ACIT Vs Sardar Patel Coop. Credit Society Ltd. (ITAT Ahmedabad)
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad in Appeal No. CIT(A)/GNR/10198/2018-19 dated 12/07/2019 for assessment year 2016-17. The dispute before the Tribunal concerned the allowability of deduction under Section 80P(2)(d) of the Income-tax Act, 1961 in respect of interest earned by the assessee on surplus funds deposited with co-operative banks.
The assessee was a co-operative society engaged in providing credit facilities exclusively to its members from deposits received from them. For the year under consideration, it declared net profit of ₹2,13,69,867/- and, after adjustment of certain items, determined its total income at Nil after claiming deduction under Section 80P of the Act.
During assessment proceedings, the Assessing Officer noted that the assessee had earned interest from co-operative banks as well as nationalized banks and had claimed deduction under Section 80P. The total interest income was ₹1,46,98,641/-, including substantial interest of ₹1,46,65,877/- from The Mehsana Urban Bank Sah. Bank. The Assessing Officer denied the deduction in totality, treated the interest income as “income from other sources” under Section 56 and also declined to allow proportionate expenses on the ground that the assessee had failed to establish the requisite nexus under Section 57(iii).
