Kanaka Credit Co-operative Society Ltd. Vs ITO (ITAT Bangalore)
The ITAT Bangalore held that once the issue of eligibility of deduction under section 80P on interest from bank deposits has attained finality, it cannot be reopened in subsequent proceedings arising from an order giving effect.
In this case, the assessee’s claim for deduction under section 80P on interest income from deposits with cooperative and nationalised banks had already been rejected by the CIT(A) in earlier proceedings, and the assessee did not appeal further. Therefore, the Tribunal held that the issue stood concluded and could not be revisited.
The surviving issue was limited to allowability of corresponding expenditure under section 57 against such interest income taxed under “Income from other sources.” The AO had allowed only 2% of total expenditure as administrative expenses on an ad hoc basis, which was upheld by the CIT(A).
The Tribunal found merit in the assessee’s contention that interest paid on members’ deposits (cost of funds) and related administrative expenses could have a direct nexus with earning such interest income. It held that such claims require proper verification rather than arbitrary estimation.
Accordingly, the matter was remanded to the AO to examine the actual cost of funds and proportionate administrative expenses and allow deduction under section 57 to the extent incurred wholly and exclusively for earning such income. The appeal was thus partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal has been instituted by the assessee against the order of the Ld. CIT(A) passed u/s 250 of the Act dated 23.09.2025.
