Jotesriram Anchal Samabay Krishi Unnayan Samity Ltd. Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has remanded the appeal filed by Jotesriram Anchal Samabay Krishi Unnayan Samity Ltd., a Primary Agricultural Credit Society, back to the Commissioner of Income-tax (Appeals), NFAC, Delhi. The dispute for the Assessment Year 2017-18 centers on the society’s claim for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961, concerning interest income.
The society, registered under the West Bengal Co-Operative Societies Act, 1912, operates primarily to provide credit facilities to its members, raising funds through member deposits and bank borrowings. The society explained that its business required depositing its operative funds, including member deposits, into its “mother Bank” or other banks to secure timely repayment to members, as per co-operative rules. The society contended that the net interest earned from these deposits constitutes business income from a banking activity and is fully eligible for the 80P deduction.
Disallowance Due to Lack of Bifurcation
During the scrutiny assessment, the Assessing Officer (AO) noted that the society had significant investments, including Rs.5,12,27,953/- in bank deposits, and had reported Rs.89,09,882/- as interest received and receivable from loans, advances, and bank deposits. The AO issued a show-cause notice asking the society to provide a clear bifurcation of the interest received—specifically distinguishing between interest earned from loans given to members and interest earned from fixed/term deposits made using surplus funds.
