Shanteshwar VividoddeshagalaSahakara Sangha Vs ITO (ITAT Bangalore)
Statutory SLR Deposits Save 80P Deduction – ITAT Bangalore Draws Clear Line Between Mandatory Funds & Idle Surplus!
The Bangalore ITAT held that a co-operative credit society is entitled to deduction u/s 80P(2)(a)(i) on interest earned from deposits maintained under the statutory requirements of the Karnataka Co-operative Societies Act, 1959. The Tribunal observed that where deposits are compulsorily maintained as SLR/fluid resources, the interest earned therefrom is “attributable to” the business of providing credit facilities to members and hence qualifies for deduction.
The Tribunal distinguished between mandatory statutory deposits and idle/surplus funds voluntarily parked to earn interest. It held that interest earned on surplus funds invested beyond statutory requirements cannot automatically qualify for deduction u/s 80P(2)(a)(i) and may instead fall under the head “Income from other sources”. However, even in such cases, the assessee would be entitled to deduction of proportionate expenditure u/s 57.
Importantly, the ITAT clarified that interest/dividend earned from investments with another co-operative society may still qualify for deduction u/s 80P(2)(d). The matter was remanded to the AO to determine the quantum of statutory deposits required under law and segregate eligible and non-eligible interest accordingly.
The Tribunal relied upon landmark Supreme Court rulings including Karnataka State Co-operative Apex Bank (251 ITR 194), Mehsana District Central Co-operative Bank (251 ITR 522) and Cambay Electric Supply (113 ITR 84) to emphasize the wider scope of the expression “attributable to” used in section 80P.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
