Siddhartha Pattina Sahakari Sangha Niyamita Vs ITO (ITAT Bangalore)
ITAT Bangalore held that the assessee is entitled to deduction under Section 80P(2)(a)(i) of the Income Tax Act on the interest income earned from deposits made in compliance with statutory requirements. Accordingly, appeal of the assessee allowed.
Facts- The assessee is a cooperative society registered under the Karnataka Co-operative Societies Act engaged in the business of providing credit facilities to its members. The assessee for the year under consideration has shown the net profit of Rs. 14,98,578/- and the same was claimed as deduction u/s 80P(2)(a)(i) of the Act. The net profit of Rs. 14,98,578/- also includes a sum of Rs. 17,445/- and Rs. 4,94,014/- being receipt of commission on E-Stamps and receipt of interest on deposits with cooperative Bank namely BDCC Bank.
AO concluded that the claim of the assessee that interest income eligible for deduction under section 80P(2)(a)(i) of the Act is not acceptable. The AO held that a cooperative society is free to make deposits with any bank as per their by-law and as pe the provision of respective Acts (cooperative societies Act). However, the income earned income from such deposits shall be liable to tax under the Income Tax Act. AO also found that the provision of section 80P(2)(d) of the Act provides deduction of interest income or dividend income on account of deposit or investment with any other cooperative society not with cooperative bank. Accordingly, AO comes to conclusion that the interest income has not been earned from its business activity and the deduction claim by the assessee for interest income is in violation of provision of section 80P of the Act.
