Common Interest received on Deposits with Co-Operative Bank  as Income is not Eligible for Deduction u/s.80P(2)(d): ITAT [Read Order]

The Bangalore bench of Income Tax Appellate Tribunal (ITAT) held that the common interest received on deposits with co-operative Bank as income is not eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.

Sangam Coop. Credit Society Ltd ,the Appellant assessee is a co-operative society registered with Karnataka Co-operative Societies Act, 1959. It was engaged in providing credit facilities to  its members only.

The assessee filed a return of income  and claimed deduction under section 80P(2)(a)(i) on the entire gross total income being business income from providing credit facilities to its members. The Assessing officer noticed that interest on investments as deposits would fall in the category of income from other sources, and denied the deduction and made addition of Rs.36,85,296 to total income. On appeal, the Commissioner of Income Tax(Appeals) confirmed the order.

Shri.Ashok Mudnur, the counsel for the appellant assessee argued that the assessee is eligible for deduction under section 80P(2)(d) of the Income Tax Act for interest received from the co-operative banks. In view of  various high court decisions  the assessee was eligible for deduction under Section 80P(2)(d) of the Income Tax Act on the interest received from the co-operative banks.

In the case of Totagars Co-operative Sale Society, it was held that the principle that interest received on surplus funds must be taxed as income from other sources, disqualifying the assessee from claiming a Section 80P deduction  because the interest was received on fixed deposits, which the assessee considers to be surplus funds.

The Single member bench of Shri Laxmi Prasad Sahu (Accountant Member) observed that  On various highcourt decisions it is clear that the  assessee is not eligible for deduction under sections 80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act on the interest received. So, the grounds raised by the assessee were dismissed.

The ITAT also directed the Assessing officer to examine whether the assessee has incurred any expenditure for  earning interest income and to decide if the assessee is eligible for setting off of loss suffered from the business while allowing the Appeals.

To Read the full text of the Order CLICK HERE

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