The Tax Publishers2021 TaxPub(DT) 0179 (Hyd-Trib)

INCOME TAX ACT, 1961

Section 80P(2)

Where assessee-co-operative credit society made deposits into savings bank account held with Kotak Mahindra Bank as a business requirement, considering that assessee's funds were available in the savings bank account, the assessee earned certain interest income thereon, thus, as interest income earned was not on fixed deposits, but it was on the funds which were available and which were required for the business purpose of the assessee, thus, assessee was eligible for deduction under section 80P(2) on interest income earned from savings bank account.

Deduction under section 80P(2) - Allowability - Assessee-co-operative credit society made deposits into savings bank account held with Kotak Mahindra Bank as a business requirement - Interest income earned on such deposits, whether was on the funds which were available and which were required for the business purpose of the assessee

Assessee was a co-operative credit society and carried on its activities of in providing loans to its members and earned interest income and also accepted thrift deposits from its members. It filed 'nil' return after claiming deduction under section 80P. AO alleged that assessee made deposits with Kotak Mahindra Bank and earned interest income there from. AO held that such interest income could not be treated as 'business income' but had to be treated as 'Income from other sources', and, accordingly, deduction under section 80P was not to be allowed. Held: Revenue relied upon the decision of the Supreme Court in the case of Totgar's Co-operative Sale Society Ltd. The said decision was distinguishable on facts and was not applicable to the facts of the case of assessee. In the case of Totgar's Co-operative Sale Society Ltd., interest income was earned on short-term bank deposits and securities which were made out of the surplus funds of the members retained by the society and were not immediately necessary for the business of the assessee therein. However, in assessee's case, it had to make the deposits into savings bank account held with Kotak Mahindra Bank as a business requirement. Since assessee's funds were available in the savings bank account, the assessee earned certain interest income thereon. Thus, it can be seen that the interest income earned was not on fixed deposits, but it was on the funds which were available and which were required for the business purpose of the assessee.

Followed:CIT v. Andhra Pradesh State Cooperative Bank Ltd. 2012 TaxPub(DT) 0400 (AP-HC).Distinguished:Totgars' Cooperative Sale Society Limited v. ITO 2010 TaxPub(DT) 1466 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2016-17



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