Sec 80P Deduction available to Bank for Investments with Sub-Treasuries during its Business / Providing Credit Facilities to its Members: ITAT [Read Order]

EOU - Income Tax Deduction - Taxscan

The Cochin Bench of Income Tax Appellate Tribunal ( ITAT ) in the case of Income Tax Officer v. M/s. Perinthalmanna Service Co-operative Bank Ltd. holding in favor of the assessee adjudged that the income earned by provision of credit facilities to it members by the Co-Operative Societies is subject to deduction under Section 80P(2)(a)(i) of the Income Tax Act.

The sole issue in the present appeal is whether the Commissioner of Income Tax Appeals (CIT(A)) is justified in directing the Assessing Officer (AO) to grant deduction in respect of interest income received by the assessee on investments made with Sub-Treasuries.

The facts of the case are that the assessee is an agricultural credit society, registered under the Kerala Co-operative Societies Act, 1969. It is carrying on the business of providing credit facilities to its members. The assessments were completed by denying the claim of deduction under Section 80P(2) of the Income Tax Act as it is engaged in the business of banking.

The Tribunal after hearing the contentions of both the parties, relying upon a number of decisions was of the view that if a cooperative bank is exclusively carrying on banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. Further, interest accrued on activities which constitute a banking activity has to be treated as business income in the course of its banking activity and is hence entitled to the deduction under the Act.

Hence, it was held that the co-operative societies engaged in providing credit facilities to its members/business of banking had made investments with sub-treasuries, co-operative banks, is entitled to deduction in respect of interest received on such investments.

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