ITO Vs Bangalore Credit Co-operative Society Ltd (ITAT Bangalore)
ITAT Bangalore held that interest received from credit facilities provided to members and interest earned out of statutory deposits is allowable as deduction u/s. 80P(2)(a)(i). Also, interest/ dividends derived by co-operative society from its investment with any other co-operative society is allowable as deduction u/s. 80P(2)(d).
Facts- Assessee is a co-operative society engaged in the business of providing credit facilities to its members. Assessee is claiming deduction u/s. 80P(2) of the Income Tax Act. Notably, vide intimation u/s. 143(1), the deduction u/s. 80P(2)(d) was disallowed.
CIT(A)/NFAC allowed the appeal of the assessee by holding that there is plethora of case laws where the uniform stand has been adopted by the different Courts/Tribunal that the income derived by co-operative societies by way of income earned from FDs with other co-operative societies/co-operative banks qualifies for deduction u/s 80P(2)(d) of the Act. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the Interest received exclusively from the credit facilities provided to its members will be treated as operating Profit of the Co-operative society & eligible for deduction u/s 80P(2)(a)(i) of the Act. Further, the Interest income earned out of the Statutory deposits/maintain fluid resources are attributable to the business activity of the co-operative society & hence also eligible for deduction u/s 80P(2)(a)(i) of the Act irrespective of the fact that the interest is earned from the co-operative bank and/or scheduled bank. In respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income is eligible for deduction u/s 80P(2)(d) of the Act.
