Belve Vyavasaya Seva Sahakari Sangha Ltd. Vs ITO (ITAT Bangalore)
In the matter abovementioned ITAT Banglore held that interest earned by the assessee from the co-operative banks/commercial bank is considered under the head income from other sources, relief to be granted to the assessee u/s 57 in accordance with law.
Assessee is a Credit Society which provides credit facilities to its members only for their agriculture related activities as permitted under its bye-laws. Assessee had filed its return at NIL after claiming deduction u/s. 80P(2)(a)(i) amounting to Rs. 1,02,21,126/-. AO found that out of total interest and dividend income received amounting to Rs. 1,37,24,438/- made with district co-operative bank and other co-operative society an amount of Rs. 1,30,85,803/- has been earned by the assessee from SCDCC bank and also interest of Rs. 23,925/- earned from Vijiya Bank. AO held that interest income earned from term deposits with co-operative banks does not fall under the head profits and gains of business and profession but income from other sources. Thus, the interest income earned from deposits and interest totaling Rs. 1,31,09,728/- was treated as income from other sources after disallowance deduction u/s. 80P.
Assessee filed appeal before CIT (A) who affirmed the view taken by AO and partly allowed the appeal by holding that interest income earned by the appellant society is not eligible for deduction u/s. 80P(2)(a)(i) as section 80P(2)(a)(i) allows deduction to a Co-operative society engaged in carrying on the business of banking or providing credit facilities to its members in respect of whole of the amount of profits and gains attributable to such activity. CIT (A) further held that deduction can be claimed u/s 80P(2)(d) only in respect of income by way of interest or dividends earned by a co-operative society from its investments with any other co-operative society. CIT (A) observed that no detailed regarding working of the business loss as claimed in the ground of appeal vis-à-vis the income earned from investments made was furnished by the assessee. CIT(A) directed AO to verify the correctness of the claim of the assessee with respect to check for any arithmetical error as claimed in determination of the total income for the year has occurred.
