Nimdasbar S K U S Limited Vs ITO (ITAT Kolkata)
The ITAT Kolkata allowed the assessee’s appeals for AYs 2020-21 and 2018-19, holding that interest earned on surplus funds deposited with co-operative banks and scheduled banks by a credit co-operative society qualified for deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961.
The assessee, a credit co-operative society engaged in providing credit facilities to its members, filed its return claiming deduction under Section 80P(2)(a)(i) in respect of interest income of ₹92,82,955 earned from deposits and investments made with co-operative banks and commercial banks. During scrutiny, the Assessing Officer held that the interest on such deposits constituted income from other sources taxable under Section 56 and denied the deduction under Section 80P(2)(a)(i). The assessment was completed under Section 143(3) read with Section 144B, and the CIT(A) affirmed the disallowance.
The Tribunal observed that the assessee’s principal business was advancing credit facilities to its members and accepting deposits only from its members. It held that interest earned on surplus funds deposited with co-operative banks or scheduled banks could not be treated as income from other sources. The Tribunal found that the issue was squarely covered by the jurisdictional High Court’s decision in West Bengal State Co-operative Agriculture & Rural Development Bank Ltd. Vs. DCIT, which held that interest earned on deposits of surplus funds, where such funds were neither amounts due to members nor liabilities owed to members, was eligible for deduction under Section 80P(2)(a)(i). The Tribunal also noted the High Court’s reliance on decisions in Tumkur Merchants Souharda Credit Cooperative Ltd., Vavveru Co-operative Rural Bank Ltd., and Principal Commissioner of Income Tax vs. Gunja Samabay Krishi Unnayan Samity Ltd., while observing that the decision in Totgars Cooperative Sales Society Ltd. was not applicable to such facts.
