Mysore University Employees Co-op Credit Society Ltd. Vs ITO (ITAT Bangalore)
The Bangalore ITAT held that interest income earned by a co-operative credit society from bank deposits is eligible for deduction u/s 80P(2)(a)(i), provided the funds are business/operational funds temporarily parked.
The AO had denied deduction on interest income (₹6.25 lakh) and other related income by relying on the Supreme Court ruling in Totgars, treating such income as “Income from other sources”.
However, the Tribunal noted:
- The assessee was exclusively engaged in providing credit facilities to members,
- Deposits were made from operational funds, not surplus retained liabilities,
- The jurisdictional Karnataka High Court in Tumkur Merchants has clearly held that such interest is “attributable to business”.
The ITAT emphasized that:
- The term “attributable to” is wider than “derived from”,
- Parking idle funds in banks is a prudent business activity,
- Interest earned is part of business income, not separate investment income.
It further held that jurisdictional High Court decisions are binding, and therefore the Revenue’s reliance on Totgars was misplaced in such facts.
Accordingly, deduction u/s 80P was allowed in full, and the same reasoning was applied to multiple assessment years.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These 3 appeals, filed by the assessee against the separate orders of the Ld. Commissioner of Income Tax (Appeal) (hereafter- Ld. CIT(A)) under the provision of section 250 of the Income Tax Act, 1961 (hereafter- the Act), were heard together.
