Case Law Details
PCIT Vs Peroorkada Service Co-operative Bank Ltd (Kerala High Court)
The Peroorkada Service Co-Operative Bank Ltd found itself in a legal battle that revolved around Section 80P of the Income Tax Act. Specifically, the issue at hand was the interest income earned by the bank from investments of surplus funds in cooperative banks and treasuries. This article delves into the case of ITA NO. 323 OF 2019, discussing the crucial aspects and outcomes.
Section 80P and Interest Income: The primary contention in this case was whether the interest income earned by the assessee, which resulted from investing surplus funds in cooperative banks and treasuries, falls within the purview of Section 80P(2)(a)(i) of the Income Tax Act. The claim was that this income should be entirely deductible. However, the Assessing Officer disagreed and treated the interest income as non-business income, rejecting the deduction claim.
Facts: The assessee was involved in banking activities and providing credit facilities to its members. They argued for a full deduction under Section 80P(2)(a)(i) and included interest income from surplus funds as business income eligible for deduction. The Assessing Officer, though, denied this claim, categorizing the interest income as non-business income. Furthermore, it was determined that the interest income did not align with Section 80P(2)(d) of the Act, resulting in the rejection of the deduction request.
Held: The authorities stated that to benefit from Section 80P(2)(a), the institution must satisfy two key requirements. First, it must be a cooperative society. In this case, this requirement was met. However, it must also establish that the interest income derives from banking activities or providing credit facilities. In this scenario, the interest income from depositing idle funds did not qualify under Section 80P(2)(a)(i).
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