Karnataka State Cooperative Agriculture and Rural Development Bank Vs ITO (ITAT Bangalore)
The assessee, a state-level co-operative credit society, claimed deduction under Section 80P(2)(a)(i) on various income streams including interest on investments, advances, and other receipts. The AO and CIT(A) restricted deduction, treating a portion (₹3.16 crore) as income from other sources.
The ITAT Bangalore, after detailed analysis of the assessee’s functioning (as elaborated from page 14 onwards), held that interest on investments (₹16.59 crore)—including statutory and surplus fund deposits is attributable to the business of providing credit facilities and hence eligible for deduction u/s 80P, following earlier years’ decisions and Karnataka High Court rulings.
For interest on other advances (₹1.77 crore), the Tribunal made a distinction:
- Interest from loans to nominal/associate members and against FDs eligible for deduction
- Interest from staff loans (₹59.24 lakh) not eligible, to be taxed as income from other sources
The Tribunal emphasized that the expression “attributable to” has a wide scope, covering even incidental income connected with business, but staff loans fall outside core business activity.
Thus, the addition was partly deleted, granting substantial relief to the assessee, with only limited disallowance sustained.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal, at the instance of the assessee, is directed against the order passed under section 250 of the Income Tax 1961 and is pertaining to A.Y. 2022-23 by the learned Commissioner of Income Tax Appeal (hereafter the learned CIT(A)) at National Faceless Appeal Centre-NFAC bearing DIN: ITBA/NFAC/S/250/2025-26/1077045835(1).
