INCOME TAX ACT, 1961

Section 80P(2)

Deduction under section 80P(2) - Co-operative society - AO denied deduction in view of section 0P(4) alleging that assessee was doing business of banking, however, without conducting inquiry into factual situation -

Assessee, a co-operative society registered under Kerala Co-operative Societies Act, 1969, claimed deduction under section 80P(2). AO disallowed assessee's claim on the ground that assessee was doing business of banking, and therefore, in view of insertion of section 80P(4) with effect from 1-4-2007, assessee was not entitled to deduction under section 80P(2). Also AO disallowed claim of deduction with regard to interest income received by assessee on investments made with District Co-operative banks.Held: AO had to conduct an inquiry into factual situation as to activities of assessee society to determine eligibility of deduction under section 80P. Accordingly, matter regarding allowability of deduction under section 80P(2) was remanded to AO to examine the activities of assessee and to determine as to whether activities were in compliance with activities of a co-operative society functioning under Kerala Co-operative Societies Act, 1969 and accordingly grant deduction under section 80P(2). Further, interest income earned from investments with treasuries and banks in the course of assessee's business was eligible to be assessed as 'Income from business', instead of 'Income from other sources'.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2010-2011 to 2015-2016

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