Interest Income of a Co-Operative Society on Funds which are not required for Business Deposited in Bank is eligible for Deduction: ITAT

Interest

In a recent ruling, the ITAT, Bangalore held that the interest income earned by a co-operaive Society on funds which are not required for the business deposited in the fixed deposit in the bank is deductible from total income under section 80P(2)(a)(i) of the Income Tax Act.

The assessee, a primary agriculture society, claimed the exemption under Section 80P(2)(a)(i) of the Income Tax Act, 1961 in respect of the income in which includes interest on Fixed Deposits. The AO, based on the Apex Court decision in Totgars Co-operative Sales Society Ltd. Vs. ITO held that the interest income would not qualify for exemption under Section 80P(2)(a)(i) of the Act. First appellate authority confirmed the above decision and therefore, assessee preferred a second appeal before the Tribunal.

The division bench noted that the jurisdictional High Court, in Cambay Electric Supply Industrial Co. Ltd. v. CIT, held that when the amount which was deposited in the bank was not an amount due to members and it was not the liability of the society to the members then the interest earned from the deposits in the bank was held to be eligible for deduction under Section 80P (1) as well as 80P(2)(a)(i) of the Act.

Read the full text of the Order below.

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