Yedamangala Vyavasaya Seva Sahakari Bank Niyamitha Vs ITO (ITAT Bangalore)
Interest on Mandatory SLR/CRR Deposits Eligible for 80P Deduction – Operational Income vs Surplus Funds – ITAT Bangalore Clarifies 80P Deduction Eligibility
Assessee, a primary agricultural co-operative society, filed appeals against orders of CIT(A), NFAC confirming denial of deduction u/s 80P(2)(a)(i) & alternatively u/s 80P(2)(d).
Facts:
Assessee declared income of ₹37,800/- after claiming deduction u/s 80P(2)(a)(i) of ₹25.68 lakh for AY 2018-19. AO observed interest income of ₹22.74 lakh from co-operative & scheduled banks and dividend of ₹5.79 lakh, totaling ₹28.54 lakh, claimed u/s 80P. AO treated them as “Income from Other Sources” relying on Totgars Co-op Sales Society Ltd. (322 ITR 283, SC) & SBI vs CIT (389 ITR 578, Guj HC). CIT(A) upheld AO’s action.
Assessee’s Contention:
Deposits were statutory as per Karnataka Co-operative Societies Act/Rules (Rule 28 requiring SLR & CRR). Hence interest formed part of operational income eligible u/s 80P(2)(a)(i). Alternatively, if treated as other sources, proportionate cost u/s 57 must be allowed.
Tribunal’s Findings/Decision:
- Interest from statutory deposits is distinct from interest on voluntary surplus. Since deposits were mandated by law, interest therefrom is attributable to business & eligible for 80P(2)(a)(i).
- Relied on CIT vs Karnataka State Co-op Apex Bank (251 ITR 194, SC) & CBDT Circular 18/2015 clarifying SLR/non-SLR interest as business income for co-ops.
- Directed AO to verify quantum of compulsory deposits & allow deduction accordingly.
- If any part of investment exceeded statutory requirement, then interest thereon may be taxed u/s 56 but corresponding cost deductible u/s 57.
- Issue remanded to AO for verification. Deduction u/s 80P(2)(a)(i) allowable on statutory deposits; proportionate cost to be allowed if taxed otherwise. Appeals allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
