INCOME TAX ACT, 1961

Section 263 Section 80P(2)(a)(i) Section 80P(2)(d)

Revision under section 263 - Erroneous and prejudicial order - Allowability of deduction under section 80P(2)(a)(i) or 80P(2)(d) as regards interest earned on investments in banks - Assessee being Co-operative Society registered under the Karnataka State Co-operative Societies Act, 1959 engaged in the business of banking/providing credit facilities to its members

Assessee a Co-operative Society registered under the Karnataka State Co-operative Societies Act, 1959 was engaged in the business of banking/providing credit facilities to its members. AO allowed claim of the assessee for deduction of a sum of Rs. 4,92,897 being interest earned on investments in banks under section 80P(2)(a)(i). Pr. CIT took the view that order of AO was erroneous and prejudicial to the interest of the Revenue for the reason that interest income amounting to Rs. 4,92,897 was received by assessee on deposits with co-operative banks and therefore deduction on aforesaid sum ought to not have been allowed to assessee by AO either under section 80P(2)(a)(i) or 80P(2)(d).Held: Interest which accrued on funds not immediately required by assessee for its business purposes and which had been invested in specified securities as 'investment' was ineligible for deduction under section 80P(2)(a)(i). Further, interest earned from investments made in any bank, not being a co-operative society, was not deductible under section 80P(2)(d). CIT was, therefore, justified in exercising his powers of revision under section263 and directing AO to tax interest income in question as it was neither of the nature specified in section 80P(2)(a)(i) or 80P(2)(d).

Relied:Pr. CIT & Anr. Totagars Co-operative SaleSociety (2017) 395 ITR 611 (Karn-HC) : 2017 TaxPub(DT) 1748 (Karn-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2015-16

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