Daivagna Credit Co-op Society Limited Vs ITO (ITAT Bangalore)
Section 80P Deduction Allowed on Bank Interest – ITAT Follows Tumkur Merchants, Distinguishes Totagars
The ITAT Bangalore allowed deduction under Section 80P(2)(a)(i) on interest income earned from bank deposits, holding that such income is business income attributable to the activity of providing credit to members.
The assessee, a credit cooperative society, had earned interest of about ₹5.04 lakhs from deposits with cooperative and commercial banks. The Assessing Officer treated this as “Income from Other Sources” and denied deduction under Section 80P, relying on the Karnataka High Court ruling in Totagars Co-operative Sale Society (2017).
The Tribunal, however, noted that:
- The funds invested were surplus business funds not immediately required for lending,
- Such funds retained the character of business funds, and
- Interest earned thereon is attributable to the business of the society.
Relying on the binding Karnataka High Court judgment in Tumkur Merchants Souharda Credit Cooperative Ltd. (2015), the ITAT held that such interest income qualifies for deduction under Section 80P(2)(a)(i).
The Tribunal distinguished Totagars (2017), observing that its facts were different and not applicable to the present case.
Accordingly, the ITAT reversed the orders of AO and CIT(A) and allowed the deduction, holding that interest on temporarily parked business funds is eligible for 80P benefit.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
