIDED CREDIT FACILITIES TO THREE CATEGORIES OF M EMBERS VIZ. I) REGULAR MEMBER II) ASSOCIATE MEMBERS AND III) NOMIN AL MEMBERS. HENCE LD.AO DISALLOWED THE DEDUCTION CLAI MED U/S.80P(2)(A)(I) OF THE ACT. 2.3 THE LD.AO WAS OF THE VIEW THAT PRINCIPLE OF MUT UALITY WERE VIOLATED BY ASSESSEE AND THEREFORE DENIED THE DEDUC TION IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF CITIZEN CO- OPERATIVE SOCIETY LTD. IN CIVIL APPEAL NO. 10245/20 17 DATED 08.08.2017 ON FOLLOWING GROUNDS: I) INTEREST/DIVIDEND INCOME WAS HELD TO BE INCOME F ROM OTHER SOURCES AND EXCLUDED FROM THE DEDUCTION UNDER SECTI ON 80P(2)(A)(I). FOR THE DEDUCTION UNDER SECTION 80P(2 )(D) WAS ALSO DENIED RELYING ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF M/S TOTGARS CO-OPERATIVE SOCIETY LTD. BY ORDER DATED 16/06/2017 . II) THE PRINCIPLES OF MAJORITY WERE VIOLATED RELYIN G ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF M/S CITIZEN CO-OPE RATIVE SOCIETY LTD. HYDERABAD DATED 08/09/2017 . 2.4 AGGRIEVED BY THE ORDER OF LD.AO ASSESSEE PREFE RRED APPEAL BEFORE THE LD.CIT(A). 2.5.THE LD.CIT(A) CAME TO THE CONCLUSION THAT AS PE R THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CITIZENS CO-OP SOCIETY (SUPRA) IF THE PRINCIPLE OF MUTUALITY IS NOT SATISFIED THEN THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80P(2)(A) (I) OF THE ACT. 2.6 IN RESPECT OF MEMBERS THE LD.CIT(A) OBSERVED T HAT THE ASSESSEE ADMITTED EXCESS NOMINAL/ASSOCIATE MEMBERS WHICH IS PAGE 5 OF 10 ITA NO.1515/BANG/2019 MORE THAN 15% OF THE TOTAL MEMBERS WHEN COMPARED TO REGULAR MEMBERS WHICH IS IN VIOLATION OF KARNATAKA CO-OPERA TIVE SOCIETY ACT 1959. IN VIEW OF THE VIOLATION OF THE KARNATA KA CO-OPERATIVE SOCIETY ACT THE LD.CIT(A) OBSERVED THAT THE SOCIET Y IS NOT ELIGIBLE FOR DEDUCTION U/S.80P AND AS SUCH RATIO OF THE DECI SION OF HON`BLE SUPREME COURT DECISION IN THE CASE OF CITIZEN CO-OP SOCIETY LTD HYDERABAD V. ACIT C-9(1) HYDERABAD I N CIVIL APPEAL NO.10245 OF 2017 DATED 8.08.2017 IS APPLICABLE TO THE FACTS OF THE ASSESSEE SOCIETY. 2.7 THE LD.CIT(A) ALSO HELD THAT IN THE ASSESSEE'S CASE MUTUALITY PRINCIPLES HAVE FAILED AS SUBSTANTIAL BUS INESS IS BEING CARRIED OUT WITH THE GENERAL PUBLIC OR NOMINAL MEMB ERS AND ALSO IN VIEW OF THE ASSESSEE BEING REGISTERED AS SOUHARD A CO-OPERATIVE SOCIETY AND NOT AS CO-OPERATIVE SOCIETY AND TAKING INTO ACCOUNT THE BYELAWS AND THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE THE SOCIETY IS NOT ELIGIBLE FOR DEDUCTION U/S 80P OF THE INCOME TAX ACT 1961. 2.8 THE LD.CIT(A) THUS UPHELD THE ORDER OF LD.AO AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS IN APPEAL BEFORE US NOW. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 3.1 THE ISSUE THAT ARISES FOR CONSIDERATION IS: (I) WHETHER THE AUTHORITIES BELOW WERE JUSTIFIED IN DENYING THE CLAIM OF THE ASSESSEE FOR REDUCTION U/S 80P(2)(A)(I ) OF THE ACT. PAGE 6 OF 10 ITA NO.1515/BANG/2019 (II) WHETHER INTEREST INCOME EARNED BY ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT WHEREAS THE DED UCTION IS ONE CLAIMED U/S 80P(2)(A)(I) OF THE ACT. GROUND NO.1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 4. GROUNDS 2: IN RESPECT OF ASSOCIATE/NOMINAL MEMBE RS HONBLE SUPREME COURT IN THE CASE OF MAVILAYI SERVICE COOPE RATIVE BANK LTD. V. CIT (2021) 123 TAXMANN.COM 161 (SC) HAS HELD THAT THE EXPRESSION MEMBERS IS NOT DEFINED IN THE INCOME-T AX ACT. HENCE IT IS NECESSARY TO CONSTRUE THE EXPRESSION MEMBERS IN SECTION 80P(2)(A)(I) OF THE ACT IN THE LIGHT OF DEF INITION OF THAT EXPRESSION AS CONTAINED IN THE CONCERNED CO-OPERATI VE SOCIETIES ACT. IN VIEW OF THIS THE FACTS ARE TO BE EXAMINED IN THE LIGHT OF PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN MAVILAYI SERVICE COOPERATIVE BANK LTD. (SUPRA) . ACCORDINGLY WE REMIT THIS ISSUE OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT TO T HE FILE OF LD.AO TO EXAMINE THE SAME DE NOVO IN THE LIGHT OF THE ABOVE JUDGMENT. ACCORDINGLY GROUNDS 2 STANDS ALLOWED FOR STATISTICA L PURPOSES. 5. GROUND 3 IS IN RESPECT OF INTEREST FROM INVESTMENT IN CO- OPERATIVE BANKS NATIONALISED BANKS. 5.1 THIS ISSUE HAS BEEN DECIDED BY COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF POTTERS COTTAGE INDUSTRIAL CO-O PERATIVE SOCIETY LTD. FOR ASSESSMENT YEARS 2015-16 IN ITA NO 1257 & 1258/BANG/2019 BY ORDER DATED 30-08-2019 . THIS TRIBUNAL OBSERVED AND DECIDED AS UNDER: PAGE 7 OF 10 ITA NO.1515/BANG/2019 WE NOTE THAT THE LD.AO DENIED DEDUCTION UNDER SECT ION 80P(2)(D) OF THE ACT AS WELL IN RESPECT OF INTEREST INCOME RECEIVED BY A SSESSEE FROM DEPOSITS KEPT WITH BANKS FOR THE YEARS UNDER CONSIDERATION. THE L D.AO ASSESSED THE INTEREST INCOME RECEIVED FROM BANK DEPOSITS UNDER T HE HEAD INCOME FROM OTHER SOURCES. THE LD.COUNSEL PLACED RELIANCE ON THE DECISION OF H ONBLE KARNATAKA HIGH COURT IN KEEP CASE OF TOTGARS CO-OPERATIVE SALE SOC IETY LTD. VS ITO REPORTED IN (2015) 58 TAXMANN.COM 35. WE HAVE PERUSED PLETHORA OF DECISIONS ON THIS ISSUE BY HONBLE KARNATAKA HIGH COURT AND THE RATIO LAID DOWN BY HONBLE SUPRE ME COURT. HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS CO-OPERATI VE SALE SOCIETY LTD. VS. ITO REPORTED IN 322 ITR 283 HELD THAT INCOME FROM UTILISATION OF SURPLUS FUNDS WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 80P. HONBLE KARNATAKA HIGH COURT IN CASE OF TUMKUR MERC HANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO REPORTED IN 230 TAXMAN 309 DEALT WITH AN ISSUE WHERE DEDUCTION U/S.80P(2)(A)(I) OF THE ACT WAS CLA IMED ON INTEREST FROM THE DEPOSITS MADE IN A NATIONALIZED BANK WHICH WAS USED FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE THEREIN CL AIMED THAT THE SAID INTEREST AMOUNT IS ATTRIBUTABLE TO THE CREDIT FACILITY PROVI DED BY THE ASSESSEE AND FORMS PART OF PROFITS AND GAINS OF BUSINESS. HONBL E KARNATAKA HIGH COURT AFTER CONSIDERING THE DECISION BY HONBLE SUPREME C OURT IN CASE OF TOTGARS(SUPRA) HELD THAT SINCE THE WORD INCOME I S QUALIFIED BY THE EXPRESSION ATTRIBUTABLE TO THE BUSINESS OF BANKIN G IS USED IN SEC.80P(2)(A)(I) OF THE ACT IT HAS TO RECEIVE A WIDER MEANING AND S HOULD BE INTERPRETED AS COVERING RECEIPTS FROM SOURCES OTHER THAN THE ACTUA L CONDUCT OF BUSINESS. HONBLE KARNATAKA COURT HELD THAT A COOPERATIVE SOC IETY THAT IS CARRYING ON WITH THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIE S TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL IF NOT I MMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS CANNOT BE KEPT IDLE. IF THEY DEPOSI T THIS AMOUNT IN BANK SO AS TO EARN INTEREST THE SAID INTEREST INCOME IS ATTRI BUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIE S TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FO R EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROF ITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUS INESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. HONBLE KARNATAKA COURT DISTINGUISHED THE FACTS IN THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS (SUPRA) BY OBS ERVING THAT HONBLE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASS ESSEE-COOPERATIVE SOCIETY APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUN T WHICH WAS PAYABLE TO PAGE 8 OF 10 ITA NO.1515/BANG/2019 ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT WAS INVES TED IN A SHORT-TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE- SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BAL ANCE SHEET ON THE LIABILITY SIDE. THEREFORE TO THAT EXTENT SUCH INTEREST INCO ME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SE CTION 80P(2)(A)(I) OF THE OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF TOTGARS (SUPRA) HONBLE SUPREME COURT HELD THE ASSESSING OFFICER WA S RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. THE COURT ALSO OBSERVED THAT EVEN THE HONBLE SUPREME COURT MADE I T CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CA SE. SIMILAR VIEW TAKEN IN CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO REPORTED IN [2015] 377 ITR 464 BY HONBLE K ARNATAKA HIGH COURT. IN A SUBSEQUENT DECISION OF PR.CIT AND ANRS VS. TOTAGARS CO-OPERATIVE SALE SOCIETY REPORTED IN 392 ITR 74 IN THE CONTEXT OF DE DUCTION U/S.80P(2)(D) OF THE ACT IT WAS HELD BY HONBLE KARNATAKA HIGH COURT T HAT DEDUCTION IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SO CIETY THE WHOLE OF SUCH INCOME IS AVAILABLE UNDER SEC.80P(2)(D) OF THE ACT. HONBLE KARNATAKA HIGH COURT HELD THAT DECISION BY HONBLE SUPREME COURT I N CASE OF TOTGARS (SUPRA) WAS NOT ON THE DEDUCTION CLAIMED U/S.80P(2)(D) OF T HE ACT BUT WAS RENDERED IN RESPECT OF DEDUCTION CLAIMED UNDER SECTION 80P(2 )(A)(I) OF THE ACT. HONBLE KARNATAKA HIGH COURT IN THE CASE OF PR.CIT ANR. VS. TOTGARS CO- OPERATIVE SALE SOCIETY REPORTED IN 395 ITR 611 TOOK A DIFFERENT VIEW AND HELD THAT INTEREST INCOME EARNED ON DEPOSITS WHETHER WIT H ANY OTHER BANK WILL BE IN THE NATURE OF INCOME FROM OTHER SOURCES AND NOT INC OME FROM BUSINESS AND THEREFORE THE DEDUCTION U/S.80P(2)(D) OF THE ACT CA NNOT BE ALLOWED TO THE ASSESSEE. THE HONBLE COURT FOLLOWED DECISION OF HO NBLE GUJARAT HIGH COURT IN THE CASE OF SBI VS. CIT REPORTED IN 389 ITR 578 WH EREIN HONBLE GUJARAT HIGH COURT DISSENTED FROM THE VIEW TAKEN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS CASE (SUPRA). IT CAN THUS BE SEEN THAT THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF TOTAGARS COOPERATIVE SALES SOCIETY IN 395 ITR 611 IS THAT I N LIGHT OF THE PRINCIPLES ENUNCIATED BY HONBLE SUPREME COURT IN TOTGARS CO-O PERATIVE SALE SOCIETY (SUPRA) IN CASE OF A SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS INCOME FROM INVESTMENTS MADE IN BANKS DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN SECTION 80P(2)(A) OF TH E ACT. THUS INTEREST EARNED FROM INVESTMENTS MADE IN ANY BANK NOT BEING A CO-O PERATIVE SOCIETY IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(D) OF THE ACT. HOWE VER SECTION 80P(2)(D) OF THE ACT SPECIFICALLY EXEMPTS INTEREST EARNED FROM FUNDS INVESTED IN CO-OPERATIVE SOCIETIES. THEREFORE TO THE EXTENT OF THE INTEREST EARNED FRO M INVESTMENTS MADE BY ASSESSEE WITH ANY CO-OPERATIVE SOCIETY A CO-OPE RATIVE SOCIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INCOME UNDER SECTION 80P(2)(D) OF THE ACT. THIS NEEDS TO BE VERIFIED BY THE LD.AO. ON THE BASIS OF ABOVE DISCUSSIONS AND IN THE INTER EST OF JUSTICE WE REMAND THIS ISSUE BACK TO THE LD.AO TO VERIFY THE INTEREST EARNED FROM INVESTMENTS MADE IN CO-OPERATIVE SOCIETIES THAT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. PAGE 9 OF 10 ITA NO.1515/BANG/2019 5.1. RESPECTFULLY FOLLOWING THE ABOVE VIEW WE DIR ECT THE LD.AO TO VERIFY THE INTEREST EARNED ON INVESTMENT EARNED FRO M CO-OPERATIVE SOCIETIES AND TO CONSIDER THE CLAIM OF ASSESSEE IN ACCORDANCE WITH LAW UNDER SECTION 80P(2)(D) OF THE ACT. ACCORDINGLY THESE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMB ER BANGALORE DATED THE 31 ST AUG 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE PAGE 10 OF 10 ITA NO.1515/BANG/2019 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -8- 2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -8- 2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -8- 2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -8- 2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -8- 2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -8- 2021 SR.PS 8. IF NOT UPLOADED FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -8- 2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS