Interest Income from the Investments Made out of Reserve Fund Exempt u/s 80P(2)(a)(i): ITAT [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that interest income arising from the investment made out of reserve fund is exempted under Section 80P(2)(a)(i) of the Income Tax Act, 1961.

The assessee ONGC Employees Co-op Credit &Thrift Society Limited was a co-operative credit society engaged in the business of providing credit facility to its members. The Assessing Officer observed that the assessee had shown interest amount and claimed it as a deduction under Section 80P of the Income Tax Act.

The assessee had deducted all the interest income derived from various banks including Nationalised Banks. The assessee had received interest income from Nationalised Bank. The Assessing Officer disallowed to an extent and made an addition being interest earned from deposits from Mehsana District Central Co-op. Bank.

The Assessing Officer also made additions in respect of the Provident Fund SB account of staff and interest income earned from Mehsana District Central Co-op. Bank and interest certificate from Mehsana District Central Co-op. Bank pertaining to PF FDR of staff.

Dhrunal Bhatt on behalf of the assessee submitted that the AO had not considered that the assessee was a Credit Co-operative Society and could not be denied the benefit of deduction under Section 80P of the Income Tax Act. He further submitted that the assessee had derived interest on the reserve fund and the same should have been allowed in the light of the Supreme Court decision in CIT vs. Karnataka State Co-operative Apex Bank.

N.J. Vyas, on behalf of the revenue submitted that whether this amount upon which the interest was derived from State Bank of India and State Bank of Bikaner & Jaipur related to reserve fund or not had not been pointed out before any of the Revenue Authorities by the assessee the AO had rightly made the addition.

A Single member Bench of Suchitra Kamble, (Judicial Member) allowed the appeal holding that the assessee being cooperative society, any income recorded in sub-section 2 of the Section 80P of the Income Tax Act, there should be in accordance with and subsection to the provisions of Section 80P, of the Income Tax Act, the same was specified in sub-section 2 in computing the total income of the assessee.

The Bench held that therefore, interest income arising from the investments made out of reserve funds is exempt under Section 80P(2)(a)(i) of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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