Bhaskara Employees Credit Co-operative Society Ltd. Vs ITO (ITAT Bangalore)
ITAT Bangalore Allows Deduction u/s 80P(2)(a)(i) on Interest from Statutory Investments – Section 80P to Be Interpreted Liberally –
ITAT Bangalore allowed the assessee’s appeal & directed AO to grant deduction of Rs.4,70,921/- u/s 80P(2)(a)(i) on interest earned from statutory investments
Assessee, a credit co-operative society of ISRO employees registered under the Karnataka Co-operative Societies Act, filed return declaring Nil income after claiming deduction of Rs.34,06,263/- u/s 80P. AO denied deduction on interest income of Rs.4,70,921/- earned on deposits with co-operative & scheduled banks, treating it as “income from other sources” relying on Karnataka HC ruling in Totagars’ Sales Co-op Society (83 taxmann.com 140). CIT(A) upheld AO’s order.
Before ITAT, assessee argued that interest was from statutory reserve funds mandated under the Karnataka Co-operative Societies Act, hence attributable to its business of providing credit facilities to members & covered by section 80P(2)(a)(i). It relied on SC rulings in Mavilayi Service Co-op Bank Ltd. (123 taxmann.com 161) & Kerala State Co-op Agricultural & Rural Development Bank Ltd. (458 ITR 384), as well as ITAT Bangalore order in assessee’s own earlier year (ITA No.1724/Bang/2019).
Tribunal observed that section 80P is a benevolent provision to be interpreted liberally in favour of co-operative movement. It distinguished Totagars since that case related to idle surplus funds & section 80P(2)(d), whereas here the deposits were statutory investments integral to business activity. Following Supreme Court rulings, ITAT held that such interest was attributable to providing credit facilities to members & eligible for deduction. Accordingly, ITAT allowed the appeal & directed AO to grant deduction of Rs.4,70,921/- u/s 80P(2)(a)(i)
