Basaveshwaranagar Credit Co-operative Society Ltd. Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, adjudicated an appeal filed by a credit co-operative society against the order of the Commissioner of Income Tax (Appeals) for assessment year 2014–15. The appeal arose from an assessment completed under Section 143(3) of the Income-tax Act, wherein the Assessing Officer determined the total income of the assessee at ₹63,02,920 after denying deduction claimed under Section 80P.
The core issue in the appeal was whether the assessee was entitled to deduction under Section 80P(2)(a)(i) on interest income earned from deposits with banks. The assessee had claimed that such interest income was attributable to its business of providing credit facilities to its members and therefore eligible for deduction. However, the Assessing Officer treated the interest income as “income from other sources” and denied the deduction, a position that was subsequently upheld by the CIT(A).
The assessee contended that it was a credit co-operative society engaged in providing credit facilities to its members and not a co-operative bank, and therefore the restriction under Section 80P(4) did not apply. It further argued that the interest income earned from bank deposits represented income derived from temporarily parking surplus funds arising from its business operations and should therefore be treated as business income eligible for deduction under Section 80P(2)(a)(i). The assessee relied on judicial precedents, including decisions of the Karnataka High Court, to support its claim.
