Begpur Samabay Krishi Unnayan Samity Ltd Vs ACIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has allowed the appeal of Begpur Samabay Krishi Unnayan Samity Ltd., overturning the decision of the lower authorities to reject the society’s claim for deduction under Section 80P(2)(d) of the Income-tax Act, 1961, for the Assessment Year 2016-17. The ruling mandates the deletion of an addition totaling Rs.28,05,000/- representing interest income.
The cooperative society, which is involved in the supply of agricultural raw materials and equipment, had claimed a deduction under Section 80P for income earned from interest on its term and savings deposits. The Assessing Officer (AO) and the Ld. CIT(A) rejected this claim, relying on the Supreme Court’s judgment in the case of Totgars Co-operative Sale Society Ltd. Vs. ITO. This precedent generally restricts the 80P(2)(a)(i) deduction to interest income derived directly from the business of providing credit facilities to members, classifying interest from surplus funds invested in banks as “Income from Other Sources.”
Judicial Precedents Distinguish Totgars Ruling
The ITAT, however, found that the issue—concerning interest earned from deposits held with a cooperative bank—was distinguishable from the core finding in the Totgars case. The Tribunal highlighted that the Totgars Supreme Court decision was confined to its specific facts, where the interest was earned on amounts retained from the sale proceeds of members’ produce, which represented a liability and was treated as surplus funds. The Totgars ruling addressed Section 80P(2)(a)(i) (profits derived from banking/credit business), not 80P(2)(d) (interest or dividend derived from investments with any other cooperative society).
