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| The Tax Publishers2020 TaxPub(DT) 2320 (Bang-Trib) INCOME TAX ACT, 1961
Section 80P
Since interest earned on investment of surplus funds not immediately required in short-term deposits and securities by a Co-operative Society providing credit facilities to members or marketing agricultural produce to members is not business income, but income from other sources and the society is not entitled to special deduction, thus to determine issue as to whether source of funds was assessee's own funds or out of liability, matter was remitted back to AO.
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Deduction under section 80P - Allowability - Interest earned by co-operative society from its scheduled banks - Whether source of funds was assessee's own funds or out of liability
Assessee was aggrieved by order of AO holding that interest earned by the co-operative society from its investments in co-operative society shall only qualify for deduction under section 80P and interest earned by the co-operative society from its scheduled banks does not qualify for deduction. Held: Benefit of deduction under section 80P(2)(a)(i) is only on income which is assessable under the head 'Income from Business'. Interest earned on investment of surplus funds not immediately required in short-term deposits and securities by a Co-operative Society providing credit facilities to members or marketing agricultural produce to members is not business income, but income from other sources and the society is not entitled to special deduction. Whether source of funds was assessee's own funds or out of liability was not subject-matter of decision of the Karnataka High Court in decision cited by revenue in The Totagars Co-operative Sale Society. Issue was restored back to AO for a fresh decision after examining facts in light of judgment of Apex Court rendered in Totagars Co-operative Sale Society Ltd. and of Karnataka High Court rendered in Tumukur Merchants Souharda Co-operative Ltd.
Distinguihsed:Pr. CIT v. The Totagars Co-operative Sale Society (2017) 395 ITR 611 (Karn.) : 2017 TaxPub(DT) 1748 (Karn-HC)Followed:M/s. The Totagars' Cooperative Sale Society Ltd. v. ITO (2010) 322 ITR 283 (SC) : 2010 TaxPub(DT) 1466 (SC) M/s. Guttigedarara Credit Co-operative Society Ltd. v. ITO [ITA 29/2015] : 2015 TaxPub(DT) 4004 (Karn-HC) Tumkur Merchants Souharda Credit Cooperative Ltd. v. ITO [ITA No. 307/Bang/2014, dt. 28-10-2014] : 2015 TaxPub(DT) 2857 (Karn-HC) M/s. The Jayanagar Co-operative Society Ltd. v. ITO [ITA No. 3254/Bang/2018, dt. 23-7-2019] M/s. Sri Maheshwara Credit Co-operative Society Ltd. v. ITO [ITA Nos.2698 And 2699/Bang/2017, dt. 24-1-2018]
REFERRED :
FAVOUR : Matter remanded
A.Y. : 2014-15
IN THE ITAT, BANGALORE BENCH
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