INCOME TAX ACT, 1961

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

Deduction under section 80P(2)(a)(i) - Co-operative society - Interest income from parking of surplus funds in fixed deposits with nationalized bank -

Assessee-society engaged in providing credit facilities to members, claimed deduction under section 80P(2)(a)(i) as regards interest income from parking of surplus funds in fixed deposits with nationalized banks. AO denied deduction on the ground that said income could not be said to have arisen out of assessee's regular business activity.Held: Interest earned by assessee society out of its investment in nationalized banks did not arose from the activity of providing loan and credit facilities to its members as society was not engaged in the business of banking and, therefore, AO was justified in denying deduction under section 80P(2)(a)(i), however, disallowance deserved to be computed on netting basis since assessee had not only derived interest income from fixed deposits in nationalized banks but had also incurred corresponding interest expenses as well. AO was directed accordingly.

REFERRED : CIT v. South Eastern Railway Employees Co-op Credit Society Ltd. (2017) 390 ITR 524 (Cal) : 2016 TaxPub(DT) 4145 (Cal-HC) and Totgars Co-operative Sale Society Ltd. v. ITO (2010) 188 Taxman 282 (SC) : 2010 TaxPub(DT) 1466 (SC).

FAVOUR : Partly in assessee's favour.

A.Y. : 2014-15

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