The Hyderabad bench of Income Tax Appellate Tribunal (ITAT) recently held that interest income of Farmers service co-operative society from fixed deposits in Union Bank of India is deductible under Section 80P(2)(a)(i) of Income Tax Ac , 1961.
Assessee Ghatkesar Farmers Service Cooperative Society Limited is a farmers services cooperative society. While processing return of income filed by the assessee for the assessment year 2018-19, claim for deduction under Section 80P(2)(a)(i) of the Income Tax Act in respect of the interest derived by the assessee on deposits with banks/institutions was denied by the Assessing Officer on the ground that the Union Bank of India from which the assessee derived such interest is not a co-operative bank.
Feeling aggrieved, assessee filed appeal before the CIT(A). After considering the appeal the CIT(A) opinion that any “interest income from investment with nationalized bank/commercial bank which is not attributable to the activities specified in section 80P(2)(a) of the Act has to be necessarily assessed under the head ‘income from other sources”.
Accordingly, the CIT(A) upheld the disallowance. Further aggrieved, the assessee filed second appeal before the tribunal.
T. Chaitanya Kumar, counsel for the assessee submitted that the funds deposited by the assessee are their own fund also the surplus fund in the nationalized bank had not been utilized in the near future. Hence, such deposit has nexus with the business of the assessee.
Before tribunal, al A. Arun counsel for the revneue submitted that deduction under section 80P(2)(a)(i) of the Income Tax Act is available only to primary agricultural co-operative societies but not to all the co-operative societies.
It was observed by the tribunal that funds deposited by the assessee with the Union Bank of India are undoubtedly the own funds of the assessee and none of such funds represents any liability of the assessee to its members or anyone else.
After considering the facts relied by the both parties, K. Narasimha Chary, (Judicial Member) of tribunal held that assessee is a primary agricultural co-operative society, thus surplus fund invested in the union bank of India was their own fund therefore, the assessee is entitled to claim the deduction under Section 80P(2)(a)(i) of the Income Tax Act.
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