Case Law Details
CIT Vs Paschim Banga Gramin Bank (Calcutta High Court)
Introduction: In a significant ruling, the Calcutta High Court addressed the matter of co-operative societies and their eligibility for Section 80P(2)(a)(i) deduction concerning interest earned from funds utilized for statutory reserves. This case, titled “CIT Vs Paschim Banga Gramin Bank,” sheds light on an essential aspect of taxation for co-operative banks and societies in India.
Background: The case revolves around the interpretation of Section 80P(2)(a)(i) of the Income Tax Act, 1961. This section deals with deductions available to co-operative societies. Specifically, it pertains to the deduction of income arising from the activities of co-operative societies engaged in banking business.
The key contention in this case was whether interest income derived from investments made in compliance with statutory provisions, using reserve funds to facilitate the co-operative society’s banking operations, is eligible for the Section 80P(2)(a)(i) deduction.
Court’s Decision: The Calcutta High Court considered the arguments presented by both the revenue and the respondent. The revenue raised the issue of whether the interest earned by a co-operative bank on deposits not subject to statutory liquidity ratio (SLR) requirements (i.e., funds other than those advanced as loans and banking reserves) is deductible under Section 80P(2)(a)(i).
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
