A division bench of the Hyderabad ITAT, while granting relief to M/s SBI Officers Coop. Credit Society Ltd, held that the society is eligible for deduction under Section 80P of the Income Tax Act, 1961 for the ‘interest income’ earned by it on the deposits placed with the State Bank of India (SBI).
Assessee, in the instant case, is a Cooperative Credit Society providing credit facility to its members. for the year under consideration, the assessee society admitted Rs. 1,91,88,053 as its Business income and claimed deduction u/s 80P of the Act.
However, the claim for deduction was rejected by the assessee on ground that the assessee was established for the benefit of SBI Officers only, by collecting share capital and thrift contributions every month, from members and was sanctioning loans to the members who are in need of money for performing of marriages and higher education of children etc. He observed that the interest earned on bank deposit should not be treated as income from other sources.
Before the authorities, the assessee maintained that the funds constitute reserves which have been deposited with State Bank of India as per norms of A.P. Cooperative Society Act, 1964 and the Society is eligible for deduction under the profits attributable to their activity u/s 80P(1)(2(a)(i) of the I.T. Act.
The bench observed that the High Court, in the case of Vavveru Coop.Rural Bank Ltd has decided the issue in favour of the assessee.
“As held by the Hon’ble Bombay High Court in the case of CIT vs. Godavaridevi Saraf reported in (1978) 113 ITR 589 (Bom.), we are bound by the decision of the jurisdictional High Court on similar set of facts. Further, in the case of SBH Employees Co-operative Credit Society also, the Hon’ble jurisdictional High Court has held the issue in favour of the assessee. Respectfully following the same, we allow the assessee’s appeal and direct the AO to allow the deduction u/s 80P of the Act of the ‘interest income’ earned by the assessee on the deposits placed with the SBI, a nationalised bank. The learned DR had tried to distinguish the facts of the case before us with the above decision stating that in the case of the assessee, the interest is earned on FDR’s, while, in the case before the Hon’ble High Court, the deposits were not fixed deposits. However, from the assessment order, it is seen that the reserves and surpluses have been kept as deposits and there is no reference to ‘FDRs’ by the AO. Therefore, this distinction is not established,” the bench said.
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