Case Law Details
ONGC Employees Co-op Credit & Thrift Society Limited Vs ITO (ITAT Ahmedabad)
The case of ONGC Employees Co-op Credit & Thrift Society Limited Vs ITO before the Income Tax Appellate Tribunal (ITAT) Ahmedabad involves the question of exemption of interest income derived from investments made out of a Reserve Fund under section 80P(2)(a)(i) of the Income Tax Act. The appellant, a Co-operative Credit Society, challenged the decision of the Commissioner of Income Tax (Appeals) (CIT(A)), who disallowed a deduction claimed under section 80P and denied the claim of proportionate expenditure.
The appellant’s principal argument revolved around the status as a Credit Co-operative Society. It contended that the interest income derived from the reserve fund should be exempt, based on the precedent set by the Supreme Court in the case of CIT vs. Karnataka State Co-operative Apex Bank. The ITAT Ahmedabad considered the application of sections 71 & 67 of the Gujarat Co-operative Societies Act and agreed to the exemption under Section 80P(2)(a)(i) provided the investments were made in compliance with statutory provisions for carrying on the banking business.
The Tribunal, acknowledging that the nature of the interest income (whether it was from the reserve fund) hadn’t been verified by the Revenue Authorities, remanded the case back to the Assessing Officer for verification.
Moreover, regarding the claim of proportionate expenditure, the tribunal allowed it under Section 57(iii) of the Act, recognizing that the assessee must have incurred expenses to earn the interest income and therefore should be allowed to deduct these expenses.
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