Belve Vyavasaya Seva Sahakari Sangha Ltd. Vs CIT (Karnataka High Court)
Summary: The Karnataka High Court considered an appeal under Section 260A of the Income-tax Act, 1961 filed by Belve Vyavasaya Seva Sahakari Sangha Ltd. for Assessment Year 2016–17 against the order dated 07.08.2024 of the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru, in ITA No.819/Bang/2024. The assessee, a Society, had filed its return claiming deduction under Section 80P(2) of the I.T. Act. The return was selected for scrutiny and notice under Section 143(2) was issued.
The Assessing Officer noticed that the assessee had made deposits with the SCDCC Bank and other nationalised bank and earned interest thereon. The assessee claimed the interest income as deduction under Section 80P(2)(a)(i). The Assessing Officer held that the interest was assessable under the head “Income from Other Sources” and that the deduction was not allowable, further holding that the assessee was not entitled to deduction of such interest income under Section 80P(2)(a)(i) in view of Section 80P(2)(d). The assessment was completed under Section 143(3) by order dated 13.12.2018. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dismissed the assessee’s appeal by order dated 01.03.2024.
The Tribunal, by order dated 07.08.2024, held that the interest income received from investments made with the SCDCC Bank and other nationalised bank was not eligible for deduction under Section 80P(2)(a)(i) in view of Section 80P(2)(d). The assessee thereafter approached the High Court.
The High Court noted that Section 80P(1) enables a co-operative society to claim deduction of income referred to in sub-section (2), while sub-section (2) provides for deduction in respect of profits and gains of business attributable to banking or providing credit facilities to members. The Court further noted that Section 80P(2)(d) provides deduction of interest income derived by co-operative societies from investments with any other co-operative societies.
The Court recorded that the assessee had made investments in SCDCC Bank, which is a Co-operative Bank, and held that interest income derived from the Co-operative Bank was not included as a deduction under Section 80P of the I.T. Act. In reaching this conclusion, the Court relied upon its decision in M/s. Judicial Employees House Building Co-operative Society Limited v. Income Tax Officer [ITA No.93/2024, dated 16.09.2025], in which it had held that interest income received from co-operative banks was not eligible for deduction under Section 80P of the I.T. Act. The Court found that the facts and legal position considered in that decision applied to the present case in all force.
In light of the aforesaid judgment, the High Court held that no substantial question of law arose for consideration. Accordingly, the appeal was dismissed.
Cases Discussed
- M/s. Judicial Employees House Building Co-operative Society Limited v. Income Tax Officer [ITA No.93/2024, dated 16.09.2025]
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
2. This appeal under Section 260A of the Income-tax Act, 1961 (for short, “the I.T. Act”) is filed by the assessee challenging the order dated 07.08.2024 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, “the Tribunal”), in ITA No.819/Bang/2024, for to the Assessment Year 2016–17.
3. The assessee is a Society which filed its return of income claiming deduction under Section 80P(2) of the I.T. Act. The return of income was selected for scrutiny and notice under Section 143(2) of the I.T. Act was issued.
3.1 The Assessing Officer noticed that the assessee had made deposits with the SCDCC Bank and other nationalised bank and had earned interest thereon. The said interest income was claimed as a deduction under Section 80P(2)(a)(i) of the I.T. Act. The Assessing Officer held that since the interest income was assessable under the head “Income from Other Sources”, the deduction claimed was not allowable. The Assessing Officer further held that the assessee was not entitled to deduction of such interest income under Section 80P(2)(a)(i) in view of Section 80P(2)(d) of the I.T. Act.
3.2 The Assessing Officer completed the assessment under Section 143(3) of the I.T. Act by order dated 13.12.2018. Aggrieved by the said assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [for short, “CIT(A)”]. The appeal was considered by the National Faceless Appeal Centre, Delhi (for short, “NFAC”). The CIT(A), by order dated 01.03.2024, dismissed the appeal.
3.3 The assessee, being further aggrieved, preferred an appeal before the Tribunal. The Tribunal, by the impugned order dated 07.08.2024, held that the interest income received by the assessee from investments made with the SCDCC Bank and other nationalised bank is not eligible for deduction under Section 80P(2)(a)(i) in view of Section 80P(2)(d) of the I.T. Act.
4. Considered the submissions made on either side and perused the appeal papers.
5. The assessee is a Society which claimed deduction under Section 80P(2) of the I.T. Act. The assessee had made deposits with the SCDCC Bank and nationalised bank and earned interest thereon.
6. Section 80P(1) of the I.T. Act enables a co-operative society to claim deduction of the income referred to in sub-section (2). Sub-section (2) provides for deduction in respect of the profits and gains of business attributable to the business of banking or providing credit facilities to its members. Section 80P(2)(d) provides deduction of interest income derived by the Co-operative Societies from its investments with any other Co-operative societies. The assessee as made investments in SCDCC Bank which is a Co-operative Bank. Interest income derived from Co-operative Bank is not included as deduction under Section 80P of the I.T. Act. This Court, in M/s. Judicial Employees House Building Co-operative Society Limited v. Income Tax Officer [ITA No.93/2024, dated 16.09.2025], has held that the interest income received from co-operative banks is not eligible for deduction under Section 80P of the I.T. Act. We find that the facts and the legal position considered in the aforesaid decision apply to the present case in all force.
7. In light of the above judgment, no substantial question of law would arise for consideration of this Court. Accordingly, the appeal stands dismissed.
