The Bangalore bench of Income Tax Appellate Tribunal ( ITAT ) directed re adjudication upon the denial of deduction claimed under Section 80(2)(d) of the Income Tax Act , 1961 with regard to the interest received from cooperative banks /scheduled banks.
The assessee S. K. Goldsmiths Industrial Co-operative Society Ltd., is a co-operative society registered under the Karnataka Cooperative Societies Act, 1959. It is mainly engaged in the business of providing credit facilities to its members.
For the Assessment Year 2017-18, return of income was filed on 31.10.2017 declaring total income of Rs.8,51,310/- after claiming deduction under section 80P of the Act, amounting to Rs.2,20,14,797/-.
The AO disallowed claim of deduction under section 80P of the Act, for the reason that assessee was dealing with non-members and had violated the principle of mutuality
Aggrieved, the assessee filed an appeal before the CIT(A), who dismissed the appeal. Thereafter the assesse filed another appeal before the tribunal.
Assesee representative , Sriram V. Roa, argued that interest income that is received out of investments with Central Co-operative Banks are mainly on account of compulsion under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules; consequently, the same is entitled to benefit of deduction under section 80P(2)(a)(i) of the Act
Subramanian S , the Department representative, supported the orders of the AO and the CIT(A).
The tribunal during the proceedings directed the AO to examine” whether the interest income received on investment with Central Co-operative Bank is out of compulsions under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. If it is so, the same may be considered as ‘business income’ and entitled to deduction under section 80P(2)(a)(i) of the Act”
After observing the submissions of both parties the two-member bench Of Laxmi Prasad Sahu, ( Accountant member ) and George George K, ( Vice President ) directed readjudication upon the denial of deduction claimed under Section 80(2)(d) of the Income Tax Act , 1961 with regard to the interest received from cooperative banks /scheduled banks.
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