INCOME TAX ACT, 1961

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

Deduction under section 80P(2)(a)(i) - Co-operative society - Interest on deposits with co-operative banks -

Assessee, a Credit Co-operative Society registered under the Karnataka State Co-operative Societies Act, 1959, claimed deduction under section 80P as regards interest earned on deposits made with District Co-operative Bank (DCC Bank). This was rejected by AO by pointing out that interest received from deposits with co-operative banks was not eligible for deduction under section 80P(2)(d). Assessee contended that interest received by it were on deposits made in compliance with section 58 of Karnataka Co-operative Societies Act, 1959 and, therefore, constituted its income from the business of providing credit facilities to the members and accordingly, ought to have held that the deduction under section 80-P(2)(a)(i) in respect thereof was rightly allowed by ITO. Held: In case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a). However, section 80P(2)(d) specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent of interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d). However, interest earned from investments made in any bank, not being a co-operative society, is not deductible under section 80P(2)(d). AO was directed accordingly.

Followed:Principal CIT & Anr. v. Totagars Co-Operative Sale Society (2017) 395 ITR 611 (Karn) : 2017 TaxPub(DT) 1748 (Karn-HC)

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2017-18

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