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Interest Income earned from Investments with Treasuries and Banks Taxable as Business Income: ITAT [Read Order]

Interest Income - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT) held that the interest income earned from investments with treasuries and banks is part of banking activity and the interest income is eligible to be assessed as `income from business’, instead of `income from other sources’.

The assessee, M/s. Enadimangalam Service Co-operative Bank Limited is a co-operative society registered under the Kerala Co-operative Societies Act, 1969. For the assessment year under consideration, the return of income was filed after claiming deduction under Section 80P of the Income Tax Act.

The Assessing Officer passed an order, disallowing the claim of deduction under Section 80P of the Income Tax Act. The reasoning of the Assessing Officer to disallow the claim of deduction under Section 80P(2) of the Income Tax Act was that the assessee was doing the business of banking, and therefore, in view of insertion of section 80P(4) of the Income Tax Act, the assessee will not be entitled to the deduction under Section 80P(2) of the Income Tax Act.

The Judicial Member, George George K, while relying on the decision held that the interest income earned from investments with treasuries and banks is part of banking activity and the interest income is eligible to be assessed as `income from business’, instead of `income from other sources’.

“However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income,” the tribunal observed.

To Read the full text of the Order CLICK HERE
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