Sec. 80P of Income Tax Act, 1961— Deduction —Matter regarding the claim of deduction was restored to the file of the Assessing Officer for examining them afresh in the light of various decisions rendered by Hon'ble High Court and Hon'ble Supreme Court.

Facts: Assessee is a credit co-operative society registered under Karnataka Souharda Sahakari Act and claimed exemption under Section 80P. Assessing Officer rejected the claim under Section 80P by holding that the assessee is carrying on banking activities and hence it will be hit by provisions of Section 80P(4) which bar deduction under Section 80P to co-operative societies who carry on banking business. Accordingly, the Assessing Officer held that the assessee is not eligible for deduciton under Section 80P(2)(a)(i). AO also held that the interest earned by co-operative society on surplus funds invested in Short Term Deposits with banks and Govt. Securities are not eligible for deduction under Section 80P. On further appeal by assessee, CIT (Appeals) also confirmed the order passed by the Assessing Officer. Being aggrieved, assessee went on appeal before Tribunal.

Held, that AO has disallowed the claim for deduction u/s 80P holding that the assessee would be hit by sec.80P(4). However, it is the contention of the assessee that the assessee is carrying on money lending activity mainly with its Members and hence it cannot be categorized as Bank as held by the Assessing Officer. Lastly, the orders passed by the CIT (Appeals) in all the three years under consideration were set aside and restored to the file of Assessing Officer for examining them afresh. - UDAYA SOUHARDHA PATTINA SAHAKARI NIYAMITHA V/s ITO - [2020] 26 ITCD Online 058 (ITAT-BANGALORE)