Venugopalakrishna Credit Co-operative Society Vs ITO (ITAT Bangalore)
This appeal before the Income Tax Appellate Tribunal (ITAT) Bangalore was filed by Venugopalakrishna Credit Co-operative Society against an order of the CIT(A) for the Assessment Year (AY) 2012-13. The appeal was initially delayed by 430 days, but the ITAT condoned the delay after accepting the management’s explanation that the appeal was missed when appeals for subsequent assessment years were filed.
The core issue stemmed from the assessment process following a notice issued under Section 148 of the Income Tax Act. The assessee, engaged in the business of providing credit facilities to its members, had initially declared Nil income after claiming a deduction of ₹26,62,456/- under Section 80P of the Act. The Assessing Officer (AO) disallowed the entire Section 80P deduction.
On first appeal, the CIT(A) granted the assessee a deduction under Section 80P(2)(a)(i) for the business income earned from providing credit facilities to its members. However, the CIT(A) did not allow a deduction under Section 80P(2)(d) on the interest income of ₹13,83,452/- earned from investments. Of this amount, ₹12,06,264/- was earned from deposits with a scheduled co-operative bank. The CIT(A) partly allowed the appeal but did not allow any corresponding expenditure under Section 57 of the Act, reasoning that the assessee had not earmarked or identified specific expenditure for the interest income.
