IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT Assessment year : 2017-18 Bhaskara Employees Credit Vs. The Income Tax Officer, Co-operative Society Ltd., Ward 4(2)(2), ISRO Satellite Centre, Airport Road, Bengaluru.

Vimanapura Post, Bengaluru – 560 017. PAN: AAATB 1577B APPELLANT RESPONDENT Appellant by : Shri Siva Prasad Reddy, ITP.

Respondent by : Shri Ganesh R. Ghale, Standing Counsel for the Revenue.

Date of hearing : 23.09.2025 Date of Pronouncement : 30.09.2025

O R D E R

1. This appeal is filed by Bhaskara Employees Credit Co-operative Society Ltd. (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the Addl/JCIT(A)-1, Visakhapatnam [ld. CIT(A)] dated 6.3.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [the Act] dated 27.12.2019 by the ITO, Ward

4(2)(2), Bangalore [ld. AO] was dismissed.

2. Only grievance in the appeal is with respect to the denial of deduction u/s 80P (2) (a) (i) of ₹ 470,921/– being the interest income accruing on statutory investment in fixed deposits and cooperative banks and scheduled banks made in compliance of the provisions of the Karnataka Cooperative Societies Act, 1959.

3. The brief facts of the case show that assessee is a cooperative society whose membership is strictly confined to the employees of Indian space research Organisation. Society is extending credit facility to its members and registered under the Karnataka Cooperative Societies Act, 1959. Therefore it has claimed that its income is exempt under section 80 P(2) (a) (i) of the Act.

4. The assessee filed its return of income on 24/10/2017 declaring nil income after claiming an amount of ₹ 3,406,263/– as deduction under section 80P of the Act. The learned assessing officer selected return of the assessee for scrutiny for the reason of examination of deduction under section 80 P of the Act.

5. On the assessment, the assessee was denied deduction u/s 80P (2) (a)

(i) of the Act on interest income earned by the assessee on investments made in pursuance of provision of The Karnataka State Cooperative Societies Act, 1959 not treating it as business income attributable to the activities of the assessee. The ld assessing officer passed an assessment order under section 143(3) of the Act on 27/12/2019 denying deduction under section 80P of the Act but determined the total income at Rs 470921/- against the returned income of rupees Nil. Thus the assessee was denied deduction under section 80 P of the Act on the interest income earned by the assessee of ₹ 470,921/–. Main reason for disallowing the above claim is the decision of the Hon’ble Karnataka High Court in case of Totagars’ Sales Cooperative Societies (2017) 83 taxmann.com 140 (Karnataka). When the matter reached before the learned CIT – A, the order of the learned AO was upheld.

Therefore, assessee is in appeal before us.

6. Though the assessee has raised a ground before us in appeal that no show cause notice was issued, but crux of the argument is that the assessee is entitled to deduction under section 80 P of the Act of interest earned by the assessee on statutory investment made by it in compliance of The Karnataka Cooperative Societies Act, 1959, is allowable as business income and therefore the entitlement of deduction under section 80 P (2) (a) (i) of the Act cannot be denied.

7. Before us the assessee distinguished the decision of the Hon’ble Karnataka High Court and further relied upon the decision of the Hon’ble Supreme Court in case of Kerala State Cooperative Agricultural And Rural Development Bank Ltd (2023) 458 ITR 384 (SC) and as well as the decision of the case of Mavilayi Service Cooperative Bank Ltd (2021) 123 taxmann.com 161 (SC). It submits that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench also (ITA No.1724/Bangalore/2019 dated 22/11/2021 for AY 2014