Ismailia Urban Co-Op Vs ITO (ITAT Nagpur)
Conclusion: Deduction under section 80P was allowable to assessee-credit co-operative society on interest income earned on its investment with other banks as assessee society was maintaining operational funds and to meet any eventuality towards repayment of deposit the cooperative society was maintaining some liquidated funds as short term deposits with banks.
Held: Assessee was a credit co-operative society engaged in the business of banking only. It was not carrying out any other activities except the banking business activities. During the relevant year, assessment proceedings were carried out u/s 143(3) wherein AO observed that assessee had earned interest income of Rs.99,94,363/- on its investment with other banks. Assessee claimed deduction u/s 70P of Rs.74,00,363 under Section 80P(2)(a)(i) and u/s 80P(2)(a)(ii). AO disallowed the deduction as assesse had included its interest income of bank FD for its computation of deduction u/s 80P purpose and added to the total income of the assessee. It was held that assessee society is maintaining operational funds and to meet any eventuality towards repayment of deposit the cooperative society is maintaining some liquidated funds as short term deposits with banks. Hence adhering to the doctrine stair desises, we hold that the assessee should be granted benefit of deduction under section 80P(2)(a)(i). Accordingly, the interest on deposits would qualify for deduction under the said section. Appellant Cooperative society is entitled for deduction u/s 80P as claimed in the return. Also Read: Co-Op society eligible for section 80P(2)(a)(i) deduction on compulsory investment with Central Co-op Bank and Investment with co-operative bank eligible for Section 80P(2)(d) deduction
