Interest Income from Investment in KDCC Bank is not Eligible for Deduction u/s 80 P(2)(a)(i) of Income Tax Act: ITAT remits to AO for Fresh Consideration

The Bangalore bench of ITAT ruled that interest income from investments in Karnataka District Central Co-operative Bank (KDCC Bank) by Laxminarayana Suvarna Credit Co-operative Society Ltd. was not eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act, 1961. \r

The tribunal noted that KDCC Bank, functioning under the Banking Regulation Act, 1949, did not qualify as a cooperative society under Section 80P(2)(d). Citing precedents from Karnataka High Court and the Tribunal, ITAT allowed the claim for deduction on the cost of funds incurred for earning interest income. The case was remitted to the assessing officer for determining the cost of funds. \r

Consequently, the appeals were partly allowed for statistical purposes.