Case Law Details

Case Name : M/s. The Totgars' Cooperative Sale Society Limited Vs ITO (Supreme Court of India)
Appeal Number : Civil Appeal No. 1622 of 2010
Date of Judgement/Order : 08/02/2010
Related Assessment Year :
Courts : Supreme Court of India (1015)

The assessee, a co-op credit society, was engaged in providing credit facilities to its members and also marketing the agricultural produce of its members. The assessee had surplus funds which it invested in short-term deposits with banks and govt securities. The question arose whether the said interest earned on the said deposits was “business profits” and eligible for deduction u/s 80P(2)(a)(i).

The assessee argued that its activity of providing credit facilities to its members was an “eligible activity” u/s 80P(2)(a)(i) and that as the investments were made as per statutory requirement, the benefit was allowable from the gross total income. HELD deciding against the assessee:

(i) S. 80P(2)(a)(i) allows a deduction in the case of a co-op society engaged in carrying on the business of providing credit facilities to its members of the whole of the amount of profits and gains of business attributable to such activity. The words “profits and gains of business” means “business profits” and not “Income from other sources”;

(ii)The interest on surplus invested in short-term deposits, not being attributable to the business of providing credit facilities to the members or marketing of agricultural produce of the members, is assessable as “other income” and not as “business profits”;

(iii) The words “the whole of the amount of profits and gains of business” attributable to one of the activities specified in s. 80P (2)(a) mean that the source of income is relevant and that the income must be “operational income”.


Appeal Details:-



CIVIL APPEAL NO. 1622 OF 2010 (Arising out of S.L.P. (C) No.7572 of 2009)

M/s. The Totgars’ Cooperative Sale Society Limited (Appellant) Versus Income Tax Officer, Karnataka (Respondent)


Civil Appeal No.1623/2010 @ S.L.P. (C) No.10489 of 2009

Civil Appeal No.1624/2010 @ S.L.P. (C) No.10490 of 2009

Civil Appeal No.1625/2010 @ S.L.P. (C) No.10491 of 2009

Civil Appeal No.1626/2010 @ S.L.P. (C) No.10492 of 2009

Civil Appeal No.1627/2010 @ S.L.P. (C) No.10494 of 2009

Civil Appeal No.1628/2010 @ S.L.P. (C) No.10497 of 2009

Civil Appeal No.1629/2010 @ S.L.P. (C) No.10498 of 2009

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Type : Judiciary (12685)

0 responses to “Interest on surplus funds is “other income” and not eligible for deduction U/s. 80P of Income Tax Act, 1961”

  1. K.Sunil Nair says:

    I welcome this land mark judgment, Interest on Surplus funds generated by Co-Operative societies should be exempted from Income Tax, b’coz co-operative society generates funds to comply with the orders of Registrar of Co-Operative society in lieu of their deposit mobilisation campaigns. While mobilising sometimes the societies generate more funds, which they are forced to invest that too for a lower rate of interest, compared to what they are offering their members. So the interest earned on such surplus funds should at any cost be exempted from Income Tax. If any body wants to share their valuable views with me, u r most welcome, my id is

  2. Vijay Kumar says:

    This is an important decision applicable in case of RRBs who were having credit deposit ratio of only 15-20%, diverting funds from rural areas leading to poor farm growth and farmers’ suicides yet claiming 100% income exempt u/s 80P.

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