Anklav Mercantile CoOp Credit Society Ltd. v. Dy. CIT

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The Tax Publishers2022 TaxPub(DT) 0291 (Ahd-Trib)

INCOME TAX ACT, 1961

Section 80P(2)(a)(i)

It is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) and the interest derived by depositing surplus funds with the State Bank of India is not being attributable to the business as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i).

Deduction under section 80P(2)(a)(i) - Assessee providing credit facilities to members and non-members - Interest on deposits from non-members -

Assessee was engaged in activity of providing credit facilities to the members and non-members. There was the surplus fund available with the assessee which, was deposited with the banks in order to generate the interest income as well as to maintain the liquidity for the repayment of the deposits accepted from the members. Assessee on such funds has earned gross amount of interest income. As per AO, amount of interest had not arisen to the assessee from activities of financing to the members. Thus, AO computed the proportionate amount of interest on the deposits from non-members, which was not eligible for deduction under section 80P(2)(a)(i). Held: Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. & Ors. v. CIT (2021) 123 Taxmann.com 161 (SC) : 2021 TaxPub(DT) 273 (SC) held that primary agricultural credit societies are held to be entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding the fact that the society may also be giving loans to its members which were not related to agriculture. Absolute denial of deduction under section 80P(2)(a)(i) to assessee engaged in the providing credit facilities to non-members along with its members was not warranted under the Act and only that part of profit and gains that was attributable and/or pertains to the non-members shall not be allowed as deduction under section 80P(2)(a)(i). Thus, profits and gains attributable to non-members arising as a result of advancement of loans was held to be not an allowable deduction under section 80P(2)(a)(i).

Followed:Mavilayi Service Cooperative Bank Ltd. & Ors. v. CIT (2021) 123 Taxmann.com 161 (SC) : 2021 TaxPub(DT) 273 (SC) and State Bank of India (SBI) v. CIT (2016) 72 Taxmann.com 64 (Guj) : 2016 TaxPub(DT) 3564 (Guj-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2014-15

IN THE ITAT, AHMEDABAD BENCH