A Primary Agricultural Credit Society is Entitled to 80P Deduction in respect of Interest received on Deposits with Sub-Treasuries: ITAT [Read Order]

Agricultural Credit Society

In an assessee-favor ruling, the Cochin bench of ITAT said that the assessee, a primary agricultural credit society is entitled to the benefit of deduction under Section 80P (2) of the Income Tax Act, with regard to interest received on deposits made by the assessee with sub treasury.

In instant case the sole issue was assessee,  claimed deduction under Section 80P (2) of the Income Tax Act was denied by the Assessing Officer. The reasons pressed were assessee is in the business of banking and in view of insertion of sub section (4) to section 80P of the Income-tax Act.

Aggrieved assessee preferred an appeal before first appellate wherein held that the same to be income from other sources and not income from business, thereby denied the benefit of deduction u/s 80P of the income-tax Act.

Now assessee contested denial of benefit of Section 80P (2) of the Income Tax Act, interest earned on deposits with Sub-treasury has filed the present appeal before the Cochin ITAT and placed reliance on the decision of same bench.

On the contrary, the revenue supported the orders of the CIT (A) and the AO. The tribunal bench observed the fact that the issue regarding whether interest received on investments with sub-treasury is liable to be assessed under the head ‘income from other sources’ or ‘income from business’.

The bench comprising Judicial Member George George K and Accountant Member Chandra Pooraji allowed the appeal of assessee and noted that if the above said income falls under income from business then the assessee would be entitled to deduction u/s 80P (2) of the I T Act. The tribunal bench observation on instant case as “the assessee do not possess any banking license from the RBI and is not exclusively carrying on any banking facility; but it is carrying on business of lending money to its members and therefore is covered u/s 80P(2) of the Act”.

The bench relied on the decision of Karnataka High Court in the case of Tumkur Merchants Souharda Credit Coop Ltd (supra) and allowed the claim of assessee.

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