Thermal Engineers Co-Op Credit Society Vs ITO (ITAT Pune)
Interest on Bank Deposits Attributable to Credit Business Eligible for Section 80P — ITAT Pune Allows Deduction
The Pune SMC Bench of the ITAT allowed the appeal of Thermal Engineers Co-operative Credit Society for AY 2018-19, holding that interest income of ₹43.10 lakh earned from fixed deposits with Bank of Maharashtra is eligible for deduction under section 80P(2)(a)(i).
Key takeaways from the ruling:
- Undisputed nature of assessee: The assessee is a credit co-operative society whose principal business is providing credit facilities to its members.
- Source of deposits decisive: The interest was earned by deploying surplus funds arising from the society’s credit business, and the deposits were made in a permitted bank as allowed under the co-operative laws.
- Totgar’s distinguished: The Tribunal distinguished the Supreme Court decision in Totgar’s Co-operative Sale Society Ltd., noting that in that case the deposits represented retained sale proceeds belonging to members, whereas here the funds were own surplus business funds.
- High Court precedents followed: Reliance was placed on:
-
AP & Telangana HC in Vavveru Co-operative Rural Bank Ltd., and
-
Kerala HC in Sahyadri Co-operative Credit Society Ltd. (2024),
both holding that interest on deposits of surplus business funds does not lose its character as income attributable to the credit activity.
-
- No contrary jurisdictional ruling: The Revenue failed to cite any contrary judgment of the Bombay High Court.
- Deduction directed: The AO was directed to allow deduction u/s 80P(2)(a)(i) on the entire interest income of ₹43,10,736.
Accordingly, the ITAT allowed the assessee’s appeal in full, granting deduction under section 80P on bank interest income.
FULL TEXT OF THE ORDER OF ITAT PUNE
