Saunshi Urban Co-op Credit Society Ltd Vs ITO (ITAT Bangalore)
The appeal before the Income Tax Appellate Tribunal Bangalore concerned the allowability of deduction under Section 80P of the Income-tax Act, 1961, for Assessment Year 2018–19. The assessee, a co-operative society registered under the Karnataka State Co-operative Societies Act, 1959, had declared nil income after claiming deduction of ₹54,05,866 under Section 80P. The Assessing Officer disallowed the deduction on the ground that interest income earned from investments with banks and other interest income was not attributable to the business of providing credit facilities to members and therefore not eligible under Section 80P(2)(a)(i). The disallowance was partly upheld by the National Faceless Appeal Centre, leading to the present appeal.
Before the Tribunal, the assessee contended that interest income of ₹45,72,083 was earned from investments made with co-operative banks and other banks due to statutory compulsion under the Karnataka State Co-operative Societies Act and the rules framed thereunder. It was argued that such investments were incidental to the main business of the society and that the resulting interest constituted business income eligible for deduction under Section 80P(2)(a)(i). The assessee further argued that, in any event, interest income earned from co-operative banks qualified for deduction under Section 80P(2)(d), relying on judicial precedents.
