Interest Income from Co-operative Bank qualifies as Business Income: ITAT allows Co-operative Society to claim Deduction u/s 80P [Read Order]

The Nagpur bench of the Income Tax Appellate Tribunal ( ITAT ) held that interest income from a co-operative Bank qualifies as business income and allowed the co-operative society to claim deduction under Section 80P of the Income Tax Act.

The assessee in this case is Coal Mines Workers Credit Co-operative Society Ltd, which is a co-operative society registered under the Maharashtra Co-operative Societies Act, 1960 and provides credit facilities to its members who are the Mine Workers of Western Coalfields Ltd.

For the assessment year 2013-14, the assessee filed its Income Tax Returns ( ITR ) declaring a total income of Rs. 12,43,170 and declaring income at Rs. 5,56,660 for the assessment year 2018-19, and claimed deductions of Rs. 50.6 lakhs and Rs. 3.7 crores for both the above-mentioned assessment years, respectively under Section 80P(2)(d) of the Income Tax Act, 1961.

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The assessing officer ( AO ) observed that the interest income derived by the assessee from the deposits made in other commercial banks is in the nature of income from other sources and is taxable under Section 56 of the Act and cannot be categorized as the income from the profits and gains of business of the assessee.

The assessing officer rejected the deduction claimed by the assessee under 80P(2)(d) of the Act, which was upheld by the CIT( A ).

The ITAT, by relying on the decision of the coordinate bench in the case of Ismailia Urban Co-operative Society v/s ITO, ITA no. 122/Nag./2023, held that the assessee trust is eligible for deduction under Section 80P(2)(a)(i)/80P2(d) of the Act.

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The Nagpur ITAT, by going through the judicial precedents, held that the interest income earned by the assessee from their investments made with the commercial bank is an income derived by it from its business activities and is assessable under the head “income from business” and not under the head ”income from other sources.”.

The ITAT, comprising V. Durga Rao ( Judicial Member ) and K. M. Roy ( Accountant Member ) allowed the appeal filed by the assesee.

To Read the full text of the Order CLICK HERE

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