The Hyderabad Bench Of Income Tax Appellate Tribunal (ITAT)has recently held that interest income of co-operative credit societis from credit balances deductible under section 80P(2)(a)(i) of the Income Tax Act, 1961.
Assessee Tirumala Tirupati Devasthanams Employees Co Op. Credit Society is an Employees Co-operative Credit Society carrying on the business of extending the loan facilities to its members and in that process, the assessee routes both the disbursement of loan and repayment thereof through its accounts with the Andhra Bank and the Indian Bank.
Before the assessing officer assessee submit that Income arising from deposit/investment of funds in banks categorized as income from the profits and gains of business of the assessee. Without considering the contentions of the assessee AO brought the said interest income to tax for all the three years under section 56 of the Income Tax Act, 1961.
Aggrieved assessee filed appeal before the CIT(A).The CIT(A) concurred with the observations of the AO and held that under section 80P(2)(d) of the Income Tax Act the income by way of interest and dividend derived by a co-operative society from its investment with any other co-operative society alone is allowable as deduction but not the interest derived on any investment with any public sector bank with multi state operations.
M. Rajagopal Naidu, counsel for the assessee submitted that no investment as such is made in any bank, but it is only out of the regular business transactions involving the bank accounts, the credit balances arose on which the bank credited the interest quarterly.
A. Arun counsel for the revenue supported the contentions of the lower authorities.
The tribunal of K.Narasimha Chary, (Judicial Member) observed that interest arose on the credit balances with reference to the regular course of business of the assessee. The bench held that disallowed interest Income of Co-operative Credit Societies is eligible for deduction under section 80P(2)(a)(i) of the Act.
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