In a noteworthy ruling, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) held that cooperative societies are not eligible to avail tax exemptions under Section 80 of the Income Tax Act, 1961 on interest income received from deposits held with nationalized banks.
In an income tax appeal filed by Balwa Group Coop Society (Balwa Society), the society contested an assessment order passed by the National Faceless Appeal Centre (NFAC), Delhi for Assessment Year (A.Y.) 2018-19 averring the fault of the Commissioner of Income Taxes (Appeals) ( CIT(A) ) in making addition of ₹18,86,277 on account of interest income received from nationalized banks.
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Balwa Society maintained that the interest income received from the nationalized banks were used for the objects of the society and thus eligible for deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961. Furthermore, the Society also held that the interest income had been sought to be taxed by the Revenue diminishing the Appellant’s claims of the same being pro-rata expenditure as claimed by the Appellant under Section 57 of the Income Tax Act, 1961.
Sunil Talati, representing the cooperative society attested to the eligibility for deductions of the interest income received from deposits with the bank, the same being used for the objects of the society and reiterated the submissions made earlier.
Meanwhile, Senior Departmental Representative Nitin Vishnu Kulkarni submitted that the assessee had taken into consideration the entire expenditure of ₹1,22,78,772 debited to profit and loss account while calculating the proportionate allowable expenditure and that the impugned interest income had been earned by the Assessee from of surplus funds/income earned by the assessee from its regular activity.
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The two-member Bench of Suchitra Kamble, Judicial Member and Shri Makarand V. Mahadeokar, Accountant Member observed that interest received from nationalized banks are not an allowable u/s. 80P of the Income Tax Act. 1961 while observing that the issue of allowability of the expenditure incurred by the Assessee on the said interest had to be further verified.
As had been averred by the Departmental Representative, the assessee while giving revised working of proportionate interest expenditure allowable u/s. 57 had considered the entire expenditure debited to their profit and loss account of ₹1,22,78,772 and thus the same is required to be remitted to the Assessing Officer for proper verification and adjudication.
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