The Income Tax Appellate Tribunal (ITAT), Bangalore Bench has held that the Cooperative society involved in Banking Business is not eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961.
The assesse, M/s. Shri Basaveswar Credit Co-op Society Ltd.registered under Karnataka State Co-operative Societies Act, 1959 hadfiled Nil return after claiming a deduction under section 80P(2)(a)(i) under chapter VIA of the Income Tax Act, 1961.
The case was selected for scrutiny. The assessee submitted that its main objectives are acceptanceof deposits and providingcredit facilities to members and hence it is eligible to claim deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961.
The assessee, M/s. Shri Basaveswar Credit Co-op Society Ltd., represented by Shri.Ravishankar S. V contended that the order of the Commissioner of Income Tax (Appeals) (CIT(A)) is liable to be set aside denying itself liable to be assessed to a total income of Rs.10,02,282/- as against the Nil income stated in its returns.
The CIT(A) directed the assessing officer (AO) to disallow the claim of deduction of interest earned from associate members, as being contrary to section 80P of the Income Tax Act, 1961. Aggrieved by this order passed by the CIT(A), Hubballi, the assessee has filed this appeal.
The assesse contended that the interest income was attributable to the business and ought to havebeen considered as a business receipt.
The assessee strongly objected that the order of the CIT(A) is completely wrong. Therefore, he requested that the matter may be remanded back to the CIT(A) for fresh consideration in light of the submissions made before him and the actual issue raised before the CIT(A).
The revenuerepresented by Shri. Ganesh R. Ghalerelied on the order of lower authorities and submitted that the assessee is running a co-operative bank and the AO has rightly observed that the co-operative society involved in banking activities, accordingly not eligible for deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961. As per the amendment made in section 80P(4) of the Act read with Section 2(24)(viia) the assessee is not eligible for a claim of deduction as per section 80P(2) of the Act and the interest income received shall be treated as income from other sources since the same is not attributable to the business of the assessee, the revenue contended.
The single bench of Shri Laxmi Prasad Sahu (Accountant Member) remitted back the issue to the CIT(A) for fresh consideration. The assessee is given the liberty to give necessary documents for substantiating its case and the CIT(A) is also directed to give a reasonable opportunity of being heard.
The appeal of the assessee is allowed for statistical purposes.
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