INCOME TAX ACT, 1961

Section 80P

Deduction under section 80P - Co-operative society - Interest on investment in bank -

Assessee, co-operative society was engaged in the activity of carrying on of business of providing credit facilities to its members, claimed deduction under section 80P. AO, taking note of insertion of section 80P(4), declined to extend benefit of deduction under section 80P(2)(i). CIT(A) held that assessee's activity was not in the nature of banking and consequently, the benefit of deduction under section 80P could not be denied. However, in so far as the income of assessee consisting of interest earned from short-term deposits was held to be liable to income-tax. Aggrieved by that portion, appeal was filed before Tribunal by assessee, which was dismissed. Held: The amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact, the amount which was in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, they had deposited the money in a bank so as to earn interest. The said interest income was attributable to carrying on of the business of banking and therefore, it was liable to be deducted in terms of section 80P(1). The order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount was unsustainable in law.

Followed:Cambay Electric Supply Industrial Co. Ltd. v. CIT (1978) 113 ITR 84 (SC) and CIT v. Andhra Pradesh State Co-operative Bank Ltd. (2011) 200 Taxman 220 (AP).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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